ProJo’s Texas Chief Plays Lame Blame Game
Friday, August 16, 2013
Just yesterday, a report surfaced that it may be dropping the subscription paywall at its flagship Dallas Morning News in favor of some sort of “premium” site, with the rest free.
Fair enough. No one has the answer these days, and if something isn’t working, you try something else. The Providence Journal, my old paper, has a paywall going. Let’s hope it works.
What’s important, however, is to understand the nature of the problem, and I couldn’t help noticing how Belo CEO Robert Decherd a couple of weeks ago sought to explain the problems at the Projo, where ad sales fell a worrisome 14 percent in the second quarter from the same period a year earlier, a not-especially-stellar year at that.
Through no fault of its own
Speaking to investors, Decherd blamed the paper’s profit woes on…the government, in this case, Rhode Island’s.
With a hat-tip to WPRI’s Ted Nesi, this was Decherd’s diagnosis:
Asked Monday on an investor call to give an overview of the situation, A.H. Belo CEO Robert Decherd was blunt: “There’s really not much good news in the Rhode Island economy right now.”
“You have a very stressed governmental environment,” Decherd said of Rhode Island. “You know of course about the pension problems that state and municipalities are facing. They have a very punishing tax structure, and way more municipalities than a geography of that size could possibly support, so they need to deal with the fundamental reforms and structure of government, which is not an easy process. It’s certainly not going to happen anytime soon.”
“So in that unwelcoming environment,” he continued, “businesses are carrying on, but a lot of wealth is leaving the state, at least from a taxation standpoint, and the in-migration is not sufficient–at least from our perspective–to get that economy back in balance anytime soon.”
Decherd suggested the Rhode Island economy could continue to struggle through at least 2016. “As we think about it, it’s easily three years from now–it might be a little longer–before you could paint a picture of comparative stability there,” he said.
Now, excuse making has a long and inglorious tradition among public company executives, especially when it comes to lackluster earnings. Be it “economic uncertainty,” “highly competitive markets,” “Y2K,” or “the sun got in our eyes,” corporate leaders can usually find something or someone–besides themselves, I mean–to blame for falling short of profit expectations or hopes.
But this was an extreme twist on a very familiar theme.
So, let’s see if I’m understanding this right: if we can just get rid of a few municipalities, that will help Projo’s ad sales?
That’s easy. I say we start with Cumberland! The place always bothered me.
The fact is, whatever problems Rhode Island has with its government–and I understand there are a few–they were basically the same back in 1996 when Belo decided to buy the old Providence Journal Company in the first place. It’s the same place. It had 39 cities and towns, as I recall. I’ve been away for a while, but I’m pretty sure we didn’t grow any new ones.
And government, believe me, was no better. We had just indicted a former governor and a Supreme Court chief justice–the second in a row! And you youngsters may not believe this, but Buddy Cianci–right, that guy–was actually the mayor of the City of Providence. Hard to believe, but that actually happened—twice! You want a “very stressed governmental environment?” There’s one for you, Bunky (apologies to Bill Reynolds there). If Belo was worried about government around here, that should have been what we call in the investment world, “a red flag.”
Perhaps, though, Belo had an excuse: Cianci at the time was only a one-time felon. Who could have known?
And another thing: it takes a bit of a nerve to run down about Rhode Island government when your state is run by Governor “What’s-That-Third-Thing?” Please. I’ll take any of the three Rhode Island contenders for governor on their worst day.
And when you talk about Rhode Island’s economy, I admit, at 1.4 percent growth for 2012, it’s not that great. And it’s also true that Texas, where Belo is based, did much better at 4.4 percent. I’ve always said Rhode Island should have found some oil under Narragansett Bay. Lack of initiative there. But Texas is a very special case; its economy and population growth buoyed by immigration and other special factors that Dr. Krugman will explain.
What’s more, places like Wyoming, Arkansas, Alabama, and elsewhere, where the government is small, are doing worse than RI. Compared to South Dakota, Rhode Island is Goldman Sachs.
I’m just suggesting that Rhode Island’s poor economic performance can probably also be traced to other factors, like, say, the worst financial crisis in 70 years, the one that crushed the global–and local–economy and has Rhode Island’s housing sector struggling through a foreclosure crisis that it is still only halfway through. That wasn’t caused by Rhode Island government at all, but by a financial sector unleashed by a president from a certain Southwestern state, endorsed, of course, by The Dallas Morning News.
And, for the record, while Rhode Island’s “in-migration” is said to be “not sufficient,” the state actually places, ahem, third in the US in attracting “knowledge workers,” after only Massachusetts and Vermont, according to the big study of the state’s economy published by Fourth Economy Consulting.
Point being, the idea that all, or even most, of the Projo’s problems, can be pinned on bad state and local government makes about as much as sense as saying the Projo prospered during the ‘80s and ‘90s because government was so much better when the Patriarca crime family was running things.
I mean, the whole newspaper industry is falling apart. That may have something to do with the Projo’s problems.
More work to be done
Finally, I don’t think it’s too out of line to suggest, gently, that some–though obviously not all–of Belo’s problems are internal. The Seeking Alpha blog singles out Belo as one of the “low-priced stocks to avoid,” saying it hasn't been able to fix any of the problems that plague the companies within the industry.”
Let’s pause to give credit where it is due: Belo under Decherd has actually matched or bettered its publicly traded newspaper-owning peers over the past five years. That’s no mean feat and deserves to be recognized.
Obviously, the company’s fate is tied to many things beyond its control. But that’s sort of the point. How much did the Great Recession add to Rhode Island’s fiscal problems? A lot.
And finally, I’d just note we’re talking about a company that has agreed to pay its CEO $300,000 a year after he retires.
So it can’t be doing all that bad.
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