Tuesday, July 31, 2012

Newsweek Takes a Stand: Profits Are for Wimps

Mitt Romney suffers from The Wimp Factor, Newsweek’s oh-so-hip cover helpfully informs us philistines this week.

Of course: Romney started a company that is still profitable. Real men lose millions of dollars a year without any hint of a sustainable business model.

I’m no fan of Mitt Romney or the Republican Party, but I’m even less a fan of amateur psychoanalysis masquerading as journalism. To call the cover story “biased reporting” would be an insult to reporting. It’s all bias and no reporting -- and an insult to Newsweek’s heritage of great political reportage and investigative journalism.

And you thought only amateur bloggers could string together unrelated facts in support of their opinions without doing any real gum-shoeing?

I have a confession to make: I’m writing about the Michael Tomasky cover story without having read it all. I tried, I really did, but somehow I kept dozing off while laboring through this extended expose of the Mittster’s alleged lack of manliness and the insightful commentary about his being “kind of lame.”

Shocking revelation: Romney recently let his wife drive the Jet Ski while he rode on the back. (If Romney were a Democrat, do you suppose Newsweek would have reported that as a sign of an egalitarian marriage? And if Romney were driving the Jet Ski, wouldn’t that be proof that Mormons oppress women?)

Tomasky may have unwittingly helped Romney’s cause among voters like me who are not particularly in love with either candidate or party. (“A seasoned journalist set out to do a hatched job on Romney and this is all he got? Maybe Romney’s not such a bad guy after all.”)

Discussions of wimpiness in the White House do no favors to President Obama. He spent his first two years there as a non-factor until President Pelosi-Reid-Baucus nearly brought the Democratic Party to ruin.

Both men have demonstrated their capability to take decisive action and to lead in difficult situations. It’s their ideologies that concern me.

Related article: What Exactly Did Barry Diller Say About Newsweek's Future?

Thursday, July 26, 2012

What Exactly Did Barry Diller Say About Newsweek's Future?

Barry Diller's cryptic comments yesterday about Newsweek have led to much speculation, some misquoting and downright erroneous reporting by the media, and charges of "scaremongering" from editor Tina Brown.

To help clear the waters, here is exactly what Diller, chairman of IAC/InterActiveCorp (Newsweek's majority owner), said about the iconic but money-losing magazine during the company's quarterly earnings call. He was responding to an analyst's question about the expenses IAC took on in acquiring the brand and whether there was "a Plan B to make it perhaps a lighter asset like an online-only business."

Diller's response:

Yes, the consolidation does put us squarely on our heads. We knew this really shortly after Sidney Harmon died that the indication was -- though it wasn't any kind of absolute, nor is it an absolute today -- that the Harmon family didn’t think that they were going to contribute to the losses in the business.

And neither by the way are we going to contribute to the losses of the business as they have been this year. Or investment next year will be considerably less than it is this year. 

Wednesday, July 18, 2012

Apple and Amazon Deliver Loophole To Consumer Magazines

Don't be surprised if you start seeing special offers soon for magazines' iPad or Kindle Fire versions of their back issues.

Sketchy sales data from Apple and Amazon have led to a new loophole for magazines whose circulation is checked by the Audit Bureau of Circulations. The loophole will enable them to bolster the reported circulation numbers of a weak-selling issue with single-copy sales of better-selling issues.

Erratic single-copy sales are the bane of many magazines that guarantee their advertisers a ratebase (a minimum number of copies that are purchased or delivered). By the time a publisher realizes an issue isn’t selling well on the newsstand, it’s too late to do much about it before the issue goes off sale. As a result, many publishers build in a cushion – often an unprofitable one, such as free copies sent to hair salons – to ensure that weak-selling issues don’t miss ratebase.

For printed magazines, ABC is accustomed to publishers providing elaborate reports that document exactly how many copies of an issue were sent to legitimate subscribers or sold to customers. Not so with Apple and Amazon, which don’t provide precise information about the number of paying customers (subscribers and single-copy buyers) per issue.

As a result, ABC has authorized new methods publishers can use when calculating the number of electronic copies served per issue. (No such

Thursday, July 12, 2012

Did Verso Come To Purchase NewPage Or To Bury It?

Talk about the pot calling the kettle black: NewPage told a bankruptcy court this week it is reluctant to merge with Verso Paper because of its rival’s high risk of going bankrupt.

But it also revealed an even bigger reason to rebuff Verso’s advances: Rather than engaging in a good-faith effort to forge a union between North America’s two largest makers of magazine-quality paper, NewPage said, Verso’s owners are engaging in “tactics of holdup and delay” to weaken NewPage and hinder its emergence from bankruptcy protection.

