Continuation of Whither Knight-Ridder?   

In October 1990, Gene Roberts, the widely respected editor of the Philadelphia Inquirer, shocked the industry by taking early retirement. He taught full time at the University of Maryland College of Journalism for three years, then took a three-year leave of absence in 1994 to become managing editor of the New York Times. "You could see the kind of ongoing financial pressures that have occurred to this day were beginning then," he says now. "And it didn't take much imagination to realize that for whatever reason, they weren't going to let up."

While Wall Street was pressuring Knight-Ridder to reinvest profits into properties other than newspapers, revenues in Knight-Ridder's newspaper division started falling. By 1991 the industry was suffering from one of its worst recessions since World War II. At Knight-Ridder, profit margins dropped steadily, from 15 percent in 1987 to 10.8 percent in 1991.

The chain's flagship papers in Detroit, Miami and Philadelphia, like so many papers in large American cities, were reeling from the economic impact of demographic change. Middle-class people were fleeing to the suburbs, leaving behind the poor and large numbers of immigrants, not traditional newspaper readers. Meanwhile, suburban dailies were encircling Miami and Philadelphia, siphoning off the affluent readers needed to attract advertisers.

By 1990 the Inquirer was no longer the chain's biggest moneymaker. Circulation was flat, advertising revenue declining. Though once it made sense to plow profits into the newsroom, the formula was no longer working, says former Knight-Ridder executive Hawkins, who was close to Batten at the time. Not long before Roberts left Knight-Ridder, Hawkins says he called a Merrill Lynch analyst to ask why his company's stock was flat. Hawkins says the analyst told him, "I'll tell you what the hell's wrong with your stock. You're winning too many Pulitzer Prizes. You're giving too much money to help Gene Roberts win Pulitzer Prizes and not giving enough back to your shareholders."

News reports of Roberts' resignation painted a picture of the evil "Darth Ridder," a bean counter from the business side bent on using benchmarks to break Knight-Ridder's editors. The portrait was a caricature, Ridder and others say. As president of the newspaper division, his job "was to build our newspapers financially, and build them journalistically. It really wasn't one or the other," he says. "I worked hard to protect the newsroom budgets during that time."

The bean counter stories persist, a fact that bothers Ridder, not only for his sake, he says, but because it hurts Jim Batten's reputation. "Jim cared very much about the profitability of this enterprise. And I care about the quality of the journalism. I think it's unfair to categorize somebody as one side or another, because I think Jim and I saw the world in very much the same way," to which other corporate insiders attest.

The Batten and Ridder message of change and innovation was making significant inroads at newspapers company-wide. In 1990 the company gambled on an experiment in Boca Raton, Florida, a redesigned newspaper aimed at attracting young professionals without alienating older, wealthier readers. They transformed the News with splashy color, bold graphics and few jumps, prompting one media critic to call it "a shopper's guide masquerading as a newspaper."

Batten called the Boca Raton News "a weapons lab designed to invent and test new approaches to making newspapers work better for younger readers. Some ideas will flop. Others will pay off."

In the next two years, three-fourths of Knight-Ridder's newspapers "undertook major projects of changing the way they put the paper together," Bill Baker, then the company's vice president for news, told Advertising Age in 1992. News coverage changed to emphasize topics readers deemed important, including more local and lifestyle news.

At the Post-Tribune in Gary, Indiana, Editor William W. Sutton Jr. restructured the newsroom and reduced meeting coverage in favor of "reader-focused stories," he says. After readers complained, the paper reinstated the coverage, "but in a different context. It's news and information that can help make their life easier, that can give them control." The newsroom underwent a culture change, he says. "I tell readers, 'I'm the editor of your newspaper. Tell me what you want in your newspaper and we'll do our best to please as many of you as we can.' "

At the Lexington, Kentucky, Herald-Leader, John Carroll, then the paper's editor, oversaw a series called "Cheating Our Children," which documented how statewide tax corruption contributed to the neglect of schools. "Reporters wrote and rewrote..until the stories were understandable to people reading on an eighth-grade level," Batten said in a 1990 speech. "That was essential, given the poor reading skills of large numbers of Herald-Leader subscribers. They kept the stories short..even showing drafts to secretaries asking for feedback and suggestions on the writing and organization... They didn't pander. They merely wrote and edited so that every reader--from the well-educated politicians to the less-educated country folks--not only could, but would, read this series. And then act on it."

