Financial Roller Coaster

Freep staff confer (left to right): Vivian Ho (COM’11), Neal Riley (COM’12), Taylor Miles (COM’11), Lauren Finch (COM’11), and Lauren Rodrigue (COM’11). Photo by Sandra Hartkopf (COM’12)

Print journalism everywhere is in trouble. That includes Boston University’s student newspaper, the Daily Free Press.

Forced to cut back publishing to four times a week, vacate spacious Commonwealth Avenue digs for a much less expansive (and expensive) office on Beacon Street, and affected by the collapse of display advertising crippling newspapers around the country, the Freep is facing what might be its toughest challenge in nearly 40 years. According to financial filings and reports, acknowledged in an article published earlier this month, the paper is lugging debt approaching six figures into the new semester.

Bad as that is, the Freep’s been there before, and survived. It has overcome stretches of bad management and has dug itself out from a six-figure legal judgment a decade ago. It has much lower costs than most newspapers in the real world — editorial staff works for free, distribution is limited to a few city blocks. It has a tailor-made, easily targeted upscale audience in the BU community, with advertisers all around campus (including the University itself) who should want to reach out and touch those people. It has major talent willing to help at its fingertips, from students and alumni to professors and top-level administrators, all saying they understand that the paper’s independence, its ability to be critical and even adversarial, must be protected.

Are these big enough advantages to haul the Freep out of a hole dug in part by forces beyond its control, in part by its own decisions and tactics?

Top line, bottom line … and a few in between
It takes money to run any newspaper, and when the paper is handed out free like the Daily Free Press, that means paid advertising must carry the day.

A decade ago, according to the financial reports all nonprofits must file with the Internal Revenue Service (the Freep operates under the umbrella of a nonprofit called Back Bay Publishing Company), the paper was generating more than $500,000 a year in revenue, almost every penny from advertising. The biggest danger signal is the decline in that annual tally.

In fiscal year 1998, ad revenue was $504,027.
In fiscal year 2002, it was $413,453.
In fiscal year 2005, it was $346,421.
And for the most recent year reported (ending August 31, 2008), it was $314,814.

That’s a drop of almost 40 percent in annual revenue in a decade. And despite efforts to cut costs, those losses reach the bottom line: most recent IRS filings show a deficit of more than $68,000, with almost $97,000 in accounts payable and accrued expenses. Adding to the woes: more than $40,000 of the paper’s accounts receivable were deemed “doubtful” by its accountant, meaning it is unlikely these overdue advertising bills will be paid.

In an article published September 2, the semester’s first day of classes, the Freep acknowledged the seriousness of its problems, releasing an internal report written by a former editor in chief warning that given existing debt and anticipated costs, the paper “is insolvent and must consider filing for bankruptcy as an option if the paper’s business model is not changed immediately.”

As financial reports filed with the IRS indicate, total revenue for the Daily Free Press, gleaned almost entirely from display advertising, has been declining for a decade. Graphic by Edward A. Brown.

The report also notes that bad bookkeeping created discrepancies of as much as 53 percent between “recorded revenue and actual collection during a five-week period in early summer.” Efforts to get last year’s advertisers to pay up have reduced accounts receivable from $115,000 to $30,000 by the end of August, and advertisers are being urged to pay in advance this year to improve cash flow, but these changes have not ended the crisis. The Freep’s printer, Turley Publications, is the biggest creditor, owed $67,500 for work done during the last school year, according to the report.

People who have worked in and with the paper say the loss of revenue cannot be blamed solely on national trends. Even the paper’s strong supporters say it has lacked a consistent business strategy. Others report that sales presentations are weak, sometimes lacking basic elements like rate cards and timely contracts.

One University official recalls meeting with Freep staffers last year about advertising upcoming events. He had planned to spend $10,000, but was asked for $5,000 worth of advertising, without being presented with a clear sense of how much space that would buy or a proposed schedule of where and when the ads would be placed.

“Of course I agreed,” he remembers, “but afterwards, I told these well-intentioned students that they need to learn about real-life sales strategies like ‘upselling’ [convincing customers to buy more ads than they had planned, not fewer]. But understand that at heart these good people struck me as aspiring journalists, not sales reps. They were there trying to do their best to help the paper, not make more money on commission by selling more, which is what motivates real salespeople.”

Evelyn Ratigan (COM’10), a former Freep city editor and this year’s chair of the nonprofit board that oversees the paper, says that currently “reporters, photographers, editors, and writers are in no way involved in making sales calls. In our view, that would be a conflict of interest — business and editorial operations should not cross over.” However, it is “former editors and writers” who then join the board of trustees and “take care of the business side of things.” The editor in chief and a student ad manager also sit on the board.

Over the decades, the University has been the Freep’s most reliable advertiser. But that relationship is by no means simple. Advertising from various departments and colleges has consistently been solicited, but most of the time the Freep has not taken ad money directly from BU’s central administration — doing so has been seen as potentially compromising the paper’s editorial independence.

Kenneth Elmore, dean of students, remembers making an offer several semesters ago to front the Freep a loan; “50 grand,” he recalls, to help cover old debt. “I kept saying, ‘No strings attached,’” he says, “and they turned me down. They have a tough decision to make, as to whether that compromises their independence.”

