Remorseful, Times Publisher Pledges Changes

Los Angeles Times Publisher Kathryn M. Downing, facing a gathering of angry Times writers and editors on Thursday, pledged to take steps to prevent a recurrence of a profit-sharing arrangement that has placed the integrity of the newspaper’s editorial content under a cloud.

Under the arrangement, half of the income generated by the Oct. 10 issue of The Times Magazine would be paid to Staples Center, the new downtown arena that was the weekly magazine’s sole subject.

Disclosure of the deal in press reports this week has raised questions by some critics over whether the newspaper was engaged in a conflict of interest in its coverage of the arena’s launch. Times Editor Michael Parks said the editorial work in the issue was free from any business-side influence.

The controversy has also refocused attention on The Times’ attempts to generate new sources of revenue, in part by establishing closer relationships between the editorial and business sides of the paper. Traditionally those functions have been separated by a firewall to underscore the independence of the editorial product.

Those changes were initiated by Times Mirror Co. Chairman and Chief Executive Officer Mark H. Willes, who contended that the division was in many cases artificial. In an era when newspapers face new challenges from an erosion of readers and revenues, he argued, the separation interfered with the development of potentially profitable ventures that would not undermine editorial integrity.

Downing on Thursday conceded to the staff that the Staples Center arrangement was a misstep. In response to often angry and indignant questioning from staff members, she accepted full blame for the episode and offered her “profound apology” for the “horrific cloud” it placed over the paper’s reputation.

She pledged to spend more time communicating with Parks, her senior editorial executive. She said she had not notified Parks that the magazine’s Oct. 10 issue was subject to the profit-sharing arrangement out of what she acknowledged was a misguided attempt to honor the separation of editorial and business concerns.

“I thought I was protecting the line [dividing the editorial and business staffs of newspaper],” she said. “But I missed completely the fallout from sharing revenue.”

Staff members and executives within The Times attribute that breakdown to Downing’s own inexperience as a newspaper executive and to lapses within her management team, which include the paper’s top marketing, advertising, human relations, editorial and financial officials. She became publisher in June after about a year as Times president and chief executive officer, her first job at a newspaper.

“This is exactly a consequence of having people in the publisher’s job who don’t have experience in newspapers,” acknowledged Willes, who himself has little newspaper experience and appointed Downing to succeed him as Times publisher. “If you don’t have people with experience, you’ll have people who don’t understand the issues until they’re made to understand the issues. That’s why we need more conversation” between the business and editorial sides of the newspaper, he said.

Downing’s meeting with several hundred members of the editorial staff was marked by angry questioning that bordered at times on the insulting. One employee asked Downing face to face whether she would consider going back to school to study journalism. Downing said that some training program in editorial might be worthwhile.

Responding to an editor, who asked whether Downing had sufficient background in newspapers to run one of the nation’s largest journalistic enterprises, she said she had no intention of resigning as publisher. “This is a major, major mistake,” she said, “but I am the publisher of the L.A. Times and I am staying the publisher of the L.A. Times. The question is how do I come up the learning curve faster?”

Downing received Willes’ continued endorsement on Thursday. “I’ve got total confidence in Kathryn,” he said. “Having had this experience, she will work doubly hard to make sure not only that it gets addressed appropriately but that it doesn’t happen again. And she will have internalized this in a way that very few would.”

At issue is an arrangement under which The Times became a “founding partner” of Staples Center, which opened Oct. 17. Under the arrangement, the newspaper agreed to pay about $3 million a year to be one of ten companies with exclusive rights to place promotional signs on the premises and to use a luxury suite in the arena.

The arrangement also calls for The Times and the arena to jointly pursue additional promotional efforts each year for five years that would generate revenue over and above the basic fee.

Downing said she personally designated the Oct. 10 issue of the Los Angeles Times Magazine, which was devoted exclusively to the arena’s launch, as this year’s joint venture. She said Thursday that Staples Center, which will receive half the profit, contributed nothing to the issue.

She added that she was the one who decided not to mention the profit-sharing arrangement to Parks.

In an effort to prevent such a mistake from happening again, Downing announced several changes: She said the newspaper would never again undertake a revenue-sharing arrangement involving an editorial product or section; would establish a written policy safeguarding the newspaper’s editorial independence and integrity; and is reviewing all existing contracts for possible problems.

She also said the newspaper has informed Staples Center that it will honor its joint-marketing obligations by paying cash, rather than developing further ventures.

Executives familiar with the Staples Center partnership contract say the profit-sharing provision was purposely vague, but clearly was never intended to include editorial products of The Times.

As the arena opening approached, several departments of The Times began planning promotional and commemorative vehicles; among those under consideration at various points was a souvenir yearbook to be sold at Staples Center events, a souvenir section to be produced by the paper’s sports staff and a glossy commemorative “advertorial” that is, a publication conceived as an advertising vehicle and produced by non-editorial employees.

In the case of the advertorial, sources say, it was understood that Staples Center management would be intimately involved in signing up advertisers, including contractors involved in construction of the $400-million structure.

Sources say that the Sunday magazine’s business director, worried that the advertorial might drain away magazine advertising, fought for the Staples Center publication to be a regular issue of the magazine.

Parks eventually agreed, on the grounds that The Times’ coverage of the arena launch should be consolidated in one section rather than several. But he said he was unaware of the profit-sharing terms until after the magazine was printed but before it was distributed.

The Oct. 10 issue proved to be a huge advertising success, with more than 100 pages of advertising compared with the 12 carried on average by the Times Magazine. Times advertising executives attributed that exclusively to the paper’s advertising staff, which mounted an unprecedented effort to prove that the magazine was a viable advertising vehicle.

Despite the transformation of the publication from a promotional vehicle to an issue of the magazine--a production of The Times’ editorial staff--the issue inherited its status as a profit-sharing venture with the arena.

Regardless of misgivings by some Times top executives over the magazine’s involvement, the full implications of the arrangement were apparently never aired during Downing’s regular meetings with her senior executives.