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Hot chain nixes wingo, buscapades - nabs Pulitzers, big bucks; Knight-Ridder show that newspaper chains can be profitable - and good.


When Walter Annenberg was publisher and owner of The Philadelphia Inquirer, there was a lot of news he didn't see fit to print. For a time, the city's pro basketball team, the 76ers, made his enemies list--and barely made the paper, given just one paragraph when they lost and two when they won. Why? "Sometimes people would be on the list and you would have no idea why,' recalls Frank Dougherty, a veteran of the Philadelphia Daily News, Annenberg's tabloid.

Then there was the Shapp Gap. Annenberg, according to a biographer, regularly called Milton Shapp a "sleazy sone of a bitch' and made it clear to his reporters that if they had to write stories on Shapp, they had better not be flattering. Philadelphians might not have noticed, except it was 1966 and Shapp, besides being a noted philanthropist, was a leading, and ultimately successful, candidate for governor of Pennsylvania. What did appear in the papers usually had to do with crime. On staff, the paper had court reporters, police reporters, and a criminal. The Inquirer's top investigative reporter was convicted for extortion after he had accepted kickbacks for suppressing stories.

Those halcyon days ended in 1969 when Annenberg sold both papers to Knight Newspapers, now Knight-Ridder, for $55 million. With the competing Philadelphia Bulletin holding a grip on the city's readers and advertisers, rivals chortled that Knight had been suckered. John Purcell, then-Gannett's vice-president for finance, told Business Week that Knight would have been better off crossing the river to Jersey. "Look at our Camden paper,' he said. "It serves Cherry Hill, and look at the statistics. The two Philadelphia papers have steadily declined and we have steadily increased.'

With the Inquirer and News bleeding red ink, Knight executives did what they had done in other cities. They spent more money. The new editor, Jim McMullen, replaced Annenberg flunkies and enlarged the staff with 80 new reporters. His successor, Eugene Roberts, got Knight to finance five new foreign bureaus, a 20 percent larger news hole, several wire services, and more than a dozen comic strips, including Doonesbury. "We wanted to become dependable and solid and readable and engaging,' says Roberts.

Philadelphians seemed to like it. By July 1980, the Inquirer had closed a 173,000 circulation gap to overtake the Bulletin, forcing it to fold two years later. Rather than stop there, Knight-Ridder increased the news budget another $5 million. It's been money well spent. Philadelphia accounted for almost half of Knight-Ridder's newspaper division's growth last year. The Inquirer has hauled in 13 Pulitzers since Annenberg left and the Daily News is a scrappy, honest tabloid with ten of its own local columnists and a great sports section. They even cover the 76ers.

Knight-Ridder's Philadelphia story is dramatic, but hardly unique to the chain. The $1.9 billion company has whipped several mediocre papers into shape. With 44 Pulitzers, five this year, Knight-Ridder and its 34 dailies boast more than any newspaper chain, save The New York Times. Most have gone to its big name papers like the Inquirer, Miami Herald, Detroit Free Press and San Jose Mercury News, but its less sexy papers in Akron, Ohio and Lexington, Kentucky have won, too. Earlier this year, Adweek's jury of notables ranked three Knight-Ridder papers (Philadelphia, San Jose and Miami) among the nation's ten best, more than any other chain. But Knight-Ridder papers aren't good just because of their reporting. They have color, comics, and plenty of life.

These are triumphs worth nothing because, like it or not, more and more papers are owned by chains--almost three quarters of the nation's 1,676 daily newspapers, up from 50 percent in 1960.

The demise of the independently owned, civicminded paper is cause for concern and no small whiff of nostalgia. But Knight-Ridder shows that all newspaper chains don't have to be cheesy Murdoch or fluffy Gannett. If they're careful to restrain their worst corporate impulses, as Knight-Ridder usually is, chains can be both profitable and good.

Four-color schlock

What happens when a newspaper chain comes to town? Historically, the owner placed his ego on public display. William Randolph Hearst, Joseph Pulitzer, and E.W. Scripps published manifestos for their own political agendas, with little concern for careful, analytic reporting. While yellow journalism has often been replaced by full color, there are still a few cities where the lurid chain lives. Most notably, there's Rupert Murdoch's News Corporation, stretching from Boston to San Antonio. Everyone has their favorite New York Post headline. Mine ran when Yuri Andropov succeeded Leonid Brezhnev: "Sinister KGB Biggie Gets Brez Job.'

