'Changing Direction for UPI'

Here's a story by George Garneau from the March 25, 1989, edition of Editor & Publisher:


United Press International, responding to long-term shrinking demand for its services among U.S. newspapers, has trimmed its size and adjusted its focus.

Adjusting to a smaller, though stabilizing, role in newspapers, the managers who took over the financially troubled news service a year ago February are now pinning hopes for profitability on non-media clients.

A year of reorganization and cutbacks indicates a diminished role from the independent privately owned service that once rivaled the cooperative Associated Press.

The UPI of 1989 is smaller, covers few minor stories and more business news. A flood of newspaper cancellations has subsided but, while many large papers have signed new contracts, small single-service newspapers are more likely to switch to AP.

"We are going through a metamorphosis," UPI president Paul Steinle said. "There is a lot of dynamism in the industry. It's changing and we are trying to mirror that."

The buzz word has been "market-driven" as UPI has tried to shift resources to meet demand, while maintaining its broad client base.

Executives, however, vehemently deny they plan to transform UPI into a business service. They insist market forces will shape it, but it will continue to compete with AP on major stories.

"Absolutely, positively we are not getting out of the news business," Steinle said. "We are trying to find a niche in the news business . . . The strategy is to maintain our position, which may not be very much, and achieve growth with non media sales."

He said UPI "will continue to put out a product and let the market decide whether the product meets their need. We think it will work."

Infotechnology Inc., a New York venture capital firm took charge in February of 1988 after the less-than-successful reign of Mexican publisher Mario Vazquez Rana, who bailed out amid growing cancellations and losses after pumping at least $50 million into UPI.

Ironically, Vazquez ceded the news service to the man he had defeated in a bidding war to buy it three years earlier, Infotech chairman Dr. Earl Brian.

When Infotech affiliate WNW Group Inc. took irrevocable 10-year proxy rights to Vazquez' stock, UPI was losing $2 million a month and clients in droves. Management was in disarray, with no marketing plan and shoe-box accounting, according to WNW executives, who considered liquidation.

Instead, UPI was dissected and restructured.

Today a marketing plan and $15 million recapitalization are in place. Some equipment has been replaced. A new business news service has started. A new contract substantially weakened Wire Service Guild clout. Losses decreased from $24 million in 1987 to $16 million last year and executives project a small profit late this year.

The cost: About 30 percent of the staff is gone, including reporters, editors, photographers, artists and support staff -- domestic and overseas. Comprehensive state reports have terminated in at least a dozen states. Editing desks and news units have merged. Morning and evening cycles merged into one all-day cycle. Administrative costs have been slashed and Infotech subsidiaries contracted.

Some staffers, skeptical after repeated layoffs and management changes, see UPI's tradition waning as a comprehensive worldwide news agency.

"I think it's clear UPI is changing its emphasis from what it has done for 85 years, covering national and international news, and is choosing a new direction, business news," one longtime staffer said. "It's probably financially necessary because the industry won't support UPI, but it's a crime because talent is being wasted."

Other foresee worse -- continued cuts again until UPI is sold again or becomes an arm of Financial News Network, an Infotech subsidiary.

"I've never seen morale this bad," said a longtime Washington reporter who complained staff was discouraged by lack of support.

UPI senior vice president and executive editor Al Rossiter Jr. disagrees with those who say the service has sacrificed its traditional broad coverage.

Rossiter maintains, except for reduced state reports, "We still are a comprehensive general news service. We provide the same coverage we always have."

"We certainly are covering fewer secondary type stories both overseas and domestically," Rossiter said. "We have shifted our focus to produce news readers want to read and editors want to buy." That includes more regulatory, business and economic news.

In sheer wordage and resources, UPI will never match AP, Rossiter said, pointing to its history as chronically understaffed and underfunded.

Like their predecessors, current managers hope to cash in on the elusive potential of "non-media" clients: schools, government agencies and associations.