On the business side, managers extended hours for customers, counseled advertisers and improved ad reproduction, among other things. In 1991, ADWEEK magazine named Ridder "Newspaper Executive of the Year." By the end of 1992, with the economy improving, Knight-Ridder posted growing revenues and a 12 percent profit margin, up from 10.8 percent the previous year.

But more needed to be done to strengthen the company's financial position, strategies familiar to corporate America in the '90s. Hiring freezes, buyouts, cutbacks, layoffs and reorganizations were felt keenly at the company's flagship papers. While executives argued that downsizing and restructuring were necessary to keep Knight-Ridder competitive, journalists complained of low morale and lowered standards, damaging the company's image as the crown jewel of America's newspaper chains.

The papers continue to post profits--the Miami Herald was the largest contributor to Knight-Ridder's profits in 1994, followed by the San Jose Mercury News, Philadelphia Newspapers Inc., the Charlotte Observer and the Detroit Free Press. But the company needed to support new media acquisitions and protect itself from an industry-wide 40 percent hike in newsprint costs. (Thanks to Knight-Ridder's stake in two newsprint plants, the newsprint crisis has hurt it less than some other companies, Ridder says.)

The toll financial demands take on journalists and the work they produce is subtle, complex and varies from city to city.

In San Jose, for instance, the Mercury News recently eliminated its afternoon edition and then added newshole: a page a day to the business section, a tabloid on personal finance and careers, a real estate section and an unspecified "editorial product" aimed at the Hispanic community due next year, says Chairman and Publisher Jay T. Harris. At the same time, Harris says, the paper plans to reduce staff and eliminate up to 10 journalists next year by attrition.

In 1994, Mercury News journalists blamed Harris for putting the paper's financial concerns ahead of public service when a consumer car-buying guide caused auto dealers to organize an ad boycott, costing the paper at least $1 million, AJR reported at the time. Harris apologized to car dealers and began running a full page house ad listing "10 reasons why you should buy or lease your car from a factory authorized dealer."

In Detroit, changes were underway even before the start last July of a lengthy, bitter strike. Management moved at least eight reporters from downtown to bureaus in surrounding communities to improve suburban coverage, says Publisher Heath Meriwether. With a strike settlement unlikely anytime soon, the newsroom will operate with a 10 percent smaller staff than in its prestrike days, Ridder says. Meriwether says the cuts will be restored when the paper begins making money again.

The paper's priorities have changed, says Lori Montgomery, a Free Press Washington reporter. "Detroit is disintegrating so much faster than other cities," she says. To protect the paper's economic interests, she adds, "managers are trying desperately to move away from being an urban paper toward being a regional and suburban paper." Meriwether calls the reorganization "a course correction."

The Free Press, like many papers throughout the country, wants to expand its definition of news; to do this in an era of shrinking resources, Meriwether says, "you reorganize. You rethink what you're doing, you figure out how to reallocate resources to cover things that matter most to readers."

Expanding news coverage in an era of shrinking resources means "taking risks, not doing some things," says Post-Tribune Editor Sutton. "Like in '92, when we said we're not going to cover meetings. That was a shock to the newsroom."

In many newsrooms, especially those suffering staff cuts, it also means more work. At the Press-Telegram in Long Beach, California, management will likely reduce the news staff by 20 percent next year, according to Executive Editor Jim Crutchfield. One reporter says editors "are in incredible denial. They keep saying: 'This doesn't mean we can't put out a helluva newspaper. It doesn't mean we can't do great stuff.' But nobody's telling us how."

Despite the cuts, Crutchfield wants the paper's coverage to be more inclusive, more diverse. "We've got to cover more people, including poor people, rich people and average people," he says; to do that might mean giving up some breaking news "in favor of explaining more."

At the Wichita Eagle, shock reverberated throughout the newsroom recently when the paper dispersed its copy desk. Copy editors, now assigned to reporting teams, also write stories; reporters write their own headlines. "We've put enormous psychic stress on the staff in the last year," says Editor Buzz Merritt. The paper, perhaps most famous for convincing its staff to inform even routine coverage with public journalism, has undergone major philosophical change and a newsroom reorganization in the last year, grouping journalists into teams and eliminating middle-management positions.

