Screwed by the Sun-Times, Part 2
Before the velvet glove came off, the Sun-Times invited its distributors to rally to the common cause.
"We have appreciated your assistance in the past and stand ready to discuss with you how we may increase circulation penetration," wrote John Cimaroli, vice-president for circulation, last March, "and achieve the Sun-Times' customer service standards in view of the impending difficulties."
These "difficulties"--an understatement on the order of Northern Ireland's "troubles"--were the impending destruction of the dual distribution system shared by the Sun-Times and the Chicago Tribune. Because the Tribune had decided to change its delivery system, the distributors faced losing their Tribune accounts, which in most cases represented the majority of their business. The Sun-Times, which had piggybacked its distribution on the Tribune's, faced going it alone and somehow remaining competitive.
In April, having faced down the distributors in court, the Tribune did the deed. It switched from these independent wholesalers to "agents" who were paid flat fees to service retailers and subscribers. Yet in mid-May, the Sun-Times sent the distributors another upbeat letter encouraging them to continue carrying the paper. "We are . . . offering you new programs of promotional and competitive allowances to help you compete . . ." exclaimed Don Piazza, executive vice-president of the Chicago Sun-Times Inc. "We are very excited because for the first time we are able to offer substantial incentives for increases in our circulation."
Enclosed was a message from Cimaroli giving the details. The distributors read them with horror. The Sun-Times program struck them as an invitation to go out of business.
When the daily Sun-Times was 25 cents, the distributors had been buying it at a wholesale price of 14.3 cents a copy. Now the Sun-Times was upping its newsstand price to 35 cents. In the past, whenever a daily paper raised its newsstand price, the wholesale price went up half that amount. If these were normal times, the distributors could have expected to begin paying about 19 cents a copy (which is what a couple dozen independent distributors still handling the Tribune are now paying).
Instead, the Sun-Times said it would charge its distributors 28 cents a copy. The wholesale price of the Sunday paper--which remained $1.25 at the newsstand--was being jacked from 67.25 cents to $1.01. These were the new wholesale rates for papers that would be delivered to subscribers. The new rates for papers that would be dropped off at retail outlets, such as 7-Elevens and White Hens, would be slightly different but were undergoing a similar boost.
The distributors saw no way to compete at these rates. Distributors have always made their profit by charging subscribers above the newsstand price--when the Sun-Times was still a quarter, four weeks worth cost $11 at a newsstand but $15 or so at the doorstep. But when the Tribune shifted to agents, it set a blanket subscription price that equaled the cost of buying the 35-cent paper each day at the corner--$13.40 for four weeks. It would be impossible for Sun-Times distributors to match that price, or even to sustain their own old price, if they had to pay what Cimaroli was threatening.
But the Sun-Times gave the distributors a way out.
They could sign up for the "competitive allowance" program. If the distributors lowered their subscription price to the Tribune's, a portion of their wholesale costs would be rebated, enough to lower the wholesale cost of the daily paper from 28 cents to 16 cents and the Sunday paper from $1.01 to 72 cents. A further "promotional allowance" of 10 cents for the daily paper and 30 cents for the Sunday paper was offered for new subscriptions that raised total circulation in a distributor's territory.
What a deal! Even with the competitive allowance, distributors would be paying more for papers than they had been; meanwhile, they'd be charging less. So they'd be squeezed, perhaps fatally. And because the allowance would be rebated monthly, rather than taken off the top, their cash flow would suffer; in effect they'd be lending the Sun-Times money interest-free to play with for a few weeks.
Those, as the distributors saw it, were the lesser evils. Here was the big one: to get the rebate they had to agree to provide the Sun-Times, upon request, "with access to any books and records reasonably necessary to verify draws, returns, rates and customers."
In other words, the Sun-Times was demanding a right to the distributors' most valued possession--their subscriber lists. And in return, what security were the distributors purchasing? Virtually none. The Sun-Times expected to be offering its allowances "for at least 90 days"; however, they were "subject to change at any time."
Six distributors went to court, alleging vertical price fixing, and asking for a temporary restraining order to halt this new pricing structure. Judge George Marovich refused to grant it (as before him another federal judge had refused to block the Tribune's shift from distributors to agents). Some distributors then came to terms. "The people who hoped to survive signed it," a large suburban distributor told us. "But a lot of dealers said the hell with it. I think the wide majority did not sign."
