By: Joe Strupp
McClatchy CEO Gary Pruitt and William Dean Singleton, CEO and vice-chair of MediaNews Group, remained carefully mum Tuesday on any pending deal between their companies involving any Knight Ridder properties soon to be owned by McClatchy.
During a lively panel discussion at the American Society of Newspaper Editors conference here, Pruitt and Singleton traded opinions on various aspects of the industry?s future, but declined to say if a rumored deal was happening.
?Since it is just us, maybe you?d like to start, Gary and Dean, by making an announcement,? Albeto Ibarguen, the former Miami Herald publisher and president of the James S. and John L. Knight Foundation said to the anxious audience at the Westin Seattle.
Pruitt?s response, ?I have nothing to say.? Ibarguen?s retort, ?Let?s move right along here.? But Ibarguen did not give up, saying, ?I just thought you might like to say if McClatchy will become the second [largest] newspaper company or if Media News will.?
Pruitt remained uncommitted, noting ?McClatchy is going to announce news about divestitures as agreements are signed and finalized.? Then he observed, ?I sound like a lawyer, don?t I?” Indeed, he was started his career in law. “Information is the enemy of the process. We?re staying mum on the issue of timing, but we?ll look forward to making announcements in the coming weeks.?
As for Singleton, who is rumored to be eyeing at least the San Jose Mercury News and Contra Costa Times, speculation was running too rampant. ?Never have I seen so many people write so many things they didn?t know,? he told an amused audience.
Ibarguen, not to be swayed, took another shot, reminding Singleton of reports that he had been seen inspecting several of the former Knight Ridder properties. ?Dean Singleton sightings have become like Elvis-is-in-the- building,? he said. Singleton quickly shot back, ?Except Gary is the rock star.?
With the prospects for specifics on any pending deal drying up, Ibarguen offered some broader questions about these companies getting involved in such major deals at a time when the industry is supposedly dying, or at least in trouble. ?You seem to be spending like drunken sailors,? he said. ?What are newspaper reports not reporting or what are you seeing that maybe other people are missing??
Singleton?s response, ?You could kind of chalk it up to ignorance, ours probably. I just heard somebody talk about presses being the dinosaurs. I am currently completing or beginning the implementation of $500 million in presses. I just don?t buy that print is gone or is anywhere close to dying. Presses last 40 years, if we believe in spending on new presses that will last 40 years, we believe print has a long, long, long future. I can?t buy that print is beginning to go away. If you want to hear people talk about the end of the newspaper industry, don?t look to me.?
Pruitt agreed, saying ?We are making a big bet on newspapers, but on the local media. Newspapers are the last remaining mass medium in each market, for the most part. Our saving grace is that there isn?t a proliferation of daily newspapers, so we are holding on to our markets. When you combine our print audience with the unduplicated reach of online audience, audience is growing, which is hardly the profile of a dying industry.
If we do that right, we are the leading local media company.?
Singleton went on to blame the industry itself for spreading some of the bad news about the industry. ?A lot of reason analysts think we are a dying business is because we keep writing in our newspapers that we are a dying business,? he complained. ?We are having a tough year, but not because the Internet is taking away our business, we are having a tough year because Ford and General Motors are having a tough year, affecting advertising in newspapers.
?We are in what we used to call a cyclical downturn in print advertising,? he continued. ?Will General Motors and Ford come back? Absolutely, and they will come back advertising in newspapers. Our own industry are mistaking a cyclical downturn for a structural change.? Singleton noted that Internet revenue was up 58%. ?But Wall Street and our own reporters who are covering us are buying into the belief that we are dying,? he said. ?That is wrong.?
Ibarguen responded by saying that ?Reporters report what people tell them.? Said Singleton, ?People tell them bullshit sometimes.? Then he went on to compare newspaper?s problems with television, ?You want to talk about a dying business, television is a dying business.?
Pruitt agreed, adding ?look at our revenue per outlet. On a per outlet basis, we are doing better than? television, ?And we are holding on to our audience better.?
Pruitt and Singleton then turned their non-responses on a deal into a nearly-comedic back and forth as certain sticky questions arose. When Ibarguen asked how each based value on a prospective purchase, Singleton said, ?The value depends on whether you are the buyer or seller. Isn?t that right, Gary?? Responded, Pruitt: ?Tell us more, Dean.?
When Ibarguen asked again about why Singleton completed some past purchases, such as his deal to take over The Detroit News, Singleton said, ?I looked at Detroit because it looked like it would be fun.? That brought a quick response from Pruitt, ?You?re full of it, Dean.?
As both men smiled, Singleton went on to explain. ?The fun part of Detroit is we get to go play newspaper and draw the first profits out and Gannett gets the headaches,? he said, noting Gannett?s control of the JOA partnership there. ?There is a return on investment or we wouldn?t have done it. Our board has this thing, if it isn?t fun, we don?t want to do it. We do a lot of things because they look like they?re fun.?