Reporters unwilling to adopt the new journalism quickly realize they must change or resign themselves to diminished visibility. About halfway through the Eagle's "People Project," a 10-week public journalism series in 1992, Merritt says, "one of our macho, middle-aged, kick-butt journalists went to the managing editor and said: 'How do I get back on the front page?' He understood [public journalism] was going to get him there."

The change has resulted in greater productivity and efficiency, Merritt says, allowing editors to pursue a new type of journalism while preserving the old, even though the paper has lost about 10 reporting positions over the last five years.

A few journalists have quit because they felt uncomfortable, Merritt says, "and that should happen. When you adopt new guiding principles and people are uncomfortable with it, then they should leave."

At the Miami Herald, reporters and editors complain the paper is refocusing its vision while diminishing its staff through layoffs and attrition. As ad revenue declines, the Herald is spending $110 million for a press upgrade, while shrinking the newsroom staff about 8 percent to 415, through attrition and early retirement, by January 1997. At the same time, executives hope to increase the paper's profit margin from 16 percent to 18 percent.

Mark Seibel, the Herald's director of international operations, says the paper is also changing its emphasis. "The trend is not to cover what we would have five years ago," he says. "We don't react to major stories outside our major circulation area. The philosophy is: We're a local newspaper. We cover South Florida. Ten years ago, we thought we competed with the New York Times and the Washington Post. I don't think we think about that anymore."

At least a dozen reporters and editors have quit, and those left behind attended mandatory sessions last summer with a management consultant whose message, according to one high-ranking editor, was, "Love it or leave it. He told us in effect: 'The people who own this company have decided this is what they're doing. If you don't like it, leave. What you're rebelling at is change. The change is going to take place with or without you.' "

Executive Editor Douglas C. Clifton disagrees that the paper's vision is changing. The Herald still maintains four foreign bureaus, he says, and considers itself "a regional newspaper whose region goes from Tallahassee to Tierra del Fuego." What changed, he says, "was a perception that we once competed with the Post and the New York Times..a vision that never existed." He also dismisses charges of a brain drain. Says Clifton, "People have always left the Miami Herald."

In Philadelphia, management must increase the combined profit margins of the Inquirer and the Daily News from 8 percent to 12 percent, Ridder says, despite the Daily News' million-dollar loss last year. The papers raised prices, cut newshole and will eliminate about 9 percent of the workforce through buyouts, attrition and, if necessary, layoffs, says spokesman Charles Fancher. The Inquirer newsroom likely will lose about 25 positions, the Daily News about 10, according to editors at the papers.

"Philadelphia had been flat and coming down over time," Ridder explains. "So it was really time to bring the margins up to a respectable level, a level that is below the Washington Post and the Chicago Tribune and papers like that."

(Knight-Ridder recently released profit margins in Philadelphia and Miami to illustrate "why we need to [change]," Ridder says. "We thought it made sense to try to have people understand why we were doing it instead of just doing it." Margins at other Knight-Ridder papers are not made public.)

"In the quest for higher profits, we end up putting a lot of energy into corporate bullshit that doesn't seem to serve any purpose," says Inquirer reporter Michael Sokolove, who covers the business and culture of sports. "The paper's journalistic visionaries are usually, or often, so involved in some huge initiative from Miami--and these initiatives keep on coming. So instead of putting all their energy and talent into great journalism, they're writing reports or attending meetings. If they're involved in all that, even if for good reason, the leadership they can devote to journalism is diffused. And that has an impact on the quality of the paper."

Inquirer editors and reporters "are being asked to do more with less, absolutely, no question about it," says Editor Maxwell E. P. King. "Newspaper people are workaholics. They'll work like hell if you create an environment in which they feel reasonably sure they can do their best work. We have to choose not to do some things. We put less emphasis on process news and on incremental news developments."

Financial matters do distract top editors, King says, but not just at the Inquirer. "It's happening at almost any newspaper company I'm aware of," he says. "There's no way out of it."

The role of the editor has changed with the advent of corporate journalism, says John Carroll, who used to work for Knight-Ridder and is now with Times Mirror. "Communism is gone and capitalism is triumphant," Carroll says, not just at Knight-Ridder but throughout American journalism. "The values of American corporate life--to the exclusion of nearly all other values, such as community service, spirited journalism--take precedence. Editors are more in line with business values and are less and less independent arbiters of right and wrong in their communities."

Reporters at the papers in Miami and Philadelphia rattle off dozens of names of highly respected colleagues who have quit recently; some have spoken candidly--on and off the record--of their frustrations, not only with Knight-Ridder, but with changing priorities throughout the news business.