So now, Cimaroli's department has been canceling one distributor after another. The usual bundles of papers are not dropped off one morning, and when the owner calls downtown to find out why he is told the Sun-Times will no longer do business with him. The most common explanation seems to be, that the distributor let his draw decrease--although in the summertime circulation inevitably dips.
Because it doesn't have the lists, the Sun-Times is taking over routes with little or no idea of who the subscribers are. It often finds out only as they call in to complain that they aren't getting the paper. The volume of these calls has forced the Sun-Times to upgrade the phone system in its service department, we're told, and to raise the number of operators there from about five to more than two dozen.
What's poignant is that the Sun-Times is arguably as much a victim in all this as the distributors it's being so ruthless to. The Tribune spent several months before its changeover creating and training a network of agents (the amount of disruption was considerable nonetheless). Taking advantage of a written contract it had earlier struck with most of its distributors (the Sun-Times had none), the Tribune could insist on buying their subscription lists and had pockets deep enough to pay for them (although it didn't pay nearly enough, according to the dozens of distributors now in arbitration with the Tribune over the amounts).
The Sun-Times now is trying to patch together a vassal distribution system of its own. But it had no infrastructure already in place, and its subscriber base may be too thin to support a system that's cost-effective. Furthermore, the Sun-Times apparently lacks both the legal and the financial means to get its hands on its distributors' lists. Given its predicament, the paper's behavior seems weirdly heavy-handed nonetheless, and the paper doesn't help its position by refusing to defend or even discuss its conduct publicly.
"I'll tell you another thing they're doing that really stinks," said one distributor whose life has been made a nightmare by both papers. "I've been getting along fine with those people for years and now they're forcing me out and when my customers are calling down there looking for the paper, they're bad-mouthing me--this guy was no good anyway, he was charging too much. . . . The Tribune at least came in and offered money on a more or less businesslike basis, but the Sun-Times is just skunks. Absolute skunks."
The fate of the Sun-Times, leveraged to the hilt, lies in its circulation numbers. John Cimaroli is the fourth circulation director there since Robert Page became publisher at the end of 1983. His three predecessors all were fired.
Oh, I could tell you who I am. That would be the easy thing. But a man who takes advice is a man who's in someone's debt. And when you're in someone's debt, you can't help but hate them and want to destroy them. And a president can't go around destroying everyone he hates because--well, it just doesn't work out, that's why. So let me identify myself merely as America's foremost elder statesman and let it go at that.
That was a fine speech you gave in Atlanta. You have trouble smiling, don't you? People say you're a cold fish. Did you know, a great man once ran for president of the United States and they called him a cold fish too? No, he wasn't a charm boy, and Americans never loved him the way they love the poontang chasers who grin their way into the Oval Office. And by the way, no one feels more strongly than I do that people have the right to love any president they want to, no matter how little he deserves it.
Well, just like you, this great man lost an important election once. And oh, how everyone laughed at him then! But he showed them all. He came back from the dead to run on a simple platform of wisdom and strength. And even though no one ever loved him, they liked him a hell of a lot better that year than they liked the bootlicking vice-president he was running against, the retiring president's kiss-ass toady who got fed his balls every day for breakfast and asked for seconds. So this man was elected and was a great president, which is why the press crucified him.
Think about it.
I never bother to read the newspapers because they're full of lies. But you probably do, so you know how they're comparing this election to the one in 1960. Don't you believe it. Study the election eight years later. What you'll see, Mike, is that 20 years ago we had a president who'd run as a man of peace and then dragged this country into the goddamn dumbest war in American history. Now what have we got? We've got a nice old fellow in there who got the job because he promised to balance the budget. And we're so far in the hole some fat Mexican's going to ride up on his mule one day and buy the whole goddamn country.
What you need to do, Mike, is run as the New Dukakis, which I must say you've been doing. Announce you have a secret plan to get us out of red ink. Promise to bring our dollars home. I must say you've been doing that too. That's why you have my vote for president, Mike. You know your history.
The other thing to bear in mind is that you know absolutely nothing about foreign affairs. Neither does the nice old fellow in there now, but he got away with it and you won't. Cold fish never get a break. So be on the lookout for a man of the world to be your personal global adviser. Someone respected and feared in every capital. There is only one such man. I bet if you asked him he would say yes.
A mutual friend
Art accompanying story in printed newspaper (not available in this archive): photo/Bruce Powell.