Newspapers must put journalism before bottom line

When he died in 1948, the Toronto Star’s former owner and publisher Joseph Atkinson stipulated in his will that the public interest should supersede profits.

This “paper for the people’’ philosophy has made the Star the most successful newspaper in Canada.

It’s all about, in the words of the late American newspaperman H.L. Mencken, afflicting the comfortable and comforting the afflicted.

There’s a similar mindset at the U. S. newspaper giant, Knight Ridder, which publishes 32 dailies, including the Miami Herald, the Philadelphia Inquirer and the Philadelphia Daily News.

This month the chain, the secondlargest in the United States, made headlines when it announced it was putting itself up for sale because its sagging stock price wasn’t rich enough for its three biggest shareholders: Private Capital Management LP of Naples, Fla., which has 19 per cent, plus Southeastern Asset Management with just under 10 per cent and Harris Associates LP with about 8 per cent. A sale is expected to break up the company at best, or degrade the titles to pay off the resulting debt to such an extent that their journalism will not be worth the paper it’s printed on.

Private Capital Management in particular is pressuring Knight Ridder for a better return, as it’s not happy with last year’s 19.4 per cent operating profit margin.

It also threatens to nominate its own slate of directors at the company’s annual meeting next April, because it hasn’t received satisfaction on its “ serious concerns’’ regarding its investment. Now, despite all the falling circulation and dwindling advertising in the paper business, it’s still a rich game.

According to The State of the News Media 2005, from the Project for Excellence in Journalism, affiliated with Columbia University Graduate School of Journalism, “ as businesses, newspapers are strong, highly profitable and resilient.” In fact, “the industry now boasts operating margins in the low- to- mid- 20 per cent range, a bit less than Microsoft and Dell but higher even than pharmaceuticals.’’ Even as the department stores disappeared along with their advertising, newspapers have adapted, with special sections devoted to cars, computers and condominiums, as well as other products such as freebie commuter dailies. Of course, circulation is declining.

This month, an industry average drop of 2.6 per cent was recorded, although some papers such as The New York Times held steady. That didn’t stop the company from cutting 500 jobs, including 80 newsroom positions at both the Times and its sister publication, The Boston Globe.

There are two main forces behind the readership drop. The first is that young people aren’t picking up the paper and the second is, of course, the Internet.

Apparently, the folks at Private Capital Management — which snapped up most of its Knight Ridder stock last summer — didn’t get the memo on that downward trend in circulation.

What’s more, Knight Ridder has generally not performed as well as other newspaper companies because it tends to invest in quality journalism.

It also has a more progressive outlook. Which is why some Knight Ridder employees are very suspicious about the For Sale sign on their corporate door. The Daily News’ Will Bunch, for example, on his company blog, recently documented the rich donations made by the top executives of Private Capital Management to the Republican National Committee and the Bush- Cheney 2004 campaign.

“ Say what you will about Knight Ridder’s business practices, but when it comes to journalism, they do a remarkably good job of getting out of the way,” blogged Bunch.

“Thus, the liberal editorial voice of the Daily News and the Inquirer, and the amazing work by Knight Ridder’s Washington bureau, which was one of the few media voices casting doubt in 2002 and 2003 on whether Iraq had WMD and posed a threat to America.” As it turns out, that company, not unlike the Star, subscribes to a “ creed,’’ handed down by cofounder John S. Knight.

This is why some 60

prominent Knight

Ridder alumni, including Pulitzer prize winners and the Inquirer’s

Mark Bowden ( Black

Hawk Down), signed

an open letter this

month, announcing

that they planned to nominate their own directors.

“ Knight Ridder is not merely another public company,” they wrote.

“ It is a public trust. It must balance corporate profitability with civic purpose. We oppose those who would cripple the purpose by coercing more profit. We abhor those for whom good business is insufficient and excellent journalism is irrelevant.” To them, and toner-stained wretches in newsrooms everywhere, the strategy for survival is clear: It is to not cave in to shortsighted bottom- liners who demand extraordinary profit margins in the near term while destroying the product in the long run.

In the business of newspapers, greed is just bad news. More Zerbisias at www.thestar.blogs.com ONLINE UPDATES

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