“The Vanishing Newspaper” excerpt:
In (Knight Rider CEO’s Alvah) Chapman’s view, Wall Street’s preoccupation with quarterly earnings growth was not all bad. “There’s some discipline there that a well-managed business needs to be aware of at least to protect itself…. You program your costs to the extent that you can, some of it you can’t program, you can’t control. You have to go ahead and take them when you get them. To the extent you can manage your business so that you do no damage to the quarterly earnings, it’s better to do it that way.”
In Chapman’s mind, the connection between profitability and quality journalism is obvious. He was asked if taking the company public inhibited it from making long term investments in quality.
“I don’t think so. We made decisions like merging Knight Ridder after we went public. We expanded our Washington bureau, doubled the size of the Washington bureau, after we went public. We added our overseas bureaus after we went public. We started Business Monday (at The Miami Herald) after we went public. We started the Neighbors sections after we were public.”
He remembers the statistics from his administration of the company in detail from the merger (he oversaw the merger and became CEO two years later) to his retirement.
“In my 15 years, from 1974 to 1989, Knight Ridder’s stock grew 23 percent, compound growth rate. We had 15 straight years of increased earnings per share. We won 37 Pulitzer Prizes in that period of time … Each year … we increased our contributions budget for community responsibility So there’s responsibility to the readers, the community, the employees. We were in the 100 Best Companies to Work for in America twice. The first two editions that came out, both editions covered Knight Ridder. That’s not so now.”
But the pressures of being a public company were felt at lower levels. I worked for James K. Batten when he had the painful job of carrying the bad news about earnings requirements out to the individual newspapers for which he was responsible. The emotional burden was heavy. From the news side perspective, the main tool for smoothing earnings was the contingency budget. Under normal circumstances, a budget is a planning tool. Under the contingency system, editors had to produce several layers of planning with each budget. If revenues fell below a certain point, a contingency plan was triggered which meant, in effect, a budget cut in the middle of a planning year. There were no layoffs in those years, but projects got postponed and staffs were thinned through attrition in times when advertising was down….
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Al Neuharth (of Gannett) and Alvah Chapman both retired in 1989. Chapman’s successor at Knight Ridder was James K. Batten, who had given up a job he loved, editor of The Charlotte Observer to get on the corporate ladder. Buzz Merritt recalls visiting him in Miami. They were old tennis buddies, and Merritt had been Batten’s first editor at The Charlotte Observer.
“He said let’s go get a sandwich, and we got in his car, and I said, “Jim, why in the world did you give up the editorship of a great newspaper, with all your news background, in order to become a corporate officer?’ And his response was, ‘Somebody has to watch the bad guys.'”
In the top job, Batten remained an able advocate for the news side, but an untimely brain tumor forced him to yield the reins to P. Anthony Ridder several years ahead of the planned schedule. Batten died in 1995.
Tony Ridder’s biggest problem was not of his making. It was on his watch that the game got much harder. Tony Ridder had earned the nickname “Darth Ridder” among the editors when he performed the task that Batten had hated, carrying the bad news from headquarters about budgets to the individual newspapers. Ridder had been a reporter early in his career, but his management jobs were on the business side. That made him a logical successor to Batten, given the Knight tradition of alternating between business experience and editing experience in the top job. What was lacking was a strong number two and heir apparent to protect his back on the news-editorial side. An anecdote from Buzz Merritt illustrates the problem.
“We had an editors only meeting shortly after Jim died…. (Ridder) gave his usual speech about you can have quality and high returns, too. And then there was a traditional Q and A. This is a roomful of editors, and somebody, I forgot who it was, asked what worries you, what keeps you up at night?
“He thought for a minute and said, ‘Electronic classifieds.’ And the air just went out of the room. And the evening was over…
Rationally, Ridder’s answer to the editor’s question was a sound one. if the Internet becomes the substitute technology that destroys newspapers, the effect is likely to be felt first in classified advertising. But a better answer for that audience would have been phrased in terms of the danger to newsrooms in that very real threat. If Batten had been asked that question, he might have given the same answer, but couched it like this “My fear is that electronic classified advertising, which is starting to grow, will become the leading edge of a force that deprives of us the means to carry out our traditional First Amendment responsibilities to our readers and their communities.”
Tony Ridder’s biggest problem was not of his making. It was on his watch that the game got much harder. The cost savings from new production technology were about used up, and newsprint prices took a big jump in 1995. In constant 2003 dollars, the eastern U.S. price went from $580 per metric ton in 1994 to $797 in 1995. That made newspaper managers think twice about trying to maintain circulation levels in the face of such a high variable cost….
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In the spring of 1981, (former Knight Ridder chairman) Lee Hills made his last address to Knight Ridder shareholders. As an employee-shareholder I was there — Lee had stepped down as chairman of the board two years earlier but continued some involvement in day-to-day operations. The company had been public for 12 years, and he was well aware of the tensions. Profits are necessary, he said, but, “one priority clearly stands above orderly profit growth and all other requirements. That is the long-range health of our company.”
“It isn’t always easy as a public company in America today — in any industry — to keep this top priority in mind. Many big traders in the stock market and their advisors decide to buy or sell depending on how this quarter’s results compare with the previous quarter and the last year.
“I happen to think that this short-term pressure is unhealthy for American business…the short-term pressure must be resisted — no matter how beguiling — in favor of long-term success. We are not building a company that measures its life or progress in 90-day spans…we are committed to the idea that quality coincides with the interests of the shareholders.”
It was an echo of John S. Knight’s opening remarks to the analysts twelve years earlier. It would always be necessary to do some things they did not understand. It was necessary not to become their prisoner.
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Excerpted from “The Vanishing Newspaper: Saving Journalism in the Information Age” by Philip E. Meyer, published by the University of Missouri Press in 2004. To order the book, please call (800) 828-1894.
