The Great Newspaper Panic of '95   

What is happening to the "public" in publicly owned companies?

When the Knight brothers were building the company that later joined the Ridder newspapers to become Knight-Ridder, Jack Knight often credited brother Jim with the strategy that won Miami. It was a victory that gave Knight total dominance of an emerging big city in a fast-growing state, and it put multi-millions of dollars into the Knight profit margins.

The strategy, said John S. Knight, was fairly simple. The time was World War II. Newsprint was rationed. The Miami Herald was up against Cox's Miami News in a battle that probably would leave only one major daily in town. The Knights decided to forgo immediate profits, turn down advertising, expand the news hole and win circulation.

The Herald rapidly became dominant and in a few years it had almost four times the circulation of the News, and its advertising after the war outpaced that of the News by even more.

I remember at least one year when the Herald provided 49 percent of the Knight company's profits, almost as much as the combined total for the Knight papers in Detroit, Akron, Philadelphia, Charlotte, Tallahassee and elsewhere.

This powerfully shrewd strategy would be inconceivable in the publicly owned newspaper companies of today, and that includes almost all the big ones. They eat their seed corn, as John Morton pointed out in his AJR column last month. They have not adjusted to anything like normal profit margins, as Phil Meyer notes in this issue (see "Learning to Love Lower Profits," page 40).

One of the most vital forces required by a democratic society has been drained by "public" ownership, which means in some cases drained by people who contribute little to the economy and exist mainly to manipulate securities.

How easily the securities dealers dominate short-sighted, transitory stockholders, as well as top executives of the newspaper companies, has never been more evident than now.

In the face of newsprint price increases and a Detroit strike affecting two ownerships, most big companies seem to have gone into panic. Here is how much they have become a quarter-to-quarter business:

Third-quarter earnings this year were abysmal compared with the same quarter last year. So... So some of the captains are scuttling their ships, notwithstanding the fact that for the first three quarters of the year combined these companies have made very substantial profits and seem headed for a higher level next year.

Newspapers have been raising their prices in big leaps, demanding more from advertisers, cutting off routes, offering less news and laying off staff. The panic also now includes announcements that editors will be led by the often silly conclusions of one-shot commentators in focus groups. Or the research is broader but still second-rate.

The Miami Herald, of all places, is paying serious attention to advice that it put national and international news at the bottom of a long list of news priorities. Miami: a newly arrived national city. Miami: a truly international city.

Miami: where the Knights won the franchise with guts and moxie. l