Knight Ridder, Gannett, MediaNews Strike Blockbuster Deal

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By: Joe Strupp

In a blockbuster deal that has turned the Detroit newspaper community upside down — and also had repercussions nationwide — The Detroit News and The Detroit Free Press have both been sold to new owners as part of a mega newspaper shakeup that extends to several other daily papers.

In a multi-part deal, first reported by E&P late Tuesday, Knight Ridder has given up ownership of the Free Press to Gannett Co. Inc. In turn, Gannett has transferred ownership of The Detroit News to MediaNews Group of Denver, Colo.

As part of the sale, Knight Ridder also will receive The (Boise) Idaho Statesman, and two newspapers in the state of Washington, The (Olympia) Olympian, and The Bellingham Herald from Gannett, according to a Knight Ridder statement. In return, Gannett will receive the Tallahassee (Fla.) Democrat and an undisclosed amount of cash from Knight Ridder.

More On The Deal
* Singleton, Ridder on the Art of the Deal
* Tracking the Management Moves
* Analyst: Profit Concerns Drove Knight Ridder’s Detroit Pullout
* Reaction from Big-City KR Papers
* Surprise at Tallahassee Democrat
* Detroit Upheaval

The transaction is subject to regulatory review and will close once that process is completed, probably the first week in September.

Editor Paul Anger of the Des Moines Register will become the new editor at the Free Press, replacing Carole Leigh Hutton, who held the title of editor and publisher. David Hunke, president and publisher of the Rochester (N.Y.) Democrat and Chronicle, has been named president and publisher of the Free Press. David K. Butler, editor of the Los Angeles Daily News, will become editor of the Detroit News.

Hutton, Free Press Managing Editor Thom Fladung and Vice President/Business Manager Jerry Teagan will remain with Knight Ridder, but in undisclosed roles.

Mark Silverman, who had been editor and publisher of the Detroit News, will take a new role within Gannett. (For more personnel moves resulting from the deal, click here.)

Knight Ridder Chairman and CEO Tony Ridder said: “From a business standpoint, this is a win-win for Knight Ridder and Gannett. Since 1989, the year the Joint Operating Agreement (JOA) between Knight Ridder and Gannett went into effect, Gannett has managed the business operations of Detroit’s two metro newspapers. Simultaneously, we have maintained independent newsrooms.

“Now, we feel the need to go our own way. In all of the cities where we have newspapers, we run the business. That is the arrangement that works best for us.

“At the same time, we are deeply saddened to be losing the Detroit Free Press and its people. Their editorial presence is part of the Motor City’s fiber. This legacy is proud, and the accomplishments of those who have shaped it will always be an inspiration to us.”

Gannett President and CEO Craig Dubow said: “Two daily newspapers, competing editorially in the city of Detroit. That’s the bottom line of today’s transactions. Detroit is the winner here, and Gannett is proud we were able to make this happen. We believe in this community.

“We welcome MediaNews Group to Detroit. They are great friends of ours and we are pleased to have them join us in this partnership. More importantly, we are looking forward to the robust competition in the newsroom. We know The Detroit News and its employees will be in good journalistic hands.

“Working with Knight Ridder in Detroit since 1989 has been a great experience for both of us. We know each other well and understand their decision. They have our thanks.”

William Dean Singleton, vice chairman and CEO of MediaNews Group, said: “We are glad to be joining our friends at Gannett in the new venture in Detroit. Like Gannett, we believe in Detroit and in two newspaper voices. So, stand by for some robust competition between newsrooms, as well as a renewed spirit of cooperation in the back office.”

Other changes expected in Detroit in the coming months include: moving the Detroit News from afternoon to morning publication; having each paper publish its own Saturday edition, and have The Detroit Free Press become sole publisher of the Sunday paper. Currently, the Saturday and Sunday editions are a joint publication of the News and the Free Press.

The ownership change has sparked concern among union leaders at the Newspaper Guild of Detroit Local 34022, which suffered a bitter strike in the late 1990s and represents about 500 staffers at the two papers. Although the guild is working under a four-year contract that does not end until 2007, President Lou Mleczko says a new owner is not required by law to abide by the contract.

“A new owner doesn’t automatically assume the existing contract,” he said. “They don’t have to honor the provisions of the existing contract.”

M.L. Elrich, a Free Press reporter and guild leader, said Gannett officials told the newsroom during Wednesday’s announcement that they planned to honor the contract.

The papers are currently under a joint-operating agreement, which began in 1989 and runs through 2089. It gives Gannett control of the business operation through a five-person board of directors, three members of which are chosen by Gannett and two by Knight Ridder. Gannett will remain in control of the JOA, with MediaNews Group a secondary partner. Terms of the arrangement were not disclosed.

According to the latest Audit Bureau of Circulations FAS-FAX report, which covers the six months ending March 2005, the Free Press led with a daily circulation of 347,447, compared to the News’ 218,841 daily circulation. That represents a 2% decrease for the Free Press and a 2.8% drop for the News. The combined Sunday paper has circulation of 682,798, which dropped 3.1% over the same period.

The Detroit Newspaper Agency, which runs the JOA, has been in somewhat of a state of uncertainty since January, following the departure of former CEO Frank Vega. After Vega left to become publisher of the San Francisco Chronicle, no replacement was named, with interim CEO Ed Humphrey running the newspaper agency.

In the meantime, the agency has continued to operate, even installing a new $170-million printing press that recently went online.

John K. Hartman, professor of journalism at nearby Central Michigan University, said the deal is not a complete surprise.

“This has been coming for a long time. Gannett has never made the profits it expected from the JOA (which went through in 1989) in part because of mismanagement and in part because a lack of chemistry in shared management with Knight Ridder,” he told E&P. “Gannett would be more likely to buy out Knight Ridder than the reverse because Gannett has more cash and that only a recession or hard times would cause a buyout. Newspapers are having hard times now. Knight Ridder is struggling financially.

“Gannett benefits by getting control of the Free Press, which has double the weekday readership of the News and often has been ranked among the top 10 newspapers in the country,” he continued, adding that MediaNews Group’s past dealings with Gannett make the two a compatible partnership. “Gannett is used to collaborating with MediaNews and the latter will be a willing junior partner in the JOA.”

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