The Deal from Hell

by James O'Shea

  From the outside, the Times appeared to be an army of journalists united in defense of its defrocked editor and in opposition of the marauding horde in Chicago. In reality, the staff resembled a pack of quarreling tribes. Tribune-mandated budget cuts had ignited intense internecine warfare as editors scrambled to lock in their share of diminishing resources instead of confronting the huge challenges on the horizon. When I met with department heads, metro’s head complained to me about how the national and foreign departments had somehow bypassed cuts. Ditto in business, sports, and features. The budget scrum was really no different than what was happening in Chicago; it was just more intense and more public. The truth was, everything you did in Los Angeles was public; news would be leaked almost immediately to Roderick at LA Observed. When I wrote a memo, I was aware that it was only a matter of hours before it would become public fodder.

  As I settled into the newsroom at the Times, I sympathized with Baquet. He hated the budget and management part of the job (he’d delegated that to Wolinsky), and he’d focused the lion’s share of his time and talent on journalism: talking to reporters about their stories, editors about their sections, and everyone about their jobs. By 2006, though, he had started spending an increasing amount of time fighting budget cuts. Over dinner during my first week on the job, Baquet told me he had deferred many hard decisions with the hope that he would eventually prevail and would fix them later. I soon discovered I faced a dysfunctional online operation, an abortive redesign of the paper, chronic misallocation of resources, and a raft of special deals that elevated the status of some reporters at the paper. The Times had three people in each of its Denver, Seattle, and Atlanta bureaus, but only one staffer was covering the San Fernando Valley, home to 1.8 million people starved for news about their community. Janet Clayton, who ran metro, stunned me when she admitted that she had not replaced the overnight police reporter (a footnote in the slew of cutbacks), leaving a paper covering Los Angeles without anyone reporting on the police beat at night. To me, it was unthinkable.

  A lunch with California Governor Arnold Schwarzenegger telegraphed the rocky road ahead. When I asked him what he liked and disliked about the Los Angeles Times, I expected him to mention a story that had angered him or his wife, Maria Shriver (like the Times’ infamous election eve story about his tendency to grope women). Instead, he replied that he hated the font of the headlines on page one. I thought: “If the headline font is so garish I have Arnold Schwarzenegger talking about it, I’m in serious trouble.”

  On arrival in Los Angeles, I had immediately taken Wolinsky out to lunch and asked him what the hell he’d been thinking about when he decided to meet with Geffen. Wolinsky told me he had been criticized in the Staples affair for not knowing what had been going on, and he’d wanted to have an upper hand on the news this time. He apologized profusely, and I decided that, although he’d clearly stepped out of line, it wasn’t a firing offense. And besides, I needed someone with Wolinsky’s knowledge of producing a massive, complex newspaper in a city I didn’t know. F. Richard Ciccone, a former managing editor at the Chicago Tribune, once pointed out to me that if I got hit by a truck on my way to work, the paper would still come out on time the next day. But if editors like Wolinsky—who knew the production process cold—got hit, the paper might not come out. Wolinsky had the kind of vital knowledge that was crucial to a new editor. I could always move Wolinsky if I wanted to, after I had more time in the editor’s office. During the first couple of months, there were some surprises, but things generally developed as I had expected, except for one challenge I hadn’t anticipated.

  Even under the best of circumstances, stress defines the relationship between a publisher and editor. Smart publishers usually delegate deadline duties to their editors and focus on the business side of the paper for good reason. A publisher’s intervention in a story can easily trigger a conflict or signal favoritism—at best an embarrassment, at worst a threat to the paper’s editorial integrity. “When people complained, I always told them there’s nothing I can do about it,” Madigan once confided in me, “because it’s the news.” The publisher’s office is the one place in a newspaper where the line between editorial and the business side can be most easily breached. For whatever reason, that line was not sacred to Hiller.

  In a perfect world, I don’t think Hiller, FitzSimons, or Smith would have selected me to be editor of the Los Angeles Times. I had clashed with each of them many times, just not as publicly as Baquet had. I was simply too independent for people who valued team players above all else. I had worked often with Hiller when he was publisher at the Chicago Tribune, but our relationship changed when I arrived in Los Angeles. In Chicago, I had Lipinski, the formidable editor of the Tribune, as a buffer to separate me from Hiller. In Los Angeles, it was just the two of us.