"We're certainly not going to make a lot of profits selling to newspapers and broadcasters," Rossiter said, explaining intensified sales targeting non-media business, "We've got to have the basic newspaper and broadcast core business to gather the news to sell to non-media. We expect to make our money in non-media sales."

Eugene Roberts, president and editor of the Philadelphia Inquirer and chairman of UPI's newspaper advisory board, said his monitoring shows UPI's foreign, national and sports reports "have held up extremely well during all the problems."

UPI appears "probably stronger than it has ever been," he said. calling managers "the most capable and competent" in years.

Roberts said for some time, UPI's appeal has been to bigger papers taking more than one wire.

Paul Golias agrees, but the managing editor of the 47,000 circulation Wilkes-Barre, Pa., Citizens' Voice, said that is why his paper is dropping UPI in favor of AP in April.

"We can see the impact of UPI's financial cutbacks on the report . . . in content, in quantity and in the quality of the report," he said. The switch was "for business reasons, the quality of the report, a general feeling that AP is better for the paper," he said, naming photo receiver breakdowns and less state news.

"Their communication with me is almost non-existent," said George Geers, editor of the 11,000-circulation Willimantic (Conn.) Chronicle and a longtime UPI client. He also saw diminished news and photo coverage and complained about an unreliable picture service.

When a technical breakdown recently disrupted UPI copy flow, Geers looked as he had in the past to nearby UPI newspaper clients for help -- but in vain.

"Now our neighbors are all AP," he said. "We would do anything to stay a UPI paper. They are giving me a carrot to go to AP."

Some signs of the times:

** UPI chairman Brian told Los Angeles staffers that newspaper revenue tumbled from $50 million in 1985 to $15 million last year, according to reports the bureau circulated. In the same period, radio and television revenue hovered at below $30 million and non-media revenue rose from $2 million to $6 million.

Newspaper defections have stabilized, according to UPI spokesman Dwight Geduldig, who said from 20 newspaper renegotiations over six months, UPI lost one medium and two small papers.

"That's a lot better than 1987 when we lost over a hundred and-some-odd in one year," Geduldig observed.

** Brian said UPI in the last year was gaining more clients than it was losing for the first time in years. He attributed gains to sales of newly "unbundled" services, sold separately instead of as a package. Losses have been cut from $2 million a month in 1987 to about $500,00 in January.

** Non-media clients will get most sales attention. Sales efforts, split between existing and potential customers, will emphasize a non-media information market estimated over $1 billion a year. Projections call for $14 million in new sales this year.

** The UPI gets 47 percent of its revenues from newspapers, 44 percent from radio and television stations and 9 percent from other sources, including syndication, 3 percent, and non media clients 6 percent, according to spokesman Geduldig.

UPI signed 49 non-media subscribers within six months, including government agencies, trade associations and a state highway patrol interested in tracking neighboring state laws. Non-media clients are expected to double this year.

** Staff has shrunk from 800 union-represented employees a little over a year ago to about 550. Photo service, which lost $3 million last year, is about half its former staff of 100 and relies more on stringers. It is projected to break even this year.

Foreign news -- a costly service that Agence France-Presse and Reuters have used to gain U.S. newspaper clients -- was slashed by 20 jobs in January, prompting foreign editor Leon Daniel to step down to columnist.

** UPI has hired at least six staffers for its new Regional Business News, a mix of business, financial and stock news compiled from UPI and other sources. It plans to expand overseas.

** UPI corporate offices have been filled from the Infotech family of companies. Of eight vice presidents, six hail from the Infotech flock and many hold multiple titles.

** Brian told Los Angeles staffers surveys have identified least client interest in international news, features and graphics (except weather maps) and most interest in sports, finance and state and regional news.

** Layoffs cut UPI's graphics staff to two, despite the soaring future of news graphics, whose demand has fueled new computer graphics services elsewhere. The features department was cut from 12 to three and merged with general staff.

