Knight Ridder, the 32-year-old national newspaper company that publishes the Times and the San Jose Mercury News, will fade into history by the end of this week.
Corporate chiefs plan to lock up a sale of all 32 Knight Ridder newspapers to McClatchy Co. for $4.5 billion on Tuesday. McClatchy will then unload 12 of them, including the Times and the Mercury News, to help finance the deal.
Although it is too early to write the definitive history of Knight Ridder, any description of its legacy will likely begin with accounts of world-class journalism produced in the face of monumental industry-wide challenges.
It will end with a chapter about a company overwhelmed by those challenges.
"I think it will be remembered most for the tragedy of its demise," said Jay Harris, who holds the Wallis Annenberg chair in journalism and democracy at the University of Southern California's Annenberg School of Communication.
Harris was publisher of the Mercury News from 1994 to 2001. He said he left because he was unwilling to make cuts mandated by Knight Ridder and had differences in "the journalistic values and the corporate management of the company," he said.
During its run, Knight Ridder compiled many awards and accolades, including 85 Pulitzer Prizes, and its papers, particularly the Mercury News, Philadelphia Inquirer and Miami Herald, employed some of the country's most talented journalists.
For many of the thousands of journalists who have contributed to Knight Ridder's legacy, Tuesday's sale will be a sad and frustrating end to the company, which was forced onto the auction block by its main institutional investors.
"When one looks back at the last quarter of the 20th century, many of the papers employed by Knight Ridder ... were among the best in the nation," Harris said. "From the perspective of the public interest, the values of the company, in regards to journalistic service and service to the community, were equally excellent.
"The great tragedy will be that ... its leaders during the last phase of its life as a corporation were not able to conceive of and pursue a strategy which would maintain the company as an independent entity."
Ultimately, however, the road to the disintegration of the country's second-largest newspaper publisher was paved at its inception.
Knight Newspapers was founded by John Knight in 1933 after he inherited the Akron Beacon Journal from his father. Ridder Publications was founded by Herman Ridder in 1892 when he bought the Staats and the Zeitung, German language newspapers.
Both families took their growing companies public in 1969 as many of the nation's most prominent newspaper families were doing, but they failed to create two tiers of stock -- voting and non-voting -- which could have allowed their heirs to maintain control in the face of ever increasing pressure from Wall Street to maximize profit growth.
When the Knight and Ridder companies merged in 1974, corporate officers again created a one-tier company vulnerable to stockholder pressures. It was three of the company's largest institutional investors who forced it to look for a buyer in 2005.
But the sale is just the final chapter in what company critics see as an increasingly troubled tale. During the past two decades, the company's bottom-line concerns began to seriously hurt its commitment to journalism, writes Davis Merritt in his 2005 book "Knightfall: Knight Ridder and How the Erosion of Newspaper Journalism is Putting Democracy at Risk."
"By 2000, some newspaper companies, including Knight Ridder, had already cut back substantially on their news operations. But it wasn't enough. When newspaper stocks swooned after an across-the-board downgrade by most analysts in 2000, even more severe cuts were made. In 2001, Knight Ridder imposed a 10 percent reduction in personnel to be carried out mostly with buyouts and attrition," according to Merritt, a former Knight Ridder editor.
The pursuit of profit margin increases is driven in part by the growth and consolidation of the nation's largest media companies. The biggest, Gannett Co., owner of USA Today, typically enjoys industry-high profit margins, setting a high bar for competitors. The landscape is dominated by Gannett and other giants, such as the Tribune Co. and MediaNews Group, that are often accused of striving for Gannett's high water mark to the detriment of good journalism.
Merritt points out in his book that from 1980 to 1993, Knight Ridder earned 38 Pulitzers while its operating return "hovered in the low teens." From 1994 to 2003, it won nine Pulitzers while the return broke the 20 percent mark.
"I think that those same trends led ultimately to the demise of the company because its corporate leadership was making promises to large investors that it more or less consistently failed to meet," Harris said. "And that failure, combined with a steady weakening of the company through cost cutting, put it ultimately in a position where it could neither stand independently nor save itself."
Knight Ridder CEO Tony Ridder declined to be interviewed for this story. In a written response to questions from the Miami Herald, he said the company could have tried to fend off the stockholder revolt, but not without the risk of serious damage.
"In theory the board could have chosen to resist exploring a sale," he said. "But we were concerned about the effect a prolonged proxy fight would have on the company, which we knew would have been enormously destabilizing to our newspapers and Web sites. Given the size of their holdings, those three shareholders had the muscle to elect their own people to the board, without our shareholders receiving a change-in-control premium."
In the end, Knight Ridder succumbed to shareholder pressures from which no publicly-traded newspaper company is immune. Some publishers, such as the Washington Post and McClatchy, which have two tiers of stock, can more safely weather Wall Street's discontent.
The Tribune Co., owner of the Chicago Tribune, the Los Angeles Times and the (Baltimore) Sun, has proposed a stock buyback to boost its lagging shares. One of its largest shareholders, the Chandler family, former owners of the Los Angeles paper, fought back by urging the company to sell itself, but the board rejected their proposal.
Regardless of ownership models, however, it is a difficult time for all newspapers. Every editor and news executive in the country is trying to navigate through a world of changing reader and advertiser habits, the unmastered challenges of the Internet and rising newsprint and employee medical costs, among other quandaries.
For years, Knight Ridder turned out high quality newspapers in the face of these challenges while keeping investors happy, or at least at bay.
"I used to tell reporters that Knight Ridder was by far the best chain in the country if you had to work for a chain," said Steve Isaacs, a journalism professor at Columbia University and the author of "Paper Dynasties: The Rise and Fall of America's Great Newspaper Families."
Once Jim Batten, the last prominent executive from Knight Newspapers, left as CEO in 1995 "forget it. The whole thing came asunder because of bad business decisions and panic," Isaacs said.
"It's sad because a newspaper, or a chain in this case, is not just like a pickle company. It's got a personality. It's got a life force," he said.
"It was a real classy chain. They were in business to make good journalism, and the Ridders destroyed it."
Ridder, who plans to join the McClatchy board after the sale closes, according to the Mercury News, gave a more upbeat assessment of Knight Ridder's place in history.
"Knight Ridder's legacy is outstanding journalism that has made a tremendous difference in all of our local communities and -- through our Washington Bureau -- nationally and internationally," Ridder told the Miami Herald in a written statement.
"The legacy is our fierce fight for freedom of the press. The legacy is 32 strong newspapers and their Web sites in communities across this nation.
"The legacy is a tradition of honesty in dealing with our employees, a strong commitment to diversity in our workforce, and excellent service to our customers and our communities.
"The legacy is cities and towns all across America that are better for our having been there -- better because the United Way is stronger, or a museum is supported, or literacy is disseminated or the consequences of a natural disaster are tempered by help of every description.
"We can all be very proud of this legacy."
Contact Kiley Russell at 925-952-5027 or krussell@cctimes.com.
