Clueless on Wall Street…
Why it’s bad for newspapers to be owned by non-family-owned chains:
But in a 33-page note to clients, Morgan Stanley newspaper analyst Douglas Arthur tried to dispel the buzz on Wall Street that there may not be many parties interested in buying the company.
Arthur’s research unit operates independently of Morgan Stanley’s investment bank. The research report was issued to Morgan Stanley’s investor clients. He said an extensive analysis of Knight Ridder’s publicly available financial information shows a buyer could make a sizable return on its investment by cutting another 5 to 6 percent of costs.
The analysis says that the cost of running Knight Ridder’s newspapers and digital media operations could be trimmed by as much as $350 million under a “scorched earth” reduction of 1,064 of the company’s 18,000 employees, the shutdown of the Philadelphia Daily News and heavy cuts at corporate headquarters and Knight Ridder Digital.
Even under a “medium scenario,” he said $150 million in costs could be trimmed by eliminating five percent of its work force, or 887 employees, cutting corporate expenses and realizing other savings.
The biggest challenge for any potential buyer, Arthur notes, is figuring out what to do with the poorest-performing Knight Ridder newspapers: The Philadelphia Inquirer and Daily News, the San Jose Mercury News and the St. Paul Pioneer Press.
Arthur estimates the Mercury News is currently producing an 8.0 percent profit margin, compared to Knight Ridder’s overall 19.4 percent margin in 2004.
Douglas Arthur may be a newspaper analyst, but I doubt he knows much about newspapers and their importance to a free democratic republic (i.e. the important journalism stuff). His only interest is making money–the short-term, Machiavellian project of American capitalism. His “scorched earth” plan would eventually kill a profitable (19 percent fercrissakes!!!) company. How clueless is this guy? He wants to make cuts in the digital operation. Hahahahaha! Oh, wait a minute…that’s sad.
UPDATE (1:21 p.m.): More from Attytood.
Dark Knight
Sorry Andy, but the only word that comes to mind is schadenfreude. I feel fully justified in that response as a news consumer. A disgruntled recipient of the structural biases of news for over two decades.
Your attack on American capitalism only demonstrates the extent that communing with the kool-aid of journalism’s religious myths still influences your thinking.
Sys- Capitalism is a lot of things. And many of them I’m quite happy with. I’m not at all happy, however, with the short-term thinking that characterizes much of its practice in the U.S. That short-term thinking is throughly Machiavellian and throughly harmful to the practice of good journalism (which is dying–some would argue it’s already dead).
Would it hurt the bottom line (in the long run) if KR were to say: “Wow–19 percent! We can spend 4 percent more next year on great journalism and still make a whopping 15 percent profit! Damn, we’re good!”?
Nope. The short-term thinkers won’t allow it.
What happened to good ol’ greed? Geez. I’d rather make MORE money putting out a product people really want than make a shrinking amount of money putting out something they don’t want (which is now the case), thus killing the business over time.
Re: schadenfreude
You SHOULD feel EXACTLY that way. Do you suppose I disagree?
Sorry Andy, but expedient, deceitful journalism preceded Wall Street’s Machiavellian interests in it.
Explain to me how Machiavellian capitalism putting an end to expedient, deceitful journalism is a bad thing?
How is killing off dead-tree fishwrap corporate newspapers ([cough] journalism) putting an end to good journalism that is important “to a free democratic republic”?
Maybe the Machiavellian killing off of rotted, infested, old media will actually let the good journalism grow?
Despite the protestations of you and Will Bunch - Look! There’s still a slightly yellowish-green leaf on that one branch proving the tree ain’t dead yet! - maybe piling more fertilizer on top of the dead tree ain’t the solution?
Maybe it ain’t the solution. But it’s a cold hard fact that you can’t do good journalism (in the context of a news organization set up as a business) if there’s little money to pay for it.
re: “expedient, deceitful journalism preceded Wall Street’s Machiavellian interests in it”
Obviously. What’s your point? There’s always been expedient, deceitful journalism just as there’s always been good journalism–unless, of course, you want to argue that there’s no such thing as good journalism, at which point we simply have to put this dialog to rest and move on.
There is such a thing as good journalism. It comes from good journalists and, as a check on bad journalists, good editors … and, perhaps, as a check on bad journalists and bad editors, good ombuds and good news councils.
And you’re correct, no business can do business if there’s little money to pay for it.
The current news business model produces more bad journalism than good in the daily/weeklies - or not enough good journalism - resulting in fewer paying consumers (especially during a shift in the noetic field). Why blame capitalists?
Isn’t it the longer view of declining advertising and subscriptions that motivates Wall Street’s actions?
Sys- Weellllll…we’re largely in agreement then
The business model that you cite is a capitalist one…hence my blame. I’m not suggesting a change from capitalism, seeing as how it is many things. I simply wish it were possible for Wall Street to take a long view of the newspaper business. It doesn’t because newspapers are one of the few businesses capable of producing 20 percent profit margins. That doesn’t mean they should be producing those margines. That’s not to say Wall Street never takes the long view. I’m sure there may be an example or two. But the one you cite (shrinking ad revenue) isn’t it, IMO.
re: “There is such a thing as good journalism…”
I agree 100 percent. Although I would ad that good journalists need the resources to practice good journalism–otherwise they are merely journalistic actors with good intentions.
Newspapers confront hard challenges
Thoughts?
Sys- My thoughts (in brief):
1. The possible break-up of K-R would be a good thing if individual local buyers purchased the papers.
2. Going digital is the future (thus my snickering at Douglas Arthur).
3. For more on K-R’s stock situation and corporate history, I suggest “Knightfall” by Buzz Merritt. Much of today’s troubles have their roots in the merger of Knight and Ridder.
4. Newspaper journalism, no matter what medium is used to deliver it, would be better off owned locally instead of owned by chains.