Today, the next act of the Knight Ridder drama begins to play out. Almost as soon as Knight Ridder announced its sale to McClatchy Co. on March 13, McClatchy CEO Gary Pruitt announced that McClatchy would immediately sell off a dozen of the newly acquired properties. First bids are being accepted by McClatchy today. Those 12 are not just small markets, but also unexpectedly large ones, including the San Francisco Bay Area and Philadelphia. They amount to 43 percent of Knight Ridder's current revenue. Perhaps as significantly, they account for 55 percent of Knight Ridder Digital’s total unique visitors and 36 percent of its page views, as of February.
The bidders are a motley lot. They are led by newspaper brethren Media News and Gannett, with Lee Newspapers expected to be a player as well. ValuePlus, a new company created by The Newspaper Guild, Yucaipa, a private equity firm, and assorted individuals and local consortia of businesspeople interested in picking up their local newspaper are also in the hunt. It has even been suggested that Yahoo! pick up the Mercury News in order to further print/online experimentation.
Clearly, McClatchy’s prime goal is to defray as much of its $4.5 billion (plus $2 billion in debt) price for Knight Ridder as possible. It expects most of the papers to be sold to other newspaper companies intent on regional clustering, a way of reducing print-oriented expense through production/advertising/finance efficiencies. That’s well and good.
Outsell affiliate analyst Ken Doctor believes that McClatchy has another opportunity to use its newspaper lures to do some big-picture hunting. With McClatchy the second biggest American newspaper company even after the 12 are divested, Pruitt could wield his new leadership – and market power – to forge and hone industry networks. Here are three possibilities:
- The CB/CV Play: Knight Ridder owned one-third of major recruitment player CareerBuilder and a lesser percentage of Classified Ventures, which specializes in autos and apartments. The other major owners, Gannett and Tribune, have the right to buy out KR’s share – or they can allow McClatchy to assume it. Play: McClatchy can allow Gannett to buy the properties it wants at a fair price, as long as McClatchy becomes a full CB/CV partner. Pruitt can also make CB/CV affiliate participation a requirement for all buyers of the 12. That way the CB/CV network can attain even greater scale against its keen competitors.
- The Yahoo! Card: Why not consider Yahoo! (or another GYM player) as at least a minority owner in the Mercury News or some combination of the papers sold, or some kind of strategic investor in McClatchy itself. The news industry needs to come to grips with the distribution power of Yahoo!, as well as Google and MSN. And it has other strategic needs, best solved by GYM: 1) better-advantaged relationships around ad-matching systems provided by the three; 2) an accommodation of content distribution that will put more money in publishers’ pockets; and 3) provision of content-useful tools to multiply page views. The industry needs leadership here, and the new McClatchy can provide it.
- The National Content Card: McClatchy inherits some parts of KR’s acclaimed Washington Bureau and, we assume, half of the KRT NewsWire - one of four major wires in the country - specializing in features, photos, and graphics. The T in KRT is Tribune, which is apparently not bidding on the 12 papers, but also has its issues. It not only needs a strong classifieds partner, it needs to rationalize its KRT investment, which is struggling financially, and figure out how it fits with its L.A. Times-Washington Post wire investment, which it inherited in buying Times Mirror in 2000. McClatchy now participates in the NYT Wire, the Scripps Howard News Service, and the Scripps McClatchy Western Service. The industry needs more consolidation here. McClatchy can decide how best to consolidate both of its own retained operations, and how it wants to be a national news player, and again, include its new buyer/partners in on the vision and the deal.
“Strategic selling” is a mold-breaking way of doing business, but worth considering in a time that is clearly not business as usual. These steps wouldn’t solve McClatchy’s and the industry’s formidable transformation from legacy print to dual-platform businesses, but they would help build a pathway there.