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Crossing the Line

A Los Angeles Times Profit-Sharing Arrangement With Staples Center Fuels a Firestorm of Protest in the Newsroom--and a Debate About Journalistic Ethics

December 20, 1999|DAVID SHAW | Times Staff Writer

That was unsettling enough to journalists at The Times once they learned about one of his letters, in a New York Times story published three weeks after the Staples issue appeared. But what they found even more objectionable was the portion of his letters that said: "As an important part of the Staples Center development team, we expect and would appreciate your participation in this magazine by purchase of an advertisement of appropriate size to represent you. We would also appreciate you forwarding to your major subcontractors and suppliers this information and encouraging their participation as well."

Sale of Ads

In some circumstances, several Times reporters say, this kind of arrangement--paying companies to do work for you, then urging them to advertise in a magazine whose profits you're going to share--could be interpreted as a kickback scheme, with The Times laundering the money.

Leiweke and Downing scoff at that notion. "That would be a huge reach," Leiweke says, and he notes that few of the people Murphy wrote to wound up advertising in the magazine. Several who did said they were proud of their work and eager to be part of the magazine.

Times advertising executives minimize the contribution that Staples made to their overall effort. But as Leiweke sat in his office at Staples Center one afternoon last month, paging through the issue, he kept pointing to ads and saying, "That's us, that was us, that was us, that was us" to note the ads that he and his colleagues did help obtain.

For the Record
Los Angeles Times Monday December 27, 1999 Home Edition Part A Page 3 Metro Desk 2 inches; 39 words Type of Material: Correction
Investment conference--Participants in the Philadelphia Inquirer investment conference are selected by members of the paper's newsroom staff but, contrary to what was reported in The Times last Monday, they are invited by Morningstar, the co-sponsor of the conference.

Regardless of how much Staples Center contributed to the effort, the magazine was a huge success financially. The newly energized sales staff far exceeded McKeon's goal of $1 million. They brought in $2.1 million in advertising revenue, more than 500 ads spread over more than 100 pages. More than 80 of the 125 members of the sales staff who had an opportunity to sell ads for the magazine did so. "That's phenomenal," McKeon says.

Raises Based on Sales

It probably didn't hurt that earlier in the summer, at a time when employees in other departments of the paper were getting their annual raises, McKeon had gathered the entire sales staff in the fifth-floor auditorium at Times Mirror Square and told them their raises would be delayed and would be dependent on their performance the rest of the year.

The advertising department was running behind its annual revenue goal, so McKeon says that he "made a decision to take the money that would normally go into raises and create an additional incentive, which the company matched." He told the sales force that raises would be based on how well each salesperson did in achieving individual goals, as well as on how well the department did in reaching its overall goal. If everyone worked hard, he said, people could make more money than they otherwise would have made.

A lot of people worked very hard.

"For the year, total advertising revenue at the Los Angeles Times is expected to be the highest ever reported in our history . . . about $980 million," Downing told securities analysts in New York two weeks ago.

As the ad volume for the Staples issue of the magazine grew through the late spring and early summer months of the sales effort, did McKeon report this surprisingly good news at high-level meetings? Given his earlier concern about having to give away half his profits, didn't he grumble anew, if only good-naturedly, now that those profits appeared to be mounting rapidly? McKeon and others say they don't recall his making any such comments, at least not with Parks or any other editors present. After all, as good as the $2.1-million effort was, it amounted to about 0.2% of the paper's total advertising revenue for the year, not exactly something that would stop a business meeting cold.

Seeking Assurances

What about the burgeoning size of the magazine? Didn't that raise any questions? The magazine is usually 48 pages or less, and Parks says, "We talked about a 60-page, maximum 72-page" issue on Staples Center. "That, to my mind, was an appropriate size in terms of proportionality." Parks says he has "a very clear recollection" of saying that and of McKeon saying, "I think we can sell . . . enough advertising to make that work."

But McKeon says that he doesn't recall discussing the size of the magazine with Parks. "If I were asked," he says, "I would have said 100 pages . . . 104, 112."

Indeed, preliminary profit and loss statements done for the magazine envisioned a magazine of at least 100 pages. On May 4, a revised "project plan" provided cost and revenue estimates for a 168-page magazine (the final size) and 188 pages.

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