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Black Monday at The Herald-Sun

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"If you had asked me yesterday with the sale closing tomorrow morning, what would happen," reflects Jim Alexander, former chief financial officer of The Herald-Sun, "I would have said, 'Not much.'" What did happen sent shock waves through the entire city of Durham.

Alexander was one of four top officers at The Herald-Sun who was fired earlier in the day. And that was just the beginning.

"This was a shock to everybody that it happened this way," he says.

At 10 a.m., members of the R.T. Rollins family completed their sale of the 50,000-circulation Durham daily to Paxton Media Group LLC, a chain based in Paducah, Ky. Paxton's own staff members then entered the building.

Within half an hour, Paxton management began pulling aside individual members of the paper's senior management. Each heard the same brief statement: Paxton is bringing in its own team. You are not needed anymore. Turn over your keys and any other company belongings.

Each person was then escorted to the parking lot by a Paxton employee, without time to gather their personal belongings or say goodbye to coworkers. They were told arrangements would be made to return their things to them. Each person will receive a severance package tied to years of service, totaling up to 26 weeks of pay.

The firings began with the top brass, including Publisher and President David Hughey, Vice President of Sales and Marketing Toby Barfield, Executive Editor William Hawkins and Alexander. Seven of the paper's 10 division directors were let go. By the end of the day, more than 40 employees were given the ax. The rest were left stunned, anticipating further cuts in the weeks to come.

Veterans of more than a decade were left wondering why Paxton's management felt the need to escort them out. "I have no clue," says Hawkins, who had been at the paper since 1988. "It was cold as can be. Maybe that's their management style, I just don't know."

Alexander worked at The Herald-Sun for 16 years. "We were allowed to get our car keys and our briefcases and go, that's all," he says. "I asked personally, could I go say goodbye to somebody, and they said no. It would have been nice to say something to the people we worked with for so long."

An article in Tuesday's edition of The Herald-Sun said 81 jobs will be eliminated in all, bringing the paper's workforce down from 351 people to 270. Of the 87 newsroom employees, 17 will be eliminated. A source inside the newspaper said Tuesday that 43 had been fired Monday, leaving 38 more heads to roll. "People are extremely upset," Alexander says. "The people that it happened to are devastated. There's a mood of fear, shock and sadness."

The atmosphere inside The Herald-Sun building Tuesday was one of stunned silence. After the firing of editorial page editor Bob Wilson, editors Ron Landfried and Greg Childress were told to continue working "as if their boss is on vacation," a source inside the paper said.

Some new bosses were already in place Tuesday: Durham native Robert Childress was named publisher; he comes from the Paxton-owned Messenger-Inquirer of Owensboro, Ky. That paper's editor, Duke graduate Bob Ashley, replaced Hawkins as executive editor. As of Tuesday afternoon, his outgoing voicemail message still played Hawkins' voice, saying, "Thanks for reading The Herald-Sun."

There was no golden handshake for top executives in the deal. Ironically, many of those who lost their jobs Monday had been working hard throughout the holidays to close the sale on time. Alexander says he expected that he and other top management might be let go; the details of the sale as he understood it did not address their fate one way or another. "The four officers, we all knew that our jobs were ultimately in peril," says Barfield, the former vice president of sales and marketing. He says conversations with Paxton management had given him and his colleagues the impression that the new owners would seek input on the local market and employee performance during the first three to six months.

"We assumed that if we did that job well, we thought Paxton would take care of us when we weren't needed anymore. We thought that's the way Paxton played the game," he says. "I think looking back on it, they knew--before they even signed the contract to buy the paper--they knew what they were going to do when they became owners, and that was to put all their own people in place right away.

"They didn't play straight with us," Barfield says. "They gave us no indication that that's what they were going to do. "

In the end, the paper's old management was not consulted on employee evaluations or the Triangle's media climate, he says. "They terminated some extraordinarily talented people yesterday from all departments in the newspaper," Barfield says. "It's just a shame that those people got treated so disrespectfully."

Why did Paxton management make such deep cuts so abruptly? The paper's own report Tuesday quoted executives saying that the company needed to cut costs and wanted to "rapidly" make changes in order to "reassure remaining workers of their job security." The cuts were necessary, it said, in order to make the paper "profitable again." Paxton has some of the highest profit margins in the newspaper industry, sources say. "This is a newspaper that, frankly, in recent years has seen its expenses exceed its revenues," editor Ashley is quoted as saying.

