Soon after, his father agreed. "This was a good opportunity to create a more efficient package," says the elder Warren.
* * *
The Acquisition:
Get the Missing Pieces
In December 1991 Courier Publications bought Emmy Lewis's ailing papers -- the Republican Journal, the Bar Harbor Times, and the Bucksport Free Press -- for "a little more than $800,000," according to Jonathan Thompson, a media consultant who was an adviser on the deal. Funds to make the purchase were borrowed against Courier's assets, and part of the payment was spread out in installments over eight years. The acquisition was a virtual steal and a boost for Morse. He got what he wanted to make big changes.
Morse moved quickly. He immediately closed down the Bucksport Free Press, a low-circulation paper, and in its place started a Bucksport edition of the Republican Journal. He put the Republican Journal's building on the market for $110,000. He moved the paper's five-unit Goss press, valued at $300,000, to Rockland. The additional capacity enabled Morse, at modest cost, to start a new free paper, the Ellsworth Weekly, and to expand and customize the Weekly Courier, a "shopper" without editorial content, into three weekly broadsheets that would carry local news: the Lincoln County Weekly, the Knox County Weekly, and the Waldo County Weekly. Within a year Morse had transformed a failing two-newspaper company into a thriving seven-newspaper group. Total weekly circulation rose from 34,000 (subscription-based and free customers) at the end of 1991 to 80,000 today. When Morse arrived at Courier, revenues stood at $3 million. Today they are approaching $6 million. Profit was nonexistent. The current operating margin, 5%, continues to rise as efficiencies take hold: as budgeted for 1994, it's more than 8%.
"This made the whole thing work," says Morse with a broad, appreciative smile as he approaches the Goss, newsprint streaming through it as the Wednesday edition of the Courier comes to life. The Goss is a more flexible, higher-speed press than its aging counterpart, a King press that hums along on the other side of the pressroom. Before the acquisition, the King was tied up printing the Courier-Gazette three days a week and Maine Antique Digest one week each month. That hamstrung the company's ability to bring in additional commercial work.
With the addition of the Goss, Morse juggles production between the two presses, so he can take in much more outside work than before -- without even adding a second shift. That means a lot more volume for only marginal cost increases. The additional production capacity is what enables Courier to print the weekly tabloids for other Maine publishers. The pressruns on those jobs are short -- typically, 10,000 copies. So the press operator has time for frequent checks that ensure high quality. In just a couple of years, Courier has developed a statewide reputation for its contract newspaper-printing services, which now account for 16% of revenues.
* * *
The Regimen:
Bring Costs Under Control
As sales grew, Morse set about cutting costs to reestablish positive cash flow. The company has turned ad-sales compensation on its head, with far more of it now coming from commissions and less from salary. Some salespeople have left, unable to make it under the new incentive system. Those who remain have seen their paychecks increase up to 20%.
"Cash flow is king," says Morse. "One thing that's good about the newspaper business is, you get your money back pretty quickly." One thing that's bad, though, is that publishing a newspaper is a capital-intensive and labor-intensive business with large costs lumped in a few areas. The "three Ps" -- people, paper, and postage -- account for 80% of total costs at the Courier-Gazette. Paper and postage costs are tough to get around. People are another matter.
In his first year at Courier, Morse invested about $250,000 in technology, but he got for it a two-to-one payback over two years ($500,000 in labor expense eliminated). Moreover, technology investments yield recurring dividends, since people get paid for as long as they work, but machines do not. Morse cut 20 full-time people from the combined workforce. The editorial head count, though, has remained unchanged, while the number of papers published increased from two to seven. Nonetheless, in the past two years Courier papers have garnered 54 Maine Press awards for editorial excellence.
Cutting people has been hard. "We've tried to be sensitive about this -- especially in this economy, where most people don't have that many other options," says Morse. "Their skills don't readily translate." He argues, though, that the company had little choice. Without layoffs there would be no company and no jobs, and, he points out, there's the multiplier effect -- the company pays $2 million in wages, collects in excess of $5 million in annual revenues, and serves four counties hungry for local news. And the papers are a boon to retailers in that market, where total retail sales surpass $1 billion annually.
"You wouldn't have believed the labor intensity in this place," Morse says, stepping into a preproduction room in the basement of Courier's building and waving his can of Diet Coke at nothing in particular. "People were tripping over each other." Many of those people are now gone. In their places are machines like the Deadliner and Scan 3. The Deadliner, a $50,000 machine, came with the acquisition. "They said they could never get it to work right over at the Lewis papers. It works fine for us." The Deadliner allows copy to go straight from paper to plate, knocking out the costly film-producing step. It replaced two workers and cuts production time by 60%. Morse steps into the next room to adore more high-tech manna, the Scan 3. "This thing is great. This replaced two workers. This is a $40,000 piece of equipment. We lease it for about $10,000 a year."
