CHICAGO (November 22, 2005) -- A couple of days after Private Capital Management LP (PCM) CEO Bruce Sherman rocked Knight Ridder and the rest of the newspaper industry with a saber-rattling letter demanding the nation's second-largest newspaper company put itself on the auction block, the influential Wall Street Journal "Heard on the Street" column led off with a rather remarkable statement.
Knight Ridder's potential sale, declared writers Joseph T. Hallinan and Joe Hagan, "might be the first shoe to drop in the long-talked-about consolidation of the newspaper industry."
"Long-talked-about," all right -- like at least since Ben Bagdikian published the first edition of The Media Monopoly going on 23 years ago.
Daily newspapers, the column suggested, would seem to be "yet another mature U.S. industry," along with the steel, auto, and airline industries, that are "prime for consolidation." Ah, the company we keep!
But the more I read media analyses of Knight Ridder's fix, the more I come to see that this is pretty much the received wisdom among my business press colleagues. The matter seemed settled among the press when the company announced it had engaged Goldman Sachs to "explore strategic alternatives," Wall Street code for, "start the bidding."
No one, it seemed, questioned the need for more consolidation -- indeed, some seemed to agree it had barely begun -- in an industry in which just 10 chains represented last year 51% of U.S. daily circulation and 57% of Sunday circulation. Add the next 11 biggest groups, and you've covered 61% of weekday circ -- and 75% of Sunday newspaper sales.
(Those figures are from the Project for Excellence in Journalism based on data from Editor & Publisher International Year Book, and does not include the consolidating effects of Lee Enterprises' purchase earlier this year of Pulitzer Inc.'s 14 dailies.)
Back East, the media critic and associate professor of journalism at New York University, Jay Rosen, was observing the same phenomenon in the business press.
But where my reaction was a kind of dull-normal puzzlement -- I must be missing something -- Rosen reacted with anger and originality.
He posted this short item on the Poynter Institute's Web site:
"Imaginary news story: 'Facing a possible sale to a competitor, Knight Ridder, Inc. took the unprecedented step of soliciting buyout offers from local owners for each of the 32 newspapers it owns, and directed the staff at each paper to assist in the search for qualified buyers with a civic conscience.'"
In a phone conversation the other day, Rosen said his point was that financial journalists can cover so many spectacular failures of deals cheered on by the Street, and yet never apply those lessons to whatever deal consumes them at the moment.
"Strategic alternatives," the phrase goes -- but as Rosen points out, nobody really thinking alternatively.
"The idea that the only possible alternative that intelligent people would discuss are those that market players sitting in Wall Street, or at pension funds or like (PCM CEO Sherman), sitting in their villas in Florida would deem acceptable," Rosen said.
These big investors are saying, in effect, the way the company is organized isn't working, but as Rosen notes, that fundamental problem apparently does not trigger some fundamental thinking about the chain.
"They don't start by saying, what would be the best ownership for these newspapers in this company?" he said. "What would be best for, for example, the Lexington (Ky.) Herald-Leader? What kind of owner should you call in. They don't even ask those kinds of questions."
At another tipping point in the American newspaper business, when social changes and new technologies such as radio challenged traditional industry ways in the 1920s and 1930s, Rosen argues, there was vigorous discussion about who should own the presses, and why. The bottom line then, he says, was getting owners who were good for the public interest.
This, too, is a good time to "break up the box," Rosen argues.
One way would be to find local owners for individual Knight Ridder papers, vet them like the pro sports league vet prospective team owners -- and charge them a premium.
"Who would be likely in this country to pay a premium for the Kansas City Star?" he said. "People in Kansas City ... that grew up with the paper, and for whom it has a certain value that the Olympia (Wash.) paper, say, would not."
Then, too, there's the non-profit or foundation route that's worked for the St. Petersburg Times, and The Anniston (Ala.) Star adopted more recently.
"Take a look at the Scott Trust in the U.K. that publishes the Guardian," Rosen said. "It's a commercial newspaper that makes money and just happens to be the most Web-savvy and forward-looking paper in England."
It also has a history that might resonate at Knight Ridder, which gets its name from two storied newspaper families, and that has a Ridder at its head to this day.
Though the Scott Trust is rightly admired today for its history of dedication to independent journalistic values, it was birthed by a financial squeeze, an only slightly different jam than the one that is pushing Knight Ridder to become whatever it becomes. In the Guardian's case it was an impending ruinous tax bill.
Forming a trust run by independent figures chosen, according to its Web site, in a way analogous to being "invited to join a rather select club," turned out also be an enduring guardian of Guardian values.
Will that option ever show up in the executive summary of Goldman Sachs report on "strategic alternatives"? I wouldn't bet my house on -- or much north of a buck, for that matter -- but a good question we in the business should ask ourselves is why shouldn't these ideas contend with the alternative of yet more industry consolidation?
"I've been pestering business journalists to start using their imagination," Rosen told me.
Consider yourself pestered.
Mark Fitzgerald (mfitzgerald@editorandpublisher.com) is E&P's editor-at-large.
