Liquidating the News
It's come to this: A single wealthy investor is able to threaten the civic vitality of 32 American metropolitan areas by forcing the sale of their newspapers to new owners in order to satisfy his demand for larger profits.
Because those higher returns almost certainly will come at the expense of investigative reporting, independence from advertisers and adequately staffed and skilled newsrooms, the readers of Knight Ridder newspapers ought to rise up in opposition to the planned sale or dismemberment of the company.
After a decade of shrinking its news staffs, the nation's second-largest newspaper company no longer commands the respect it earned winning 84 Pulitzer Prizes in 79 years. But papers such as the Philadelphia Inquirer, Miami Herald, Charlotte Observer, Fort Worth Star-Telegram, Kansas City Star, St. Paul Pioneer Press and San Jose Mercury News are still too essential to the civic life of their cities to be auctioned off like so many pork bellies.
Not just Knight Ridder's problem
Bruce S. Sherman, CEO and chief investment officer of Private Capital Management (PCM) catalyzed this threat to the public-service ethic of journalism without concern for the communities affected. And if he succeeds, he will not stop with Knight Ridder. PCM is the largest shareholder in six other large newspaper companies and owns a major stake in two more.
Because Mr. Sherman is focused on making money for his clients and gaining a personal payday that the Wall Street Journal estimates in the hundreds of millions of dollars, only a bottom-line argument might persuade him to back off. With more than 90% of Knight Ridder stock controlled by institutional investors pledged to maximize return to shareholders, there is only one force that can stand up to Mr. Sherman -- the company's customers. And then only if they act in concert.
Readers dismayed at the prospect of denatured local news should write letters to Mr. Sherman promising a boycott of the new owners of their paper -- if they fire journalists or slash their compensation in order to meet PCM's price.
As a carrot, readers should also agree that if Mr. Sherman abandons his power play, they will try to convince at least one other person to subscribe to the newspaper. A rise in circulation would boost shareholder value the right way.
Newspapers are still essential
Whether you subscribe or not, the newspaper is an essential democratic institution, affecting everyone in the region. Newspapers empower civic participation. They set the public agenda by digging up much of the content seen on local TV news, radio, cable and the Web.
News has the power to define reality. It is unlike any other product traded on Wall Street.
In recent years Knight Ridder, like other news companies beholden to the stock market, shed hundreds of journalists and adulterated its news with inexpensively produced sensationalism to please investors. It has also retreated from its commitment to ethnic diversity in its newsrooms and jettisoned important weekly ethnic papers.
But Mr. Sherman and PCM are not satisfied with the sacrifices Knight Ridder has already laid at their feet. News could be squeezed for still greater returns. Just as ClearChannel found a way to make radio more profitable at the public's expense, new ownership could dismantle the many remaining qualities of Knight Ridder, whose skeptical reporting of the White House case for the Iraq war was a standout example of public-service journalism. John McManus
Tony Ridder as Katharine Graham
Although he's been widely criticized, Knight Ridder CEO Tony Ridder may come to seem almost as beneficent as the Washington Post's legendary Katharine Graham compared with the new ownership PCM and its allies would force upon these communities.
There is the outside possibility a buyer concerned with journalism integrity might be found, perhaps a cash-laden technology firm. But Google and Yahoo are reportedly not interested. If speculation on Wall Street sheds any light, the most likely purchaser would be an investment firm specializing in turnarounds after severe cost cutting.
Any new owner will have to incur massive debt to meet Mr. Sherman's desired share price. In an industry with declining advertising and circulation revenues, it's difficult to foresee how such debt might be paid off without further cuts of bone and muscle in the newsroom. As Newsweek business columnist Allan Sloan put it: "New owners will almost certainly depopulate newsrooms even more than Knight Ridder already has, accelerating the decline of its papers."
If enough customers speak up, however, PCM won't find any buyers; it will be peddling devalued properties.
Even a chain paying sweatshop wages like Dean Singleton's MediaNews would refuse to offer a premium price per share if as few as 5% of the customers promised to cancel their subscriptions. Each letter would signal the displeasure of many others who didn't bother to write. Fewer readers mean lower ad rates.
Is a boycott threat realistic?
Is it realistic to think that communities such as San Jose, Charlotte, Philadelphia, Miami, Kansas City and more than two dozen others might stand up to Wall Street for the sake of their newspapers?
Once it might have seemed unlikely. But using the power of the Internet, journalists, educators, community and government leaders, and citizens who recognize that newspapers form the spinal cord of participatory government now have the power to generate a massive protest. The supposedly apathetic public forcefully changed the debate two years ago when the FCC tried to allow greater media concentration, and later when congressional Republicans tried to cut the public broadcasting budget.
How new owners might treat news
The stakes in this fight are just as important. If boosting return to Wall Street became the only concern of editors, the quality of journalism as a resource for citizens would decline in predictable ways:
- Government and corporate misconduct that required expensive investigative reporting to uncover would fester unchecked.
- With fewer reporters churning out more stories, the news would become superficial and more dependent on self-serving public relations.
- Because they provide most of the paper's revenue, advertisers would have more sway over what becomes news -- and what doesn't.
- Sensational news would proliferate because it attracts audience in the short term at little cost. Such junk journalism distracts rather than engages the public with important civic matters.
- Newsroom wages and the "psychic pay" of speaking truth to power would both decline, deskilling the newsroom.
But we can avoid these outcomes and send a powerful message to the market: Newspapers are and should continue to be a public trust, not merely a business. Because of their fundamental role in a democracy, they should not be objects of stock market speculation.