Other chains have adhered to the tradition of putting the owner's imprimatur on the paper. Freedom Newspapers, a booming libertarian-leaning outfit out of Irvine, California, with 29 papers and circulation approaching one million, peddles brochures with its editorial philosophy: "[In] free enterprise the gain or profit of one is the gain of all.' And, of course, Gannett has infused the up-tempo tone of owner Al Neuharth throughout all of its 93 dailies, not just USA Today. Glance at the front-page story about the horse who chugs beer in the July 11 Idaho Statesman and you know it's Gannett.

But most chains poison papers not by pushing an ideology but by running them as little more than free weekly shopping supplements. Mencken said chain papers were designed to "please everyone, and especially everyone with something to sell.' He might have been describing the $1 billion empire of Donald W. Reynolds, owner, founder, and CEO of Donrey Media with 57 small dailies not exactly known for their pit-bull reporting. "At some small papers, if you leave the lights on all night, you're in the red,' he told Forbes.

Such cut-and-paste journalism is alien to those weaned on The New York Times, The Washington Post or the Los Angeles Times. But for millions of Americans outside the reach of urban dailies, the lousy chain paper is all they can get, not just for the minutes of the Rotary Club meeting but for national and international news, too. Take Canadian-owned Thomson Newspapers, king of the 10,000-circulation daily. With more papers than any other chain, it is the daily bread in 104 towns, from Altoona, Pennsylvania to Zanesville, Ohio.

You'd be surprised how much money you can make off Zanesvillians. It's estimated that Thomson scores profit margins of approximately 30 to 40 percent--roughly twice the industry average. After all the cash is squeezed out, the papers are left with skeleton staffs and heaps of copy off the Associated Press wire. Bruce VanDusen edited the Kokomo (Indiana) Tribune until he resigned in frustration 13 months after it was purchased by Thomson. He found Thomson HQ demanding more and more copy from his overworked staff. "Our staff efficiency ratio was 2.0 stories and 0.42 photos per staffer day,' he wrote in Quill. "Similar Thomson papers averaged 7.7 and 1.2 photos. We had to improve.'

Clearly lousy newspapers--like awful restaurants--can avoid being slapped by the invisible hand of the marketplace. While bad restaurants survive because the peckish and the harried need them, most papers have a captive audience and can easily get away with cutting back on quality (fewer than 2 percent of U.S. towns have two competative papers). But for every overpriced fern bar there's a great cheap restaurant that turns a healthy profit, too. In the newspaper world there is Knight-Ridder. The executives at Knight-Ridder's corporate headquarters in Miami are very much concerned with the bottom line and pleasing the stockholders, but their strategy is starkly different from many chains: making long-term editorial investments with the hope that readers will gravitate towards quality. "We are totally convinced that good newspapers are profitable newspapers; that undergirds the culture that we inherited,' says James K. Batten, Knight-Ridder's president.

The formula has worked well since the thirties, when John S. Knight began the chain by taking over his father's sole paper, the Akron Beacon Journal, and then moving south to buy the Miami Herald and smaller papers in Georgia. Knight reformed and strengthened his new properties. During World War II, when newsprint rations forced publishers to cut ads or cut news, Knight kept the Miami Herald filled with the latest bulletins from overseas and cut ads. The rival Miami Tribune chose to cut news and eventually watched its readership slip away. The same commitment to news transformed the Charlotte Observer from a sleepy sheet into one of the best newspapers of its size. Before Knight bought the paper in 1954, the ad manager regularly assigned stories--dispatching reporters to cover store openings and sales. Under Knight-Ridder, it's booming.

The Ridders, on the other hand, published lower-grade papers. They had worked their way east to west, beginning with a German language daily in New York in 1892 and then purchasing the Journal of Commerce, the St. Paul Pioneer Dispatch and the San Jose Mercury News over the next 84 years. But, significantly, the merger that brought the two chains together in 1974, was more like an acquisition. Knight heirs controlled the new board.

Within a decade the new company had transformed not just the Philadelphia Inquirer but several other dreary papers. The San Jose Mercury News, skimpy before the merger, is now one of the nation's best. "The Ridders could have been selling shoes. They were much more interested in the bottom line than the Knights,' said one reporter with the Mercury News, before and after it was consolidated into the Knight-Ridder chain. Over the years, Ridder did little to beef up the Mercury News. Chains rarely do. When Newhouse's Cleveland Plain Dealer became the only paper in town in 1982, the response wasn't to invigorate the city desk or open a foreign bureau, but to jack up ad rates by one-third.

