Lee + Emmis Coming together
In an era of layoffs and cutbacks after a merger, former Lee employees have found happiness with Emmis
By Dan Trigoboff -- Broadcasting & Cable, 2/18/2001 7:00:00 PM
When Dick Gottlieb, head of Lee Enterprises, retired late last year, the tributes began. Don Ray recalled, in a written tribute, the moment when he realized how working for Gottlieb would be different.
"In the first phone call I got from Dick after I became general manager at WSAZ [in 1989], he asked how I was doing," says Ray. "I started running off numbers about revenue. 'No,' he said, 'How are you doing? How are Becky and the boys?' It sent a message to me that people at Lee practice what they preach about caring for people and it came from the top."
The stations then owned by Lee Enterprises are now owned by Emmis Communications, which purchased the stations for $562 million last year. At Gottlieb's retirement party, there were video tributes described as "warm and fuzzy" from the heads of Lee television stations, but one couldn't help thinking that many of those tributes were not only to Dick but to Lee, as well.
"Why not?" says Mary Junck, who succeeded Gottlieb as head of Lee. "These guys knew Dick well. They had very genuine feelings toward Lee and toward Dick."
A merger or sale of a company can often turn an employee's feelings towards the company upside down. Mergers and acquisitions have spelled turmoil, culture clashes, streamlining and major layoffs for major media companies, and when it happens to a small, family-owned business, employees wonder, "What will this mean to me and the company I love?"
The answer, so far, from some high-level Lee employees is that the new life is pretty good. And the eight network-affiliated and seven satellite TV stations have been able to fold nicely into the portfolio of hard-charging and innovative radio power Emmis Communications.
A key reason for the general happiness is that-while Emmis is clearly different from Lee, with a more ambitious bottom line and more aggressive management-people familiar with Emmis say that, like Lee, it puts a premium on keeping employees satisfied-if busy.
"Lee was a nice family business," said a former Lee station executive. "It wasn't Wall Street-driven. We felt insulated; the company would eat a tough time. If you had to fire someone [for cause], no problem. But if there was a layoff, Lee would look harshly on the manager. Was the station overstaffed? That would be considered poor management."
Colleen Brown, former president of the Lee broadcast group, now senior vice president/business development for Belo Corp., says that early word on life after the merger remains positive. "You always worry about culture, especially when you're close to the people," she says. "Everyone walked into this with a lot of hope. I have not heard any disappointment from anyone still with the company, and I'm in touch with friends there."
Part of that comfort level may be that Emmis, like Lee, treats its employees well. UBS Warburg analyst Leland Westerfield says, "Emmis fosters a high measure of loyalty in its employees by recognizing and rewarding those who contribute. That's why you seldom hear of people departing. It's not their modus operandi to slash and burn. When Emmis bought SF Broadcasting, it re-geared its New Orleans stations and doubled cash flow. They did not do that through firing people."
The deal was announced in May to a poor reception on Wall Street, with the actual takeover coming in early October, following regulatory approval. Turnover has not been noticeable, staffers say. The Lee general managers remain, and there have been no significant layoffs, Emmis said. Employees had been warned by Lee early in the sale process that they might have to reapply to a new owner for their jobs, but that did not happen.
"[Working for] Emmis has been very good so far," says one former Lee company executive. "The jury's still out, but so far they've let us do everything we've needed to do. All the signs say that they're focused and professional. We won't know the true character of the company until the budget reviews are over. And we all know the current [slow advertising] environment. They're professional, but they're not starry-eyed idealists."
There have been no significant job losses since the purchase, and, says Emmis chief Jeff Smulyan, "we don't know if there will be any." With a fiscal year that runs from March to March, things will be clearer as the numbers are tallied this month.
"That's the caveat," says one former Lee executive. "It's expected to be a soft year. That, more than the transition, has people concerned. Budgets are aggressive. When you come to midyear, if people are way behind on their budgets, we'll see what happens."