When Richard Aregood, Pulitzer Prize-winning editorial page editor of the Daily News, left in February to take the same position at Newhouse's Newark Star-Ledger, he told AJR, "It's a better job than the one I had. Spacing and staffing have been going down here." Aregood had previously said Knight-Ridder "was becoming a company on the standard model of corporations rather than on the Knight model."

David Von Drehle, who once worked in the Miami Herald's now-shuttered New York bureau, is the Washington Post's assistant managing editor for Style. "My growing sense was that the people who ran Knight-Ridder Inc. had lost editorial control of their newspapers to the analysts on Wall Street," he says. "I thought then and I'm 100 percent convinced now that it's time to pronounce the experiment of publicly trading newspapers a failure. If anybody was going to be able to prove me wrong, it would have been Knight-Ridder. But this latest recession has put the lie to that."

In late November, Executive Editor Jim Naughton saddened many at the Philadelphia Inquirer when he announced he was taking a buyout and leaving the paper after 18 years, due in part to ongoing cutbacks. "It's a very wearing experience, year after year, to have cuts and squeezes and then try to cope and be as jolly as possible," he says. "It's not as much fun. And it's not so easy to be jolly." Morale, he says, "is a serious problem. It's never been as low as it is now. And that's understandable, given what's going on in the newsroom, in the company and in the industry."

Tony Ridder says he understands the toll change has taken on employees, and the company is doing its best to improve morale where needed. "I have a concern about morale at the Herald more than in Philadelphia. Morale is an issue that we're working on. I think at most of the papers, where they're not dealing with the kinds of things that are happening here in Miami and in Philadelphia, I'm not aware of a problem."

Many great journalists remain at Knight-Ridder, and they continue to produce high quality work. Since 1990, Knight-Ridder newspapers have won nine Pulitzer Prizes, compared to five for Gannett, the nation's largest newspaper company, 11 for the New York Times and 10 for Times Mirror. They have published scores of stories exposing government mismanagement, waste and corruption. Last year AJR readers, asked to pick the best newspaper ownership, chose Knight-Ridder.

In February, Batten met with the company's publishers and came away renewed, with hope for the industry's and his company's future.

Unfortunately, his health was failing fast. In June 1994 he had been diagnosed with a malignant brain tumor.

As Batten's life was ending, he could reflect on the myriad successes he had brought to the company he so loved. "He had vision," says Bill Baker, former vice president for news. "Even far more than vision, what we took from Jim Batten was the example he set. And that was: Try to be a good person. That is so uncommon in people who have gotten high up in an organization... He was a nice guy who really cared about people. And he never lost that."

The one dragon Batten's kindness couldn't kill was Wall Street. Wall Street remained "skittish" about Knight-Ridder, reported a March 13 Miami Herald article, due to a familiar list of conditions beyond Batten's control: rising newsprint prices, fierce competition for ad dollars, declining newspaper readership, the threat of electronic media, ever-demanding stockholders and the CEO's cancer. "It was a disappointment," Batten said, "because in many ways we had our best year in history."

Two weeks later, Batten's tenure as CEO ended. With Batten's recommendation, the board chose Tony Ridder for the job effective March 25.

Three months later, Batten died at 59.

There was more pain at Knight-Ridder following Batten's death. In an effort to streamline operations, Ridder shut down a research laboratory in Colorado aimed at finding electronic alternatives to newspapers. The 1995 third-quarter earnings report showed a 75 percent decline in profits, a consequence of the Detroit strike. In the fall, more cuts were announced, including reducing the staff of Knight-Ridder Financial by 10 percent, or more than 100 jobs; reducing the newsroom at the Grand Forks Herald by 5 percent (an estimated three jobs); reducing the newsroom at Long Beach's Press-Telegram by 20 percent (an estimated 20 jobs). The company's Business Information Services group, which Ridder hopes eventually will contribute about 20 to 25 percent of the company's profits, has yet to live up to expectations: It currently contributes about 6 percent of Knight-Ridder's profits.

Bad press dogged Knight-Ridder. In the September 18 issue of The New Yorker, David Remnick wrote: "The Miami Herald, which used to be a vigorous daily even while constantly losing young talent to the New York Times and the Washington Post, has shut down bureaus, whacked away at its staff, and is now thin and anemic, a booster sheet." The New York Times followed on October 12, calling Ridder "a longtime executive known for his bottom-line orientation."

