Sobering thoughts on the dead tree media

Knight Ridder is the second-largest newspaper chain in the country, behind Gannett, although perhaps not for long. The company's single largest investor, Private Capital Management, sent an ultimatum to the board last month demanding an imminent sale or breakup so it could realize some sort of premium on its 20 percent holding considering the stagnant stock price. The announcement that CEO Tony Ridder had dutifully hired Goldman Sachs to begin looking around prompted those newly romantic journos to suggest nominating a slate of their retired colleagues to the board or inspiring communities to buy their local papers, as if they were Green Bay and Knight Ridder were the Packers. They have nothing but disdain for PCM, the institutional shareholders who care about nothing other than the share price, and the Wall Street analysts who approve of radical cost cutting to justify the deal. (Morgan Stanley's Douglas Arthur, whose "scorched earth" recommendation would pare $350 million in costs, was denounced in the pages of Knight Ridder's Philadelphia Daily News, which under Arthur's plan would be the first thing to go.)


Of course, if these same journalists were writing about any industry besides newspapers, they might be less soft-hearted and more hard-headed. They'd point out that newspapers are losing their main reason for being in business -- their readers. They'd point out how websites are draining away lucrative classified advertising. They might even applaud PCM for shaking up management.


They don't, of course, because they're hopeless romantics about the business they're in. Investors like PCM are realists and figure that newspapers are no longer growth properties. They're not even value properties. They're cash cows to be milked -- a trick that private equity funds do best. What's fascinating in Knight Ridder's case is how its leaders -- who have been less willing to cut costs than their peers at Gannett or Tribune Co. -- have been upstaged by presumably savvier investors who want out of the stock right now.

Is the Romance Gone From Newspapers?