But all companies will be facing those difficulties, not only Emmis. Nearly all companies are basing budgets on the past two years-years that, in hindsight, may have been a strange anomaly rather than a natural growth pattern.
"The budgets are [more aggressive] than I thought overall," another executive says. "If you can't drive revenue this year, the only way to meet margins is to cut costs."
Smulyan did not deny that there are economic pressures. "We can't ignore the economy," he says. "Things are dropping rapidly; we have to be cognizant of that. It's a challenge, but we're up to it. It gets everybody focused."
One thing Smulyan makes clear is that the company's style is not to blow things up. "This is a people-driven business," he adds. "There are tradeoffs, there are dislocations, but the most encouraging thing is that everybody in the company understands that. The Emmis culture is one in which we really rely on our people."
Despite the rosiness of life at Lee, there obviously was a business pressure that caused the stations to be sold. So what was the problem? Lee executives, both inside and now outside Lee, agree that being small made it difficult. "Broadcasting is a good business," says Lee's Junck. "It was a tough decision."
Junck says that, in an era of consolidation, the relative smallness of Lee's holdings would be a detriment to growth. "In the newspaper business, there are not the same competitive pressures to grow," she adds. "Most of the content-the reason people read you-is local. Our view was that it's a disadvantage to be relatively small in television but not in newspaper publishing."
Lee contacted Credit Suisse First Boston to help write up a description of the company. "Ideally," says Junck, "we wanted to find a really good home for our stations and for our people. But once you get into it, prospects are prospects. There was a lot of interest. And, at the end, it got kind of competitive."
With Emmis, she says, "our fit was good between what we had and what they're trying to build. They had articulated that they wanted to be more heavily into TV. They had a pretty good base to build on. Those kinds of things come through in the presentation and during the due-diligence process. You can see the quality of people a company has and how they've been treated over the years. They could see the value we put on local news. We thought they would make a good home for our stations."
Says a station executive, "We've moved from a company that was primarily in the newspaper business to one that's primarily in the radio business. So we're going from a company accustomed to having a monopoly [within its market] to one that's more [competitive]. Radio is a very competitive medium."
Past and present Lee executives say its TV margins had moved a few percentage points up from the low-30s return on investment but Emmis seeks returns in the mid-40s.
Emmis' margins, says analyst Westerfield, "tell you it's a much more efficient company. There's significant room for margin improvement through revenue growth over the course of the next several years. What lies ahead is a significant margin improvement, as Emmis brings its unique radio style of sales to some very prominent stations in their markets. Emmis does relentless research of markets, competitors, clients, advertisers, individual needs, actions. Jeff will get involved in that personally. It's more aggressive than what television has known across the decades. Radio is a scrappier business.
"Jeff is remarkably good at perceiving the relationship between local advertiser needs and programming. He's the reason we have [New York sports-oriented AM radio station] WFAN as a format. He has developed original formats. Smulyan will say that programming needs to be done on a station-by-station, minute-by minute basis."
Smulyan does acknowledge that there are some problems to be solved. "There are a lot of inefficiencies in television," he says. "We will have to do more with less, though not necessarily with fewer people. Our culture has always been to work smarter. We're more likely to expand news [than cut back]. The rub might be that we might try to do news with no more resources. Hopefully, we can work smarter. There are advances in technology; none of us can put our head in the sand."
The key, he says, is that each television station has to find its niche. Audience fragmentation affects all media. "In radio, we tear apart our markets. We're all looking for different audiences. We're double Lee's size [in television], so there are more chances to buy product; we can make better deals for Maury or Oprah. The days of broadly based, broadly targeted broadcasting are over. You've got to find out what the niche is.
"Wall Street hates television," he adds, recalling the hit his company's stock took with the announcement of the deal with Lee. "We have to prove that we can make this a vibrant business. Our home is in radio, but we really felt there was an opportunity in television. TV's an unloved sector. The big challenge is redefining the television business today."
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