Outsourcing and Consolidation Driving the Newspaper Business | Article

By John Harney, Business Writer

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What if the New York Times replaced Pulitzer Prize winner Gretchen Morgenson, cited for her "trenchant and incisive Wall Street coverage", with a writer in India to save four-fifths of her salary? Absurd, you say? Absurd or not, doing so seems to be a developing trend in American newspapers. Though it's unlikely a writer of Morgenson's stature would be displaced, the point is: should any journalists covering their well-known beats be replaced by outsourced personnel in other countries who lack feet-on-the-street savvy?

Some newspapers seem to think so. And possibly with good reason, as the measure would prevent them from losing readership to electronic newspapers or going under altogether due to prohibitive costs.

Journalists Band Together to Ward Off the Inevitable?

But don't tell that to journalists at the Reuters Group. They organized to protest that very practice at Reuters in April 2012, according to the Newspaper Guild of New York. The Guild charges that offshoring U.S.-based editorial jobs to India violates its contract with Reuters. It took the issue to court to be heard before an independent arbitrator, whose decision is binding. The case is still pending and could take a few more months to complete.

"Instead of focusing on producing the highest quality news, Reuters is now focused on producing the cheapest news," said New York Guild President Barry Lipton. "This change is not just bad for our members, it's bad for Reuters and its clients." "This is remote-control journalism, with low-paid reporters in India writing U.S. news to U.S. editors' specifications," he said. "It produces a cheaper product but adds no value to stories with reporting at the source."

Although no Guild-covered employees have lost jobs to offshore outsourcing as yet, that could change – Reuters plans to migrate other U.S.-based editorial jobs to Canada and Singapore.

This is especially egregious since the strategy comes just a few years after Reuters built its Times Square office tower and received millions of dollars in tax breaks by agreeing to retain and increase jobs in the city.

The Guild and Reuters have been in contract negotiations for more than two years. Reuters has sought to cut health care coverage, retirement benefits and job security while the Guild has steadfastly resisted the attempts.

Consolidation on the Rise

In a related development, consolidation of newspapers to cut production costs seems to be on the rise – most notably in Southern California, where Freedom Communications put the Orange County Register, its other newspapers and its television stations up for auction. Leading contenders to buy the Register were MediaNews, with nine dailies in the area, and the companies that own the L.A. Times and the Union-Tribune. The company that owns the Register also owns 32 other dailies, 70 weekly newspapers and eight TV stations. Different suitors are likely to be attracted to each of those segments.

Many in the industry believe that the sale of the Register will be just the first in a series of consolidations. They predict that eventually it could result in what once would have been unthinkable: a single owner for most of Southern California's substantial daily newspapers.

Most newspapers are having to deal with many of the problems plaguing the industry as a whole — dwindling circulation among daily papers, competition from the Internet, rising newsprint costs and declining ad income to name just a few. They are meeting the challenges by consolidating activities such as ad sales across several newspapers, putting employees out of work in the process.

One of the most vocal proponents of outsourcing is MediaNews Group CEO, Dean Singleton. He recently stated he believes newspaper publishers should consider consolidating and outsourcing news operations -- even overseas -- to save money as revenues continue to shrink. Singleton, who also serves as chairman of the board of The Associated Press, said in a speech to the Southern Newspaper Publishers Association that papers should explore outsourcing in nearly every aspect of their operations. "In today's world," he said, "whether your desk is down the hall or around the world, from a computer standpoint, it doesn't matter."

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