When Ibarguen asked each if they would rather buy a newspaper that had great editorial quality and made little money, or vice versa, the responses were somewhat couched.
?We look at everything and then some,? said Pruitt. ?We can?t change markets, we can change newspapers. News quality will not affect an up or down decision on McClatchy, we want to publish high-quality newspapers in growth markets.?
Singleton said he looks for growth potential, noting ?I?d far rather buy low-margin newspapers because you have great opportunity over time to push those margins up. The low margins always out-perform the high margins.?
He also pointed out the advantage his company has by not being a publicly traded commodity, and at the same time sticking it to some public companies. ?When you go public, you make a pact with the devil,? he declared. ?You say ?I want your money and in return for your money, I will give you a return better than you can get somewhere else and I have to keep my end of the bargain.? If you keep your end of the bargain, you may not do what?s best for your company.?
Pruitt seemed to agree, but pointed out that poor business results are the same for any company. ?There is ultimately no security if we are not doing well financially, public or private,? he said. ?There is no exception for newspapers, we are going to have to be successful and at the same time, live up to our values. The margin for error is less than it used to be. I do think long-term, good journalism is good business.?
Also in the debate was William B. Drewry, managing director and head of media for Credit Suisse Securities, who brought the analyst viewpoint. Ibarguen put him on the hot seat by asking about the impact such opinions can have on the news business. ?Who are you accountable to?? he asked Drewry? ?Should we know more about you??
?Analysts have to pass rigorous exams to be certified. It is heavily regulated and we have to certify every quarter that our work is of our own, that there is no outside pressure,? Drewry said. ?From there comes the credibility of what we do. We are judged by that each and every day.?
Ibarguen then asked each of them what changes are likely in the next five years for newspapering. Both Pruitt and Singleton pointed to online growth, but also the need to link up with local and national search engines for audience improvement.
?We are going to see fast growth online and the emergence in local search, what Google and others are doing broadly,? said Pruitt. ?That will help bring more people into our audience. And a slow erosion of the print audience, and fast growth online and lots of new products online. More targeting online, and increased use of direct mail.?
Singleton said it would be a two-pronged change. ?One is we certainly have to protect and build our print product because that is still 90 percent of our revenue. But we have to make them much more compelling than they are today,? he said. ?In the last 30 years, we have edited newspapers for each other and to win awards so we can pat ourselves on the back. The circulation numbers show us that the newspapers we are putting out today are not what consumers want. We have to stop writing for ourselves. The type of newspaper we put out in the next five years will be different from what we have put out.”
Singleton described it as ?probably more information, more entertainment and less long series that we love to do but our readers hate to read.
Citing expensive war coverage as an example, Singleton said, ?It?s fun to send people to Iraq during the war, but it is not nearly as important to the local community as covering local injustice.?
Added Singleton, ?We have never gotten paid for our news copy online and we have got to get paid.? He also cited the search engine approach, which may include partnering with Yahoo or another engine. ?If we don?t start getting paid for news, we can?t continue to afford to producing it,? he stressed.
Pruitt cautioned against charging too quickly, though, stating ?I?m afraid if you start charging, you may lose money, we?ll have to sort that out as we go forward.?
When questions were allowed from the audience, the first was from Rich Oppel, editor of the Austin American-Statesman, who took Singleton to task. Citing the recent string of Pulitzer Prize-winning projects, ranging from The Washington Post?s revelations about lobbyist Jack Abramoff to The Copley News Service?s exposure of Rep. Randy Cunningham?s bribery scandal, he asked Singleton ?Which of those series do you think is an example of the kind of series that editors are producing for other editors??
Singleton agreed with the quality of each, but stressed again ?I don?t think we are giving them enough of what they want. If we hang our hat on just giving what we know they need. I love all of those stories, I love long stories, but increasingly our readers are telling us what they want to read. And we have to listen to them.?
When asked by an audience member what impact the quality of a paper has on the stock market, Drewry reluctantly admitted that it was very little: ?The market does not differentiate between the difference in quality of The New York Times and the quality of USA Today. It really comes down to the numbers.?
Each participant also defended Tribune Company for its Times Mirror purchase six years ago, which has apparently turned out less-successfully than they would have liked.
?There are a lot of newspaper stocks that are lower then they were then,? Drewry said. ?The final chapters of this have not been written. On a raw basis, one can say it has been difficult. But no more difficult than if they had not bought TimesMirror.” Said Singleton, ?If Tribune had been a private company, you would have said it was a phenomenal deal. Wall Street sees it a lot of different ways.?
When asked about the ability of Knight Ridder investors led by Bruce Sherman to force a sale, Drewry said ?it was the one company.? Pruitt agreed, saying, to some surprise, ?If I had been an employee, I would have voted against the sale.? Then he added quickly, ?Had I known McClatchy would get it, I would have voted for it.?