Article created by The Century Foundation.
By the end of June, Knight-Ridder, until recently the country’s second-largest newspaper chain, will disappear. Its newspapers have been dispersed to the respected McClatchy chain and other proprietors, including a PR titan in Philadelphia. Until a decade or so ago, these newspapers were among the country’s best: The Philadelphia Inquirer, Miami Herald, San Jose Mercury News, Detroit Free Press, and even the smaller Lexington (Ky.) Herald-Leader, among others, were regionally dominant and nationally admired. The papers themselves will remain in business, in new portfolios. They are battered and demoralized, yet still profitable, and in every community where they are published, they remain essential.
News delivery systems, whether in print, online, video and broadcast, free or paid, or a mix of these, are immutable even as they constantly adapt to technology and taste. Whatever may be happening these days, history is absolutely clear: there always will be people interested in news and advertisers who want to reach those people.
So what happened at Knight-Ridder to take it down? And what can we learn from the unraveling?
Recently at a small gathering, a senior executive of the chain, who will be unemployed in a few weeks, briefly and poignantly told the story, and it came down to this: misguided pursuit of shareholder value that ultimately degraded the newspapers and their business models, satisfying no one, except perhaps the investors who forced the breakup and reaped the rewards.
In this telling, about thirty years ago, John. S. Knight made an ultimately disastrous decision, different from his counterparts, the owners of the New York Times and the Washington Post. The Sulzbergers and the Grahams decided to create a protected class of stock which assured family control and took the companies “public” on the American Stock Exchange, where such arrangements were permitted. Knight wanted to be listed on the more prestigious New York Stock Exchange, where they were not. The Knights had an overwhelming percentage of the stock, so relinquishing ultimate control to the market seemed reasonable. In the merger with the Ridder family newspapers and subsequent transactions, Knight-Ridder stock became increasingly available to buyers who saw rising stock value as their overriding goal. (Ironically, the NYSE changed its rules and the New York Times and Washington Post companies are now listed there with family control intact.)
As the stock price and quarterly profit margins grew in importance at Knight-Ridder, the squeezing of the newsrooms began to bring down costs. What started as an exercise in efficiency turned, as it almost always does, into the corrosive undermining of quality. One by one, the editors and publishers at the newspapers who resisted these changes left in martyrdom. Their successors believed that it was worth fighting with management to save what they could. And meanwhile, Knight-Ridder endured the spiral of growing mutual frustration by all concerned, which culminated with its demise. Knight-Ridder, R.I.P.
But in the dynamic and often frenetic world of information, entertainment, and the technologies that support them, there is an alternative strategy to the Knight-Ridder pursuit of shareholder value. Among journalists it is known as “More Tomatoes in the Soup.” This is what Abe Rosenthal, as editor of the New York Times said in the mid-1970s was his mandate. He was told to improve the newspaper by investing in its future, by making it more interesting, more fun to read, and more relevant to the lives of its audience. That approach requires money, which comes from proprietors, and creative talent, which comes from newsrooms.
It is generally overlooked that the people choosing journalism as a career today, as reporters and eventually editors, are on the whole, much more capable (if less raffish) than their predecessors. Today’s professional class of doctors, lawyers, dentists, and academics is no more gifted than the “creative” class of writers, editors, filmmakers, and broadcasters. When creative energies are unleashed, amazing things happen, as we’ve seen over the last decade on the Web. When the issue is endlessly restricted budgets, layoffs, buyouts, and boardroom battles over stock prices, the likelihood of making something better out of the product is drastically reduced.
The Los Angeles Times, the Chicago Tribune, Newsday, the Baltimore Sun, the Hartford Courant are excellent newspapers, with great histories and enormous roles to play in their areas. Their future is now caught up in a dispute between the Tribune company and the Chandler family and against a background of arguments over shareholder value and corporate strategy. My guess is that there are a lot of people in and around Knight-Ridder who are have a strong sense of deja vu.