  To many locals, Hiller seemed a curious choice for publisher of the Los Angeles Times, particularly given the lasting legacy of Otis Chandler. Otis had worked his way up through the newsroom and resembled a Greek god who could toss a spear across the Pacific. He was muscular and handsome, a motorcycle-riding sportsman who rebelled against his family. Hiller, by contrast, had never worked as a journalist. Slender and well groomed, with wavy gray hair and a relaxed sense of humor, he was a Harvard-educated lawyer from Park Ridge, Illinois. He had joined Tribune Company as general counsel before working in the company’s development arm putting together and sealing deals. Prior to becoming publisher of the Chicago Tribune, he had run the newspaper company’s Internet operation. A single man in his fifties, he lived in a Santa Monica apartment in a building that he was fond of telling people had once been home to Lawrence Welk.

  Although Hiller had limited publisher experience in Chicago, his political roots and loyal nature appealed to FitzSimons. A self-described member of the political right, Hiller had served as an assistant attorney general in the Reagan Justice Department but also as a law clerk to Associate Justice to the Supreme Court, Potter Stewart, a judge with liberal leanings. He had also worked at the Tribune’s law firm, Sidley Austin. He communicated his political leanings with the halting, lawyerly questions he used to make a point.

  Many Tribune employees back in Chicago liked Hiller, and for good reason. He was friendly, intelligent, funny, and perhaps most importantly, he was the consummate team player. He came off as a kind man, someone who wanted desperately to be liked. The kind of guy who ran for class president. And he loved to sing. In the midst of a crisis, I’d get the feeling Hiller was about to jump up and sing, “Everything’s Coming Up Roses.” As publisher of both the Tribune and the Times, he successfully lobbied the Chicago Cubs and the Los Angeles Dodgers to let him sing the national anthem in Wrigley Field and in Dodger Stadium. At a staff party celebrating the paper’s 125th anniversary, Hiller grabbed a microphone and started crooning show tunes.

  Being the editor of a paper is like few other jobs in America; it’s like owning a baseball team—a business that at heart belongs to the public it serves. If you breach the public’s faith in your product, you fail. I viewed my job as a custodian of a public trust—a role that involved a lot more than collecting a big salary. I had to protect the integrity of the institution I ran and by extension the news at all costs.

  As I assumed the responsibility of editing the Los Angeles Times, maintaining that public trust had become increasingly difficult. The industry faced an unprecedented assault by everyone from bloggers and blowhards on the political right and left to critics of the so-called mainstream media. Editors of papers large and small struggled with newsrooms in denial and owners under the gun to maintain solid financial returns to their shareholders.

  In Baltimore, a wealthy hedge-fund investor had just forced the Knight Ridder chain to put itself on the auction block, and in June 2006, the Sacramento McClatchy publishing chain had stepped up and bought much of the company. McClatchy promptly began selling off papers it didn’t want, including the Minneapolis Star Tribune, which sold the following year for $530 m
illion, a staggering $670 million less than McClatchy had paid for the paper just nine years earlier. The sale shocked an industry where papers had routinely commanded far higher prices.

  In my quest to deal with problems that could no longer be deferred another day, I worried most about diminishing the newspaper. The Los Angeles Times put out an excellent newspaper with 1,200 journalists in the newsroom, and I felt I could produce an equally excellent paper with just over 900. But I searched my soul asking at what point the cuts, bureau closings, and newsprint savings would fundamentally dilute the quality of the newspaper. Readers in Los Angeles complained about cuts in the paper far more than they did in Chicago. I told myself that I would not dare leave until I improved the paper that I’d inherited.

  I had barely settled in Los Angeles when my worst fears were realized. Almost immediately, the Tribune Company pressured me for a staff cut. My experience in shaving budgets taught me that the Tribune numbers game was a road to nowhere. The corporate staff assessed the needs of the company, engaged in the give and take that public companies routinely practice with Wall Street analysts, and figured out how much excess cash the business needed to prop up the stock price and deliver 20 percent plus returns.

