Control Ceded to Executive of Parent Company, Infotech
Here's a story by George Garneau from the Oct. 14, 1989, edition of Editor & Publisher:
The president of United Press International has ceded control of non-news functions to an executive of the news agency's parent company.
Paul Steinle, named UPI president when Infotechnology Inc., took control 18 months ago, said he would retain responsibility for most editorial operations.
Control of the rest of UPI and business affairs at five semiautonomous news units was turned over to Joseph K. Taussig, who in August was named vice president of Infotech's information and news group, consisting of UPI and Comtex Scientific Corp.
Two weeks after Steinle announced the changes, Taussig was named UPI vice chairman.
"The old model just wasn't working," Steinle said in an interview.
Among the greatest frustrations, he said, has been "we haven't got the market intelligence we needed to make the service more compelling."
Announcing the reorganization to employees Sept. 26, Steinle said "stronger business leadership is needed closer to where the products are produced."
A new level of business managers was created to take charge of "modular editorial units" -- sports, business, international, photos, radio network. The "entrepreneurial" managers report to Taussig on business matters, while Steinle retains overall editorial responsibility.
The split authority of Taussig and Steinle compares with the roles of a newspaper's publisher and editor, Steinle said.
Since an Infotech reshuffling in August, Taussig assumed managerial control over UPI from Dr. Earl Brian, the Infotech chairman who lost a 1985 bid to buy the news service but become UPI chairman in 1988 when Mexican publisher Mario Vazquez Rana surrendered to mounting losses.
The latest changes followed the removal of UPI's sales vice president and came amid Steinle's disclosure to Los Angeles staffers that losses running at $6 million a year had not improved and the goal of profitability by year's end may not materialize.
(Steinle later said publicly that UPI is still expected to earn a "modest profit" in the fourth quarter).
Modular news units will be more responsive to the market, the reasoning goes, because general managers will have time to work with clients and to arrange resources through Taussig.
According to Steinle, editors of the "single-product profit centers" have separate budgets and act as "product managers working in liaison with UPI's sales and marketing leadership to make their units profitable, and with editorial management to assure their services are professional and competitive."
On "overall profit and loss strategic issues," general managers report to Taussig, who allocates resources and aids arrangements with information suppliers and Infotech companies, he said.
Named as general managers of the new units were Pieter VanBennekom, currently vice president of international operations, and Mike Freedman, vice president and manager of the radio network. Others are being sought.
The reorganization removes journalists from financial authority and injects business managers closer to unit line editors.
Steinle, whose background is in journalism and business management, remains responsible for newsroom staffing and editorial policy. Daily news operations, including Washington, state and national coverage, remain in the hands of executive editor and senior vice president Al Rossiter Jr., a UPI veteran who reports to Steinle.
Taussig was formerly president of Data Broadcasting Corp., a subsidiary of Infotech-controlled Financial News Network, a cable programming company that turned a profit by selling programming time to advertisers whose pitches resembled news interviews.
The moves were preceded by the quiet ouster of UPI vice president for sales Scott Hultz, a former FNN vice president, who was replaced by former DBC vice president Patrick Grotto.
Eugene Roberts, Philadelphia Inquirer president and chairman of UPI's newspaper advisory group, knew nothing of the reorganization and had no comment.
The reorganization excited no major outcry from staff when Steinle and Rossiter toured UPI bureaus to explain it. Staffers were confused and complained about more managers for short-staffed operations and about stalled contract talks.
"It doesn't appear to have any major impact on what I do," said Washington bureau chief David Wiessler.
"I don't anticipate any problems," said UPI sports editor Fred McMane in New York. He welcomed the idea of a manager assigned to marketing.
"The only problem I could foresee is if the general managers are not familiar with procedures and tell us now to run the news," McMane said. "The boundaries have to be clearly defined and I think they have been."
The changes are the latest since Brian, through a subsidiary, acquired control of UPI for an undisclosed sum from Vazquez. They move UPI closer still to other Infotech companies, as Infotech changes from a business development company to a business operating company and moves to cash in on the "synergy" of its subsidiaries.
Brian has installed managers from Infotech companies on UPI's board and in top management, from Steinle, a former FNN president and current board member, to at least five UPI vice presidents, including James Arnold, Infotech and UPI general counsel.
UPI business offices are housed in Fairfax County, Va., in what Steinle said were less expensive offices controlled by Infotech's corporate resources.
UPI's new computer system is supplied by Infotech Data Resources.
Steinle admitted the most recent changes had not been brought to UPI's board, but said it was required and was not an issue anyway.
He said Infotech routinely charges its companies small management fees, but currently "the cash flow is all to UPI."
Founded in 1907 by E.W. Scripps, UPI built itself into a profitable, privately owned news agency by the 1940s but, partly because afternoon papers were dying, it became by the 1960s a chronic money loser.
Infotech has cut losses running at $24 million a year in early 1988 to around $6 million a year.
Projections in the business plans for a small profit late this year depend on sales to newspapers, which currently are in their budgeting process, Steinle said.
Even without a profit, Steinle said he saw no intention to curtail Infotech investment in UPI, currently around $20 million.
He said a project being tested was expected to cut costs of delivering electronic news services to personal computers by using space within standard television signals.
As such services grow, UPI revenues from media clients are expected to drop over five years as a share of its business from 95 percent now to about 80 percent to 85 percent, he said.