NewPage’s bankruptcy case presents Verso “with both significant opportunities and risks,” an attorney representing holders of first-lien debt wrote to the bankruptcy court today.

“On the one hand, Verso’s market position will be greatly improved if Verso is able to acquire NewPage’s assets at fire-sale prices, or if the Debtors fail to successfully reorganize [NewPage],” Dennis F. Dunne wrote.

“On the other hand, Verso is significantly threatened by the possibility

Tuesday, July 10, 2012

NewPage's Fraudulent Deals Started in 2007, Creditors Claim

Four years before it went into bankruptcy protection, NewPage Corp. was essentially structured as a giant scheme to defraud suppliers and other creditors for the benefit of its owners, a creditors committee charges.

The creditors committee wants the bankruptcy court to declare as “fraudulent transfers” the highly leveraged 2007 transactions that enabled NewPage to become North America’s largest producer of magazine-quality papers and the 2009 refinancing of that massive debt.

The Official Committee of Unsecured Creditors is also trying to claw back millions of dollars in “excessively high” management fees paid to leveraged buyout firm Cerberus, NewPage’s primary owner, and millions more in bills paid to two suppliers that are subsidiaries of Stora Enso, a European paper company that owns 20% of NewPage.

The U.S. Bankruptcy Court appointed the committee to advocate for the interests of companies that were left holding accounts receivable but no collateral when NewPage filed for Chapter 11 bankruptcy protection on Sept. 7, 2011. The committee consists of representatives of organizations that stand to lose millions of dollars resulting from NewPage’s insolvency, including the Pension Benefit Guaranty Corporation, Deutsche Bank, OMNOVA Solutions (a major supplier of specialty chemicals to the paper industry), and United Steelworkers.

NewPage’s owners have challenged whether the committee has the right to press its claims in bankruptcy court. The court has not ruled on that question yet.

Among the creditors’ claims are:

Destined to fail
NewPage’s 2007 acquisition of Stora’s North American paper mills left it “with a crippling amount of new debt, but without any new value to show for it. No new equity was injected whatsoever. The target Debtors [the various NewPage subsidiaries] simply had new owners. Hobbled by this

Saturday, July 7, 2012

Postal Workers Are Putting Off Retirement

Note: PostalNews Blog has a different interpretation of the recent USPS employment statistics that is worth noting. It points out that thousands of employees have gone from part-time to full-time. The number of part-timers, meanwhile, is decreasing faster than the number of full-timers. So much for the goal of having a more flexible USPS workforce.

Talk of early-retirement incentives for U.S. Postal Service employees may have temporarily backfired: Career employees of the U.S. Postal Service have apparently been retiring in record low numbers

The number of full-time employees shrank by only 1.6% in the past year, according to a statistical report USPS released Friday. That’s a minuscule net attrition rate in an organization that is hardly hiring any new full-time employees, where half the employees are 50 or older, and where nearly half the employees are eligible to retire.

The net loss of only 8,141 full-timers between June 2011 and June 2012 is a far cry from the decrease of nearly 22,000 the previous year and more than 38,000 the year before that. The irony is that the Postal Service has placed increased emphasis on downsizing its workforce to cope with declining revenues.

The low attrition numbers back up what many USPS employees have been saying for more than a year: They are delaying retirement in hopes of bagging some incentive money.

Wednesday, July 4, 2012

USPS' 'Safeguards' Have Been Running Amok For 3 Decades

The more things change at the U.S. Postal Service, the more they stay the same.

Consider this statement written 31 years ago by then-Postmaster General William F. Bolger:

"The main disadvantage of the Postal Service's present status is that the 'safeguards' that accompanied independence have tended to grow to the point that new fetters have been substituted in part for the former ones. The Postal Service continues to be overregulated, and its managers continue to have difficulty finding the authority to execute certain decisions that are necessary to modernize the service and operate the postal system efficiently."

Bolger's reference to "safeguards" came from a 1970 Congressional report that called for making the Post Office Department an independent agency, which happened the next year. Bolger quoted the committee as writing that the only way to fix the Post Office was "fundamental reform that puts complete responsibility in a single place, with appropriate safeguards. . . . Top management must be given authority, consistent with its responsibilities, to provide an efficient and economical postal system."

The overregulation of the U.S. Postal Service has become even more apparent and more damaging today. Congress demands that the agency break even yet hamstrings its efforts to reduce costs and mostly prevents it from building new sources of revenue. For too many Congress members, "appropriate safeguards" mean preventing any changes that would hurt anyone in their district regardless of the greater harm to mailers, employees, and the Postal Service from doing nothing.

Bolger's letter in answer to a questionnaire from the National Academy of Public Administration provides quite a lesson on the history and legal standing of USPS. I have posted the entire letter on Scribd.