  Once the finance guys set a target, each paper had to submit budgets that hit the magic number measured by cash flow. If Tribune needed $100 million in cash flow to keep Wall Street happy (and fund management bonuses) and the Los Angeles Times contribution was $50 million, then the paper would have to move heaven and earth to reach the goal, readers be damned. It was a lazy process in which accountants did the math and ordered cuts to reach a budget goal. The exercise put a premium on cost cutting and devalued the kind of enterprise or editorial risk taking that could actually generate revenues. The unstated understanding was that the newspaper could always be cut, because not that many readers noticed, and most didn’t have an alternative source of news.

  I had not entered Los Angeles with a budget or job-cut target. Smith and Hiller had asked me to commit to a reduced staff level, but I told them I couldn’t say how many people I would need to run the Los Angeles Times since I had never worked in that newsroom. “I’m a reporter,” I told Smith, “and a pretty damned good one. If I go out there, I’ll do some reporting. The only thing I’ll guarantee you is an honest answer. If I can do it with less, I’ll tell you. If I think I’ll need more, I’ll tell you that, too.” I was adamant that I wouldn’t weaken the newspaper with indiscriminate, thoughtless budget cuts.

  Significantly, Smith and I agreed that I would manage the budget so that it would not exceed an unspecified percentage of the paper’s revenues, generally around 12 percent to 13 percent, which was about the same level as the Chicago Tribune. How I achieved that level would be up to me. The process gave me more flexibility and the newsroom a stake in fixing the revenue drain that most papers faced at the time. We had a revenue problem that we were treating like a cost problem, which would only make the revenue problem worse. If revenues tanked, as they usually did during a recession, I was more vulnerable, but it was a gamble I was willing to take.

  In point of fact, my budget deal with Smith was somewhat unusual in a newsroom. Traditionally, editors didn’t concern themselves a great deal with revenues or finances; they were journalists, after all, people who were supposed to worry about the news regardless of financial consequence. But that attitude—that revenue was the realm of the business side of the paper—had developed when monopoly ad markets minted money and newspaper editors were driven to work in chauffeured cars. I had a budget of about $130 million, which sounds like a lot of money until you consider what it takes to cover everything from Hollywood and Washington to the war in Iraq (the Baghdad bureau alone cost me about $1.5 million a year). If I didn’t want to cut the budget, I had to figure out a way to help finance our journalism. I couldn’t just do it by slashing a budget or sitting tight and waiting for things to get better. Those days were over.

  At heart, newspaper budgets are really paper and people. In Los Angeles, the newsroom cost ratio for people is about 80/20, or about $.80 of every dollar you spend pays the salary and benefits of the journalist writing or editing the news and $.20 covers expenses, things like travel, meals, notebooks, cameras, and overhead. Bean counters usually place the other major expenses—newsprint and ink—in a separate budget. A newspaper like the Los Angeles Times can spend $160 million to $170 million a year on ink and paper alone. In the Tribune’s top-down budget process, accountants usually gave you the bad news in two messages. In one, they would order, say, $8 million or $10 million in newsprint savings, leaving editors to come up with recommendations to the publisher regarding which sections to slash or kill. In a second message, they’d squeeze your editorial spending, demanding something like a 5 percent cut in a $130 million budget, or $6.5 million. Do the math, and it’s easy to see why hitting that target without getting rid of people is almost impossible. Assuming 80 percent of a $130 million budget is devoted to salary and benefits, you would have to cut $6.5 million out of the remaining $26 million if you didn’t want to axe people. A 25 percent reduction in expense money would seriously diminish most newsrooms.

  In our first budget dance, Hiller tried to hit me with a huge staff cut, but I objected in strong terms, actually storming out of the building after arguing that I needed a chance to rejuvenate sections that were losing money and to increase revenues in others. To his credit, Hiller backed off. I truly believed I could resolve the problems in the Los Angeles Times newsroom, but I also knew I wouldn’t make any progress unless—and until—I won the respect and confidence of the staff. To do that, I needed Hiller’s help, and he needed mine. But barbs inevitably developed that complicated our relationship and made me realize that I faced a far larger hurdle than I’d anticipated.

