Knight Ridder breakup may create unprecedented concentration of ownership in Bay Area newspapers

Fears of reduced competition and newsroom cutbacks spur interest in employee plan

By Michael Stoll
Posted March 14, 2006

With the sale of Knight Ridder to the McClatchy newspaper company, San Jose will lose one of its most promient corporate headquarters. The fate of Knight Ridder's biggest Northern California papers remains in doubt.

The sale of the Knight Ridder newspaper chain over the weekend, to a company that plans to resell three local titles, raises the possibility of an unprecedented concentration of ownership in the San Francisco Bay Area.

MediaNews, which has a reputation for operating thinly staffed and minimally compensated news rooms, could come to dominate newspaper circulation in the region if allowed to add the San Jose Mercury News, Contra Costa Times, Monterey Herald, Palo Alto Daily News and its sibling papers, plus the weekly Silicon Valley Community Newspapers to its growing archipelago of dailies.

That possibility so concerns employees of the papers that a counterproposal by the union, once considered a long shot, is now garnering a second look.

The announcement Sunday that competitor McClatchy would buy Knight Ridder for $4.5 billion, plus $2 billion in debt, sent a short-lived wave of relief through the newsroom of the Mercury News, journalists there said. McClatchy, the parent of the Sacramento Bee and other papers, has grown steadily for 20 years, earned 13 Pulitzer Prizes and avoided major labor strife.

But when McClatchy said it intended to sell off 12 of Knight Ridder's daily papers around the country to reduce its debt, employees said their jobs and the papers' public-service mission was again at great risk.

"I went to bed last night pretty encouraged by this," Joe Livernois, a reporter at the Monterey Herald and the paper's unit chair of the Newspaper Guild, said Monday. "McClatchy had a pretty good reputation for community coverage. Now everything's in flux again."

William Dean Singleton's MediaNews chain would virtually ring the Bay if it acquired the three papers. By one way of counting separate newspaper titles, the company operates eight in the Bay Area, including five under the Alameda Newspaper Group. The group's flagship paper is the Oakland Tribune.

Some journalists said they feared Mr. Singleton would gut the newsrooms of the Knight Ridder papers in order to boost profitability. The Alameda Newspaper Group has consolidated some business functions and shares news articles regionally, allowing it to cover the region with fewer staff than separate papers would.

The prospect that the same thing could happen to the Mercury News and the other two papers has refocused the attention of workers on a proposal by the union to aid in the purchase by a new "worker-friendly" company, whose investors include a former Southern California grocery magnate and a fund the union could assemble from employees' retirement savings.

"I would have said two weeks ago that it was pie in the sky," said Dennis Uyeno, a classified advertising representative and the unit chair of the Newspaper Guild at the Mercury News. "I wouldn't say it's 50-50 yet, but it's a lot more likely."

After Knight Ridder originally put itself up for sale in November at the behest of a Florida institutional investor seeking to boost the share price, guild representatives responded by creating a company called Value Plus Media to bid on the company's nine union-represented papers. Part of the money would come from an unusual arrangement called an employee stock ownership plan, which allows employees to invest their retirement funds and gives them voice in management.

Knight Ridder said before the sale to McClatchy that it was only interested in bids for the entire company. But now some version of the union proposal might work.

"It's a whole new ballgame," said Luther Jackson, chief executive of the Guild's San Jose office. "We're excited to have a chance to compete.

"Our backer, Yucaipa Companies, has a great record of being worker friendly," Mr. Jackson said. "Their investment philosophy is that they invest for the long term. We think this is much more conducive to quality journalism. Having good wages, benefits and working conditions also plays into good public service. If people can't afford to live here and have good benefits, it makes it hard to retain an excellent staff."

By contrast, several journalists said they feared that Mr. Singleton would battle with unions, cut staff and salaries, and combine operations in ways that increase profitability but hurt coverage. MediaNews operates the Tribune, the Marin Independent Journal, The San Mateo County Times and other Bay Area papers.

"ANG is a bare-bones operation," said Robert Gammon, who recently left the Tribune for the weekly East Bay Express. "Staff are paid at the lowest levels in the Bay Area, and the results are predictable. ANG has produced good stories over the years, but overall I don't think you could compare the quality to either that of the Contra Costa Times or the Mercury News."