In contrast, when Knight-Ridder formed, it began pouring money into the Mercury News-- doubling the number of reporters, adding foreign bureaus and 20 sections. The soaring semiconductor industry helped boost San Jose's fortunes, but it's hard to imagine Donrey, Thomson, or Gannett re-investing that money in reporting.

These improvements make the Mercury News a much better read than the San Francisco Chronicle 75 miles away. Even though the Chronicle's 506,000 circulation is almost twice as large as that of the Mercury News, it is a far less substantial paper. Take the April 9th issues. The two papers run wire stories on the Moscow sex-and-spy scandal and both cover a local plane crash. But any similarity ends there. The Mercury News carries two original, enterprising series by staff reporters. From the South China Sea, there's the first of a three-part series on how Thai pirates slaughter Vietnamese boat refugees while the international community looks the other way. (San Jose has a big Vietnamese community and the story is one of several that month on Asian topics.) The other shows how the West, booming a few years ago, is now getting pummeled by the trade deficit.

The same day, the Chronicle is flat. There's a tired piece by the paper's political editor about the campaign to fill Sala Burton's congressional seat. The article is buried at the bottom of the page next to a late-breaking two-paragraph Reuters item about mischievous Soviet youths tipping gravestones. The Chronicle's important investigative story uncovers Haight-Ashbury and "The Twentieth Anniversary of the Summer of Love.' The lead is especially gripping: "It was 1967 in San Francisco and love flowed as freely as the psychedelic drugs.' You know the rest. The Chronicle's must-read editorial page features intellectual heavy-weights like Dear Abby.

And while the Mercury News is more serious than the Chronicle, it is also more fun. It has plenty of what most people read newspapers for--crosswords, color, leisure sections, a Sunday magazine--even more comics than the Chronicle. With sharp graphics and color that doesn't render everyone Martian-toned, San Jose is a striking paper, in part because Knight-Ridder's very profitable Graphics Network is supplied free to its papers. In contrast, the Chronicle is a gray, Sominex-laced paper that's difficult to follow. Tiny stories, like those nutty Soviet kids, pop out everywhere, and big chunks of white space between stories make it difficult to tell where you are. The business section is all green, but its hue is more pea-soup than legal tender.

The Partridge Family

Of course, Knight-Ridder isn't the only chain that puts out good papers. Times-Mirror boasts its flagship Los Angeles Times, the Baltimore Sun and Newsday on Long Island. The Tribune Company owns the New York Daily News, Chicago Tribune and the Orlando Sentinel. But those companies operate just a few papers apiece in mostly urban markets. Knight-Ridder also brings good journalism to towns and smaller cities.

In Ohio, Knight-Ridder's Akron Beacon Journal makes Gannett's Cincinnati Enquirer look lightweight. On June 1, both covered President Reagan's first big speech on AIDS. But the Beacon Journal went further with a piece on how Akron is coping with the epidemic. The issue is dominated by three stories on the local housing shortage; the Enquirer's biggest story is about a couple that makes their own shoes.

In South Dakota, Knight-Ridder's Aberdeen American News has everything a small rural paper should: a good mix of local, state and foreign stories and the latest commodity prices presented clearly and attractively on the front page. In June, they published strong pieces on literacy in South Dakota and corruption in a local foster grandparents program. By contrast, the Huron Daily Plainsman, run by Freedom Newspapers, is thin, almost all AP copy, and full of probing articles such as the gripping saga of a traveling family band, like the Partridge Family, where the kids are blind.

While Knight-Ridder puts its reporters on big assignments, it also knows when not to. On one hand it avoids the syndrome of relying almost entirely on the AP and UPI wires. But unlike other chains it doesn't go on prestige trips and send a reporter to every event. Two reporters covered the Iran-contra hearings for the Knight-Ridder chain. But virtually every Times-Mirror paper sent a reporter to sit in the committee room and take copious notes. Is there really a compelling reason, besides a thirst for prestige, for each paper to send a reporter to the hearings? Couldn't they have used a wire story about the testimony and then dispatched a bureau reporter to a story not swamped by journalists? Just because Knight-Ridder uses wire services for important stories doesn't mean they miss out. When you pick up the Knight-Ridder paper in Long Beach, California, you are not just getting the best of Knight-Ridder but the best of The New York Times. New Yorkers aren't so lucky. The Times doesn't run stories from the Knight-Ridder wire.