  In early December, I walked into my office and noticed my schedule placed me in Hollywood for much of the day at a ceremony in which the Los Angeles Times, in honor of its 125th anniversary, would become the first newspaper to be awarded a star on the Hollywood Walk of Fame. “What is this?” I asked Polly Ross, my assistant. “Are you kidding? I’m not going. I’ve got better things to do with my time.” But Ross reminded me that my newfound stature dictated otherwise. “You have to go,” she said. “You are the editor. They would be insulted if you didn’t show up.”

  To my surprise, one of the people who would take offense was Hiller. Later in the morning, Clayton from the metro desk came to see me, her eyes bulging in disbelief that the publisher’s office had called the city desk to ask about our plans to cover the Walk of Fame ceremony. This was not something that a publisher at the Los Angeles Times would have done in the past, and Clayton was shocked by the suggestion we cover something so lacking in substance. I told Clayton not to worry; I would take care of it. I called the photo editor and told him to send a photographer up to Hollywood to take pictures at the event. “As far as a picture in the paper,” I said, “judge it in the context of the day’s news. If it doesn’t measure up to the rest of the news, it doesn’t measure up.” Many of the pictures a photographer takes don’t make it into the newspaper and I couldn’t imagine that such an image would ever appear in the news columns of the Los Angeles Times. It simply wasn’t newsworthy. It was a publicity stunt.

  But Hiller saw things differently. When the Times limo pulled up at the Hollywood Roosevelt Hotel, Hiller stepped out, beaming. He was thrilled to be Los Angeles Times publisher when the paper got a star on the Hollywood Walk of Fame. Certainly, there had been a time when being awarded a star had been a big deal, but by late 2006, it didn’t take much to get one. More than 2,000 stars dotted sidewalks in the neighborhood. Even Charlie Tuna had one! Stars were not ceremoniously handed out solely for a lifetime of achievement, either. Recipients forked over $25,000 for their pink terrazzo, five-point star rimmed in bronze.

  As the Times entourage neared the sidewalk where our star was laid, Hiller met Johnny Grant, the honorary mayor of Hollywood who ran the star selec
tion committee. Grant, an avuncular, glad-handing legend, shook hands with Hiller, sealing a union of kindred spirits. A delighted Hiller stepped to the lectern and praised Grant and some Times veterans who had shown up for the ceremony. Grant, who died months later, unveiled the star and more pictures were taken. Ed Begley, Jr., spoke at a lunch at the Roosevelt Hotel and then it was finally over. I got back to the office just before the 3:30 news meeting with my editors. No one mentioned the Walk of Fame, and I didn’t bring it up.

  As I was driving home, Hiller called me, wanting to know about coverage of the Times star in the Saturday paper. I told him that we had sent a photographer to cover the event, but that the picture didn’t measure up to the news of the day and that we wouldn’t run anything. A moment of silence passed uncomfortably. When Hiller finally responded, he was furious.

  “They’ll run negative stories about us all the time,” Hiller barked, referring to the coverage allotted to his dismissal of Baquet, “but when something positive happens, no story.” I tried to settle Hiller down, explaining that the event was the kind of public relations stunt we simply didn’t cover: It wasn’t news. When I pointed out that the newspaper had paid for the star, Hiller shot back, “What do you mean we paid for it?” I told him that I had heard we paid for the event, but that I didn’t have the details and would get back to him. “Well, I want a full and detailed report,” he sputtered in frustration before hanging up.

  The next Saturday afternoon, Hiller called me again, asking if I could run a photo of the event, or a story in the Sunday paper. I told him no, a story would be inappropriate, particularly given the circumstances of the award. I had subsequently learned that the deal to honor the paper with a star had been hatched when the head of the Los Angeles Times PR department met Johnny Grant at a party and suggested it. Twenty-five grand later, Grant agreed. “If you want something in the paper, you should run a house ad [an advertisement labeled as a Times ad and paid for by the paper],” I told Hiller. After more back and forth, an angry Hiller agreed, letting me know that he would take the space for the ad “out of the fucking newsroom budget.” Within a week he ran a full-page house ad touting the paper’s star.