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Don't let corporate raiders liquidate the fourth estate

Write a letter

If you want to speak your own truth to power, here's a customizable letter to Bruce Sherman of Private Capital Management. Please cc us. Please forward this call to letters to others. If you'd like to help save quality local newspapers, please get in touch at jmcmanus (at symbol) gradethenews.org.

It's come to this: A single wealthy investor is able to threaten the civic vitality of 32 American metropolitan areas by forcing the sale of their newspapers to new owners in order to satisfy his demand for larger profits.

Because those higher returns almost certainly will come at the expense of investigative reporting, independence from advertisers and adequately staffed and skilled newsrooms, the readers of Knight Ridder newspapers ought to rise up in opposition to the planned sale or dismemberment of the company.

After a decade of shrinking its news staffs, the nation's second-largest newspaper company no longer commands the respect it earned winning 84 Pulitzer Prizes in 79 years. But papers such as the Philadelphia Inquirer, Miami Herald, Charlotte Observer, Fort Worth Star-Telegram, Kansas City Star, St. Paul Pioneer Press and San Jose Mercury News are still too essential to the civic life of their cities to be auctioned off like so many pork bellies.

Not just Knight Ridder's problem

Bruce Sherman.

Bruce S. Sherman, CEO and chief investment officer of Private Capital Management (PCM) catalyzed this threat to the public-service ethic of journalism without concern for the communities affected. And if he succeeds, he will not stop with Knight Ridder. PCM is the largest shareholder in six other large newspaper companies and owns a major stake in two more.

Because Mr. Sherman is focused on making money for his clients and gaining a personal payday that the Wall Street Journal estimates in the hundreds of millions of dollars, only a bottom-line argument might persuade him to back off. With more than 90% of Knight Ridder stock controlled by institutional investors pledged to maximize return to shareholders, there is only one force that can stand up to Mr. Sherman -- the company's customers. And then only if they act in concert.

Readers dismayed at the prospect of denatured local news should write letters to Mr. Sherman promising a boycott of the new owners of their paper -- if they fire journalists or slash their compensation in order to meet PCM's price.

As a carrot, readers should also agree that if Mr. Sherman abandons his power play, they will try to convince at least one other person to subscribe to the newspaper. A rise in circulation would boost shareholder value the right way.

Newspapers are still essential

Whether you subscribe or not, the newspaper is an essential democratic institution, affecting everyone in the region. Newspapers empower civic participation. They set the public agenda by digging up much of the content seen on local TV news, radio, cable and the Web.

News has the power to define reality. It is unlike any other product traded on Wall Street.

In recent years Knight Ridder, like other news companies beholden to the stock market, shed hundreds of journalists and adulterated its news with inexpensively produced sensationalism to please investors. It has also retreated from its commitment to ethnic diversity in its newsrooms and jettisoned important weekly ethnic papers.

But Mr. Sherman and PCM are not satisfied with the sacrifices Knight Ridder has already laid at their feet. News could be squeezed for still greater returns. Just as ClearChannel found a way to make radio more profitable at the public's expense, new ownership could dismantle the many remaining qualities of Knight Ridder, whose skeptical reporting of the White House case for the Iraq war was a standout example of public-service journalism.

John McManus

Tony Ridder as Katharine Graham

Although he's been widely criticized, Knight Ridder CEO Tony Ridder may come to seem almost as beneficent as the Washington Post's legendary Katharine Graham compared with the new ownership PCM and its allies would force upon these communities.

There is the outside possibility a buyer concerned with journalism integrity might be found, perhaps a cash-laden technology firm. But Google and Yahoo are reportedly not interested. If speculation on Wall Street sheds any light, the most likely purchaser would be an investment firm specializing in turnarounds after severe cost cutting.

Any new owner will have to incur massive debt to meet Mr. Sherman's desired share price. In an industry with declining advertising and circulation revenues, it's difficult to foresee how such debt might be paid off without further cuts of bone and muscle in the newsroom. As Newsweek business columnist Allan Sloan put it: "New owners will almost certainly depopulate newsrooms even more than Knight Ridder already has, accelerating the decline of its papers."

If enough customers speak up, however, PCM won't find any buyers; it will be peddling devalued properties.

Even a chain paying sweatshop wages like Dean Singleton's MediaNews would refuse to offer a premium price per share if as few as 5% of the customers promised to cancel their subscriptions. Each letter would signal the displeasure of many others who didn't bother to write. Fewer readers mean lower ad rates.

Is a boycott threat realistic?

Is it realistic to think that communities such as San Jose, Charlotte, Philadelphia, Miami, Kansas City and more than two dozen others might stand up to Wall Street for the sake of their newspapers?

Once it might have seemed unlikely. But using the power of the Internet, journalists, educators, community and government leaders, and citizens who recognize that newspapers form the spinal cord of participatory government now have the power to generate a massive protest. The supposedly apathetic public forcefully changed the debate two years ago when the FCC tried to allow greater media concentration, and later when congressional Republicans tried to cut the public broadcasting budget.

How new owners might treat news

The stakes in this fight are just as important. If boosting return to Wall Street became the only concern of editors, the quality of journalism as a resource for citizens would decline in predictable ways:

But we can avoid these outcomes and send a powerful message to the market: Newspapers are and should continue to be a public trust, not merely a business. Because of their fundamental role in a democracy, they should not be objects of stock market speculation.


What do you think? Discuss it in The Coffeehouse.


A project of the School of Journalism and Mass Communications at San Jose State University, Grade the News is affiliated with the Graduate Program in Journalism at Stanford University and KTEH, public television in Silicon Valley.

Monitoring the Bay Area's most popular news media:

Contra Costa Times

Knight Ridder

San Francisco Chronicle


San Jose Mercury News

Knight Ridder

KTVU, Oakland (FOX)

KTVU, Oakland (FOX)

KRON, San Francisco

KRON, San Francisco

KPIX, San Francisco (CBS)

KPIX, San Francisco (CBS)

KGO, San Francisco (ABC)

KGO, San Francisco (ABC)

KNTV, San Jose (NBC)

KNTV, San Jose (NBC)


Bay Area media advocates:

Media Alliance
Center for the Integration and Improvement of Journalism at SFSU
Maynard Institute
Youth Media Council
Project Censored
New California Media
Society of Professional Journalists, Northern California chapter
National Writers Union Bay Area chapter

Site highlights


The three-part series follows the rise of three Bay Area handouts:
• Part 1: At free dailies, advertisers sometimes call the shots
• Part 2: Free daily papers: more local but often superficial
• Part 3: Free papers' growth threatens traditional news
• See also: SF Examiner and Independent agree to end payola restaurant reviews
• And: The free tabloid that wasn't: East Bay's aborted Daily Flash


Lou Alexander started a firestorm with his original guest commentary predicting the company would be sold. Several other experts on newspapers have weighed in:
Newspapers can't cut their way back into Wall Street investors' hearts, by Stephen R. Lacy; Alexander responds
Humbler profits won't encourage buyouts, by John Morton; Alexander responds
Newspapers can't maintain monopoly profits because they've lost their monopolies, by Philip Meyer
Knight Ridder in grave jeopardy, by Lou Alexander...


Leakers and plumbers: There's no difference between a good leak and a bad leak? Journalists need a shield law. 11/22/05
Unintended consequences: How Craigslist and similar services are sucking revenue from faltering newspapers. 9/13/05
Is CPB irrelevant? As Congress moves to cut public broadcasting funds, has CPB become obsolete in the modern marketplace. 6/26/05
The paradox of news: There's more news available and its cheaper than ever before, but fewer young people are interested. 5/12/05


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