A call to Mr. Singleton was not returned. Kevin Keane, editor of ANG, said he preferred not to comment. One Tribune journalist, who spoke on the condition of anonymity, said both Mr. Singleton's poor reputation as an owner and Knight Ridder's good reputation may no longer apply.

"MediaNews is trying to live down a reputation that was poor a few years ago," the journalist said. "I think Dean Singleton realized that and is working hard to rehabilitate his reputation, and has been successful to some degree."

David Satterfield, managing editor of the Mercury News, said "the jury's still out" on the effect a purchase by Singleton would bring. Both he and Mr. Gammon said Singleton's ownership of the Denver Post shows that he has some record of investing well in a paper and allowing it to do quality journalism. "I think people are afraid of the unknown," Mr. Satterfield said.

He added that the prospect of more concentration in newspaper ownership could be a problem: "I think the more concentrated you get, the more worrisome it is, just because you want to have a lot of voices out there. But with the growth of the Internet and television, you've got a lot of voices out there. The concentration of ownership in newspapers is a lot less important than it was 20 years ago."

The loss of competition under a sale of the three papers to MediaNews likely would not be challenged on legal grounds.

"Virtually no newspaper merger raises an antitrust issue anymore, especially in a market that large," said Stephen Barnett, a law professor at the University of California at Berkeley who follows the newspaper industry.

"That's what's so unfortunate about the present situation. There's virtually no competitive cities left. It takes away different points of view and sources of information. The monopoly daily paper becomes virtually the only source of news on local issues."

Mr. Singleton was reported to have been in talks with Gannett, the nation's largest newspaper chain, to bid jointly for Knight Ridder. Subsequent reports indicated that the two companies dropped out of the running before McClatchy clinched the deal.

McClatchy says it hopes to sell the 12 papers by the time its purchase of Knight Ridder is consummated in the summer. Though the field of potential buyers is now wide open, Mr. Singleton is among the most prominent suitors.

MediaNews said the Alameda Newspaper Group and its other Bay Area papers last year had a combined daily circulation of nearly 300,000 papers, according to the MediaNews Web site. Adding the Mercury News, Contra Costa Times, Monterey Herald and the Daily News group, the company's regional daily circulation could jump to more than 800,000.

Dan Breeden, a spokesman for the Mercury News, said it was his understanding that the Daily News and Silicon Valley Community Newspapers would be bundled with the Mercury News.

The only remaining major daily papers not part of the company's Alameda Newspaper Group archipelago would be the San Francisco Chronicle, with a circulation of about 400,000; the San Francisco Examiner, which last fall was claiming 166,000; and the Santa Rosa Press Democrat at about 90,000.

There was rampant speculation on Monday that Tony Ridder, the CEO of Knight Ridder, might want to buy back some of the papers himself. Mr. Livernois said Mr. Ridder showed up unannounced in the newsroom of the Monterey Herald and told staff there that he hadn't anticipated that McClatchy would turn around and sell the paper. The Herald's union is still bitter over Knight Ridder's decision in 1997, upon purchasing the paper, to fire all the staff and make them reapply for their jobs.

"When we heard Knight Ridder took over in 1997, we were jumping for joy, and it turned out to be a freakin' nightmare," Mr. Livernois said. He added that the staff are wary that something like that might happen again with whoever buys the paper next.

Many Knight Ridder employees expressed frustration that McClatchy, with a reputation of quality journalism and respect for workers, was now out of the picture.

"The attitude generally has been anybody but Gannet or Singleton," said Mercury News reporter Becky Bartindale who is president of the San Jose Newspaper Guild.

The team of financial consultants working with the guild to assemble a worker-friendly deal met most recently on March 2 with Mercury News staff. Mr. Jackson of the guild said he anticipated much closer scrutiny of the plan now.

Mike Antonucci, a reporter who has worked for the Mercury News for 29 years, said the revelation that McClatchy wanted to flip his paper was a "letdown."

But he said there are too many unknowns at this point to determine what option would most benefit Bay Area readers: "Speaking hypothetically, the best result is a buyer that has three principal qualities: One, an understanding of good journalism; two, a specific commitment to the South Bay and the community; and three, the assets, the wherewithal to not feel some immediate pressure to overhaul what has been a very good newspaper."