Knight-Ridder executives rallied; many complain the coverage of Knight-Ridder recently has been superficial, incomplete, biased. "So many stories are written by journalists who need to feel as though they've got to take their bite out of Knight-Ridder for the sake of journalism," says Herald Executive Editor Clifton. "Somehow they believe that they're protecting journalism by doing it. They use the stick figure portraits of Jim and Tony, with Tony as the bottom- line-monger."

Ironically, he adds, the image helps Knight-Ridder immeasurably with the stock analysts. "The stock," he says, "is going up on the strength of these stupid stories that say Tony Ridder is Darth Ridder, a profit-mongering thug."

Tony Ridder is a nice guy. That rarely surfaces in news coverage. Writers usually paint him with broad strokes, portraying him as wooden and one-dimensional. But he is neither. He is friendly, bordering on shy, down to earth, with a firm handshake and a warm smile. He is also prompt and informal.

He sometimes comes to work on the sixth floor of the Miami Herald building, to his office overlooking Biscayne Bay, dressed casually in a crisply pressed cotton shirt, khaki pants and loafers. No tie.

He is an unassuming, accommodating man who is, like Jim Batten was, very rich. In 1994, his salary as president was $833,000 plus stock options. Contrary to popular wisdom, he says, members of the founding families and the Knight Foundation now own less than 20 percent of the company's stock. The rest is owned by institutional investors, which, though friendly to Knight-Ridder's mission, still demand financial performance.

The threat of a hostile takeover looms for any undervalued company with a flat stock price, according to analyst Julianne Wallace, and the best way to protect the company from being bought by someone without Knight-Ridder's commitment to journalism is "to perform," Ridder says. "The companies that are performing rarely are taken over."

Ridder swivels around in his chair and taps his computer keyboard. The stock price pops up. "It's up $5 from last week," he says. "We're at 60. And it's been a long time since we've been at 60." By mid-December it had risen to 64.

But the future remains uncertain. Though the newspaper division's ad revenues reached a 10-year high in 1994, profit margins "are still a lot less than the Tribune Co.," he says. "A lot less than Gannett."

And that's the problem. Knight-Ridder's 12.5 percent margin in 1994 (16.4 for its newspapers) trailed Gannett's 21.3 percent. "Recent announcements of staff trimming in both Miami and Philadelphia begin to address this, but do not seem very aggressive," says Brian Oakes, a J.P. Morgan securities analyst. "We would look for more substantial cost cuts and possibly the selling of under-performing assets and redeploying the proceeds into higher-growth businesses."

Last summer, Ridder picked attorney John C. Fontaine as president; together, they will lead Knight-Ridder. The company remains committed to newspapers, Ridder says, paying more than $360 million in the fall to acquire Lesher Communications, a family owned group of newspapers in the growing San Francisco Bay area. At the same time, it will likely sell some of its papers "in a trading up strategy," Ridder says. (He declined to name the papers.)

Knight-Ridder will also continue to invest in business information services and online communications and increase the value of Knight-Ridder for its shareholders, Ridder says. The company will deliver information "wherever, however and whenever our customers want it," he adds, "and expect more of Knight-Ridder people."

Perhaps most important, he says, is the company's continued commitment to public service and civic journalism. "Local coverage is fundamental to what we stand for. We need good writing and lively newspapers. I find the New York Times lively. So lively doesn't mean USA Today. It means stories that are compelling, that draw you into the newspaper."

Some top Knight-Ridder editors say they believe Ridder is as committed to editorial excellence as he is to increasing the company's profits; some are waiting to see what happens. "My relations with Tony are cordial," says Ed Williams, editor of the Charlotte Observer's editorial pages. "I don't know him well enough to have an opinion. But he ain't Jim Batten. A lot of us had the feeling that Jim was the difference between us and Gannett. And Jim's not there anymore."

Others, like the Herald's Tom Fiedler, say they now realize that the master they serve is not Jim Batten, or Tony Ridder or even Knight-Ridder. It's Wall Street. And Wall Street, ever-voracious, will never be satisfied. "In the past, we were able to deny that we were part of a Wall Street corporation because the profit was healthy enough," he says. "Now, all of a sudden, we realize we're a corporation. And that's unsettling. It's like waking up and realizing that this is a harsh world. And we're a part of it."