I’m not a fan of trying to predict major executive moves in the newspaper industry. (Who knows who will be the next CEO of The New York Times?) Once they do happen, though, as with CEO Gary Pruitt’s decision last week to leave McClatchy to become president and CEO of the Associated Press, it is worth examining what’s behind them.
McClatchy is not the toast of Wall Street these days, its stock trading below $3 a share and its profits still largely chewed up paying off debt from the 2006 Knight Ridder acquisition. But Pruitt remains highly regarded by his peers, and newspaper company CEOs run AP’s board (of which Pruitt has been a member for nine years).
So he knows AP’s complicated business structure and current set of business issues. And there is more.
Credibility with newspapers, but not beholden to them
A governance oddity for AP is that it’s a not-for-profit cooperative owned by its newspaper members at a time when American newspapers account for a progressively smaller share of its revenue. The big growth opportunities are in broadcast, digital, photo and international markets.
So the ideal fit is a CEO with credibility among (and sympathy for) the newspaper crowd, but someone ready to do what needs to be done, as Pruitt often has said in talking about cuts at McClatchy.
Still, conflicts could flare again over what AP charges newspapers, whether it provides too much national and international news than papers can use in their scaled-back print editions, and whether it doesn’t provide enough backup coverage of state and local stories.
I don’t think it was coincidental that Pruitt’s first comment in interviews was that he will focus on growing revenues in those newer lines of business.
Roots in First Amendment law
Pruitt, 54, became a top executive at McClatchy while still in his late 20s. However, his roots (and still a passion, according to those who know him well) are in First Amendment law.
That’s relevant because AP takes a leading role in freedom-of-information requests and operates throughout the world, often in countries where regulation of the press or even basic safety are critical issues.
Pruitt’s legal background also complements the ongoing effort to license news content for AP and its members and to collect royalties from aggregators. After years of development inside AP, the effort has been spun off into a separate company, NewsRight. However, AP remains lead investor, and successful licensing is one of its highest business priorities.
“I got into this business as a First Amendment lawyer,” Pruitt said in a phone interview late Friday. “What attracted me was the news … and AP is all about the news. It is the most important source for news in the world. … And as ad-based news media retrench, AP becomes even more important.”
Another plus in Pruitt’s resume is that McClatchy’s digital efforts began early and now provide a bigger share of revenue than at most newspaper companies. He has no professional experience with broadcast or international markets, but the AP board calculated that he could learn that side of the business quickly.
When I asked Pruitt his personal reasons for making the change, his reply was characteristically precise and detailed. The AP job, he said, “is something exciting, new and different [pause] and important [another pause] and definitely challenging.
“I’m 54 years old. I have been CEO for 16 years and with the company for 28. So if I were going to make a move, now was the time,” he said. “Also, the company [McClatchy] is in a lot stronger position than it was two or three years ago. If this had come up then, I wouldn’t have made the move.”
Leaving in the 19th inning
I had no premonition that Pruitt would consider jumping ship at McClatchy, but that makes some sense too.
Pruitt is an appealingly unstuffy executive, a serious runner and rock-n-roll connoisseur. While he may not have been pounding out police beat stories in his 20s, he is consistently candid and cogent as a speaker.
In the newspaper chapter of the State of the News Media report, published a week ago, I used one of his bon mots in the opening section. During a July earnings conference call, an industry analyst asked Pruitt: If cost-cutting were a baseball game, what inning would it be in?
Pruitt answered, “Well, it feels like the 19th.” That neatly encapsulated how much the last five years have worn on newspaper executives, as well as those who have dealt with cutbacks in the newsroom and business departments.
In retrospect, Pruitt sounded like a man who might trade one set of challenges for another if the right offer came along.
Seeking CEOs with finance credentials
Meanwhile, back at the McClatchy ranch, Pruitt’s succession seems to fit two mini-trends in the industry. Pat Talamantes is the second chief financial officer in the last six months to be elevated to the top job at a big company. Gracia Martore, longtime CFO and more recently chief operating officer, succeeded Craig Dubow as CEO of Gannett when Dubow stepped down for health reasons in October.
Mark this as a juncture for the newspaper business where strong financial credentials may be an especially sought-after skill.
Like Gannett, McClatchy has split the top job in two, with Kevin McClatchy, a former baseball executive, taking the role of chairman. (Pruitt and Dubow were both chairman-CEOs; Gannett moved Marjorie Magner, a Wall Street private equity executive, into the chairman role.) Splitting the roles reduces the likelihood, or at least the appearance, that a single person dominates the board while also running the company.
It is also a reminder that McClatchy remains a hybrid of a public and a family company – true also for Media General and Scripps, as well as the better-known cases of The New York Times Co. and The Washington Post Co.
Other analysts and I have speculated whether the next wave of executive appointments will include men and women whose main experience and expertise is digital. Maybe, and maybe even with the open CEO position at The New York Times Co. Instead, AP, McClatchy and Gannett all went with progressive but more traditional leaders.
Correction: This post originally misstated the context of Pruitt’s comment that “it feels like the 19th” inning. He said that in response to a question about cost-cutting; this post originally said that the question was about cost-cutting and transformation.