But current student leadership is all for accepting advertising from the administration, seeing a major distinction between taking a fee for service and accepting a loan or gift. Matt Negrin (COM’09), an editor for two semesters who moved onto the board of directors, proposed that to Elmore, remembers Vivian Ho (COM’11), this semester’s editor in chief, and “we were all for that deal,” she says, “but in the end, for whatever reason, Dean Elmore did not return our calls. I understand he’s a very busy man. However, we in no way declined this deal.”

Elmore says that like so many potential advertisers, “I got to admit, I’m not a guy who sees great benefits in print these days. I’m inclined toward other ways of getting the word out.” But he also wants to support the paper; buying a lot of print advertising is an idea that’s “still on the table,” he says.

He also would like to offer expertise, he says, especially on the business side, and he worries that the paper isn’t aggressive enough in searching for advertisers and revenue. He mentions that concern over lunch at the BU Pub. He looks around. “I have to believe that the people who run this fine establishment would be very willing to advertise in the Freep,” he says. “But to tell you the truth, I don’t think they’ve been asked.”

Tom Fiedler (COM’71), dean of the College of Communication, a two-time Pulitzer Prize–winner and longtime editor of the Miami Herald, also is concerned that the Freep has “a real problem doing the blocking and tackling,” the basics that make any newspaper succeed. One crucial business ingredient, Fiedler says, is solid distribution.

“Here I am at COM,” he says. “You’d think this would be a primary market for the Free Press. Well, we get it delivered here maybe once or twice a week. And I’d say if it were here, every student in the journalism program would read it.”

Fiedler advocates building a strong link to the School of Management, exploiting what he calls a natural tie-in to find students as passionate about the business side as editors and reporters are about journalism. “There should be someone in our community who would be delighted to put on his or her résumé at the end of the year, ‘I ran a college newspaper,’” Fiedler says.

“Because, you know, there’s an old saying in this business: the worst thing you can do, financially, is have a newspaper — any newspaper — run entirely by journalists.”

Short-term strategies, longer term fixes
To try to keep stay afloat, the Freep has taken two dramatic steps:

In February of this year, it reduced its printing schedule from five to four days a week to lower printing bills that in the previous fiscal approached $115,000 even with fewer pages. “That was really tough,” remembers Ho, who has been working at the paper since freshman year. “I started to cry, when I found out; you know, the Freep is kind of your baby. But I understood it was a financial decision.”

The press run has been cut back to about 4,000 papers a day, another saving (possibly curtailing the number of people who see each issue, diminishing editorial impact and advertising results). Issues are now 8 to 12 pages rather than 24, but even so, daily print costs can reach $1,500.

In another cutback, the paper moved out of sprawling, highly visible offices at 842 Commonwealth Ave. to smaller quarters at 648 Beacon St. in February 2008. In both locations, BU is the landlord. The rent for 4,000 square feet on Comm Ave was $93,601 a year, for 1,200 square feet on Beacon Street it’s $39,375, saving more than $54,000 annually.

Over the years, according to administration sources, the landlord has been unusually helpful, allowing the paper to slide on the rent for months — sometimes many months; according to the Freep’s own report, the paper is $10,000 behind in rent as of the end of August. “They have wanted complete and total independence from us, and appropriately so,” says Joseph Mercurio, BU’s executive vice president. “But that’s never been the real model. In truth, they could not have survived had we not propped them up periodically.”

This is a cycle that goes back to 1974, says Mercurio, when he was in the financial office and even then worked with Freep staff to buttress the paper. During another crisis, in 1986, the University and the paper made the kind of agreement Freep leadership would like to see now: the administration committed to $20,000 in prepaid advertising, which allowed the paper to pay overdue bills and keep cash flowing.

So the present crisis, although severe, is not unique, and could even be seen as one long-standing theme in the paper’s life. “I attribute all this in part to a model where there’s little continuity,” says Mercurio. “There’s a new generation every three years; memories are short.”

No one on staff now, for example, was involved in what was arguably the Freep’s most traumatic financial crisis. On October 28, 1998, the Massachusetts Superior Court ruled that a woman working at the paper had been discriminated against and unfairly dismissed. According to financial documents filed with the IRS, the court ordered the nonprofit to pay more than $295,000 in damages, $40,000 to start, $4,000 a month until the full amount was covered (at the time, the Freep reported the judgment as roughly $165,000; the discrepancy may have to do with additional penalties and legal costs).

That judgment alone would have left the Freep reeling financially, but was only one of the paper’s problems. In 1998, editor Gene Johnson (COM’99) penned an open letter to the community that appeared alongside news of the damages awarded: “[T]he business of the Daily Free Press has been poorly organized for the past several years and needs attention now if the paper is to survive beyond its 30th anniversary.” Johnson’s assessment was accurate. In 1997, the paper was showing a net balance of more than $300,000; by fiscal year 2002, its net assets were minus $131,000.

Yet catlike, the Freep survived well past year 30, and now approaches its 40th anniversary in 2010. It clawed its way a decade forward with belt-tightening, better management, and support and goodwill from many quarters, including some who over the years it’s seen as adversaries.

“These folks are activists, always have been, and that’s a neat thing,” says Elmore. “They want the University to be the best it can be, and I love that. So here’s my belief: a big-time urban university needs a first-class student newspaper. And independent? You bet.”

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Seth Rolbein can be reached at srolbein@bu.edu. Edward A. Brown can be reached at ebrown@bu.edu.

Read more from the Freep series.