As a privately held company, The Herald-Sun does not release financial figures to the public. Is it true that it has been operating in the red over the course of several years?

Sources inside the paper say it depends on which bottom line you're looking at. "That doesn't account for huge dividends paid to the Rollins family," one source says.

Another says that while the economic downtown hurt the paper, the statement mischaracterizes the paper's recent financial state. "The last three or four years it has not been nearly as profitable as everyone would have liked them to be. Did he lie? No, not really. But you have to decide what your frame of reference is. The sad thing is, revenue had begun to turn around and we'd had several really good months in the past few months ... December was the best month we've had in a very long time."

Paxton's plans for The Herald-Sun are unclear, and it is hard to contemplate the level of morale that new management faces. New editor Ashley did not return calls for comment. Oddly, the paper's own report Tuesday included comments from Ashley regarding revenue, but not editorial content.

That report also stated that the paper will "retain a good deal of its autonomy," with new publisher Childress "making the vast majority of decisions." Childress is credited with saying that the paper will remain dedicated to local coverage in Durham, Orange, Person and Granville counties, and that "the future of any newspaper is local news."

Hawkins says he expects the paper's coverage will change. "Absolutely. They'll put their own stamp on it," Hawkins says. As for those left in the newsroom, "It has to be a very disturbing thing for those who stay. It's got to be a very trying and stressful time for them, and I feel bad about that, I really do."

The firing of 17 newsroom employees will have two effects, Hawkins predicts: "Obviously, it will impact their ability to cover the news in the way that they were able to do. Numerically, it can't happen. You can only stretch it so far," he says. "Secondly, it has seriously undermined morale and will lead to a further erosion of talent. We brought some really good people in, and people--including the N&O, who started first--will pick them off."

Hawkins regrets that he couldn't wish his reporters and editors well before leaving. "I'd have just thanked them for putting out damn good newspapers and encourage them to continue to do the same regardless of who owns them."

The larger question is what these changes will mean for Durham and the surrounding community. While it has never had a national reputation comparable to the N&O, The Herald-Sun has always concentrated on local news and demonstrated an involvement in community concerns. John Burness, Duke University's senior vice president for public affairs, has dealt with The Herald-Sun at all levels, from news to business to community involvement. "I think it's too soon to tell," Burness says of the impact on the city. "The paper has had a lot of advocates and a lot of detractors over the years, but I think it's fair to say that it's covered Durham in its entirety and did so extremely well. I think a lot of folks will be watching to see if they continue to do so."

Paxton owns 28 other newspapers in small markets around the country with an average circulation of 30,000. Most are in non-competitive markets--one-newspaper towns. With a circulation of more than 50,000, The Herald-Sun is the largest paper Paxton has acquired to date, and it has had strong competition from the N&O ever since the Raleigh paper opened a bureau in Durham.

"It appears to me that the Paxton management does not have a clear understanding of the complexities of this market," Barfield says, "and in particular the complexity of Durham as it relates to this larger market. I don't think they understand that this market demands a very good, sophisticated local paper. I think it's true that The Herald-Sun is one of the best newspapers of its size in the entire country, and it has to be because we've got a newspaper three times its size 25 miles away from us. I'm afraid that what the Paxton folks are doing is operating this as if it were a typical 50,000-circ newspaper in a noncompetitive market. I'm very concerned that the quality of the product is going to take a nosedive."

Media mergers based on profit potential rarely end well for the readers. Will Paxton be willing to pay the price?

"Based on their margins, we were indeed a low performer," says a source inside the paper who estimated Paxton would expect margins greater than 30 percent.

Former editor Hawkins says the result was a newspaper that could afford to compete.

"The tradeoff was a quality newspaper that held its own in one of the most competitive markets in the nation," he says. "We competed vigorously against the N&O when they came in to try to take us. Frank Daniels Jr. [former owner of the N&O] vowed there would be one newspaper in the Triangle, and it would be theirs. We were brought in to rebuff that. And whether it was our hard work, or good luck, we did that."

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