The Dallas Morning News is attempting to position itself for financial success in the new year, by laying off 43 employees from its newsroom and other sections of the company, reports Maria Halkias for the newspaper. The cuts represent about 4.0 percent of total staff and include about 20 writers, editors, photographers and newsroom support staff. Among the cuts are beat reporters and administrative staff who were surprised by the layoffs, says WFAA, Channel 8 for ABC, who talked with several of the laid off workers in this interview.

While The Dallas Morning News, which is owned by A.H. Belo Corporation (NYSE: AHC), has focused on acquiring digital subscribers, it has seen additional print revenue decreases as well as drops in circulation revenue from home delivery and single-copy sales.

“After considerable thought and analysis, our management team has determined that our business in the future is largely supported by subscription revenue and the need for more aggressive investment in our digital products,” said president and publisher Grant Moise.

“We are rebalancing our financial resources to support these new foundational elements, so we are position for success and can delivery quality journalism for many years to come,” added Moise.

Halkias reports that these cuts are part of a reorganization across the company that include investing in technology, customer service and the online experience of its subscribers.

“In 2019, we are committed to aligning the company’s investments and resources with the goal of becoming the best possible subscriber-first digital organization,” said Katy Murray, CFO for A. H. Belo.

A. H. Belo was founded in Dallas in 1842. In addition to owning The Dallas Morning News, the company owns Al Día Dallas and Briefing, as well as online news and information sites. The company says the newspaper and its portfolio of print and digital products reaches an average daily audience of more than 1.1 million people.

A. H. Belo reported its third quarter 2018 financials on October 30, 2018. For the third quarter, the company had total revenue of $49.1 million, a decrease of $11.5 million, or 19 percent, compared to the same period the prior year. A. H. Belo reported a net loss of $1.0 million, or $0.05 per share, compared to net income of $2.6 million, or $0.12 per share, for the third quarter of 2017. Additional highlights for the third quarter, that likely impacted this decision, include the following:

• Revenue from advertising and marketing, including print and digital revenue, was $25.3 million, a decrease of $9.6 million, or 27.6 percent, compared to the third quarter of 2017.
• Total digital and marketing services revenue was 41.6 percent of total advertising and marketing services revenue, compared to 39.3 percent for the prior year period.
• Circulation revenue was $17.9 million, a decrease of $0.9 million, or 5.0 percent, year-over-year. The decrease was attributed to a drop in home delivery and single-copy sales which were partially offset by a rate increase in single-copy prices.
• Printing, distribution and other revenue decreased $0.09 million, or 13.8 percent, to $5.9 million, due to a $0.4 million decrease in commercial printing revenue and a decrease of $0.2 million from a discontinued product.
• Total consolidated operating expenses (GAAP) were $50.4 million, a decrease of $10.2 million, or 16.8 percent. $3.5 million of this expense decrease was due to decreases in employee compensation and benefits.
• On September 30, 2018, the company had $145.7 million in total assets, compared to $162.8 million as of December 31, 2017.

“The forces at work in the newspaper industry continue to affect advertising revenues at The Dallas Morning News. And while circulation levels are fairly stable, the benefits of increased investment in both digital and print circulation are just beginning to be defined. The Management Committee and leaders throughout The Morning News are well along in building the framework for a sustainably profitable newspaper in the digital world, with specific initiatives being developed for 2019 and beyond. I’m convinced that A. H. Belo has the right leadership focusing on the right questions in order to achieve this long-term result,” said Robert W. Decherd, chairman, president and CEO of A. H. Belo, in the October 30 earnings report.

Another contributing factor to the layoffs may be a terminated agreement to sell the former campus of The Dallas Morning News in downtown Dallas. A. H. Belo had an agreement with 508 Young Acquisition LP to sell the building for $33 million, but the buyer terminated the agreement in December.

Following the news, A. H. Belo stock rose from $3.95 per share on January 4 to $4.15 per share as of 4 p.m. EST on January 7.

Insider Take:

We always hate to see layoffs in the news industry. While we expect more companies – if not all – to become digital-first companies, we continue to be surprised by the fact that the transitions are incredibly slow and employees are often the first resource to be cut. This impacts an organization’s ability to produce quality journalism, particularly local beat reporting which seems to bear the brunt of such layoffs, and it is discouraging to remaining employees who wonder if they’ll be next.