Those moves contradict a trend in graphics to newspapers and past strategies to emphasize graphics and features as UPI's only hope to outshine AP.

In a survey last year, editors projected news graphics to be the fastest-growing visual element in newspapers over the next five years, a trend attributed to USA Today. AP, whose two-year-old service using Mcintosh personal computers has grown from 200 clients to 700, finds that demands for graphics is "very strong and continues to expand," said Don DeMaio, who as graphics director heads a 13-person staff.

"If they are trying to sell a total package -- including photos, graphics and editorial -- they need the graphic package. To compete in graphics, they would need to upgrade their technology," said Joe Scopin, the Washington Times assistant manager editor for graphics and photos who once ran UPI's 11-person graphics staff.

AP spokeswoman Wendell Wood, asked about features, said, "We are growing in that area. We're not cutting back." Three years ago, AP added six regional feature writers, pushing total features staff over 30.

Steinle said graphics was cut based on a one-week survey showing clients were using "almost nothing." Weather maps almost always made print but no other graphic was used more than 10 percent of the time," he said, calling it "a cost decision" to invest in areas of greatest client interest.

"We are producing a basic graphics service right now. That seems to be what our clients want," Rossiter said. He said UPI would produce more graphics if clients wanted but many papers have their own graphics staffs.

UPI executives emphasized a cost accountability that requires expenses be justified by clients willing to pay.

"We're getting our costs in line with revenues," Steinle declared.

Staffing in some states was cut to fit revenues. Full state reports were eliminated in more than a dozen states, including North and South Dakota, South Carolina and Wyoming. Other states expanded coverage. Every state but Montana has at least one full-time staffer, and UPI expects to hire one there, Rossiter said.

In its Washington, D.C., headquarters, UPI combined Washington and national editing desks last November and will add the foreign desk to create one world desk that always includes editors with various specialties. The Latin American desk moved to Latin America. AM and PM cycles merged into one BC (both cycles) cycle with stories updated as new leads break.

Rossiter said layoffs by seniority have actually increased the average staff experience.

Asked whether clients have canceled service as a result of cutbacks, Steinle said, "If they have, they've never told us that."

He said most cancellations were "financial decisions."

UPI said it sued for breach of contract more than 30 newspapers that canceled service. It has lost of a number of papers in Ohio and Oklahoma. Except to say it has 2,500 clients, the company does not break out numbers.

While UPI has lost the Atlanta Constitution, unbundling has retained papers in San Diego, Seattle and Phoenix, among others, Rossiter said.

The Washington Post signed again -- but paying less for service, said Peter Silberman, Post deputy managing editor. He said the Post contracted for UPI's business, state and Washington wires and dropped other services for a "considerable savings."

The Los Angeles Times sign again for most UPI services and is satisfied, said managing editor George Cotliar.

"All newspapers want UPI to succeed," said Pamela Brunger Scott, deputy managing editor of the San Francisco Examiner, which cut costs but kept some UPI services. "I think the unbundling will give them an opportunity to enrich the parts of the service that needed help. We feel very much hopeful that they can get it together."

Rossiter conceded some "erosion" in revenue from unbundling, but said it helped gain sales.

Rossiter looks forward to rebuilding staff within four years, though probably never to reach its former size.

Then he predicted, "We'll be certainly stronger, and we'll be making money, and I think our non-media sales will be up significantly. That will produce resources that we can plow back into our news staff and even improve the report to newspapers and broadcasters."

Marty Weybret, editor of the 17,000-circulation Lodi (Calif.) News-Sentinel and a third-generation subscriber, supports UPI for two reasons: 1, "This country needs two wire services. And if publishers and editors aren't willing to commit their papers and their checkbooks to it, it's pretty clear to me that it's going to be only a concept," and 2, "It's a good wire service."

A former Unipresser, Weybret, who takes McClatchy and pools resources with other papers for added reportage, maintains, "I'll stick with it until I absolutely can't."