Instead of sending the whole staff plodding around with the pack, Knight-Ridder allows its reporters to do longer, investigative pieces. At The Philadelphia Inquirer, special projects teams dot the newsroom and many reporters are given a remarkable tool--the freedom to take their time. "Hell, you're just getting your hands dirty after three months,' said one Inquirer reporter. Because reporters are allowed to thoroughly study the nuances of seemingly boring institutions, the Inquirer's reports on securities fraud, municipal court corruption, and IRS ineptitude are not only comprehensive but engaging. Sure, there are some interminable series, dubbed "megaturds' by reporters, like the four-part saga of the African rhino. But most hit the mark. Such generosity with time is not limited to the Inquirer. Jeffrey Marx and Michael York of the Lexington Herald Leader conducted more than 200 interviews and spent months to uncover corruption in University of Kentucky athletics.

Even in foreign coverage, Knight-Ridder deploys its people wisely. It has 15 foreign bureaus and has assigned two major bureaus to each of its four largest papers. San Jose, for instance, controls the Tokyo and Mexico City bureaus. Instead of having its reporter, Lewis Simons, cover Prime Minister Nakasone's latest press release, they have him work on major enterprise stories geared towards the computer industry.

It would be one thing if Knight-Ridder's attention to news threatened to bankrupt the company. But Knight-Ridder turns a healthy profit-- suggesting that other newspaper chains could emulate its model were they willing.

The investor who bought Knight-Ridder stock at the beginning of 1986 would have gotten a 20 percent return from stock appreciation and dividends by year's end, almost as high as Ganett's 22 percent. Knight-Ridder isn't the best buy, but it's very close. "There are some people interested in nothing but the bottom line, but we say to them: "Look, we've had eleven straight years of increased earnings per year.' I think that answers them,' said Lawrence Jinks, Vice-President for news and operations. It's telling that Knight-Ridder executives boast about news quality as well as profits in their meetings with stock market analysts.

None of this comes as a surprise to industry analysts who have known Knight-Ridder and other editorially-minded companies to be profitable. "In the long run quality will win out,' said John Morton, a newspaper analyst with Lynch, Jones and Ryan, a Washington securities firm. Where Knight-Ridder invested in editorial quality, circulation has usually risen, boosting ad revenues. And the Knight-Ridder expansion has not just been geared toward raw circulation numbers. In Philadelphia, the extra suburban editions have helped maintain circulation in the affluent Main Line suburbs, providing even further inducement to advertisers.

Draw this picture

While Knight-Ridder is editorially and financially healthy, it would be wrong to leave the impression that it is committed to the news at any cost. Start-and-stop layoffs and hiring freezes are common at even the chain's most profitable papers. And the company's take-no-prisoners style of newspaper competition may be turning wimpy. In Philadelphia, reporters wonder whether major layoffs announced last fall don't presage the folding of the Philadelphia Daily News which, unlike the Inquirer, has been losing money.

Still it is hard to see Knight-Ridder becoming a slapdash chain like Newhouse or Thomson. Knight-Ridder's real ailment is the spread of B-school management techniques that affect so many corporations. Reporters I spoke with at Knight-Ridder papers consistently spoke well of their papers, but, more often than not, complained about oppressive bureaucracy. For instance, there were plenty of gripes about the company's Management by Objective system, or MBOs. Under the system, managers are given specific goals they must achieve.

In many ways, it's a sensible link between pay and performance and many of the objectives are laudable, like sprucing up graphics or interviewing more minorities for jobs. But MBOs, like other management "systems' inevitably tend to reduce subjective goals (like better local coverage) to easily identifiable, quantitative goals (more local coverage.)

"I hate the fuckers,' says one editor in California. "The part I don't like about them is that they can lead to someone becoming a bureaucratic manager. As long as you hold X number of meetings on a topic or meet with "community leaders' Y number of times you're O.K.' One Knight-Ridder reporter on the East Coast recalled being taken out to lunch by a corporate officer from Miami as part of what seemed to be an official inspection tour of his bureau. "We talked through lunch about a lot of things, none of them especially pertinent to the newspaper,' the reporter recalled. "At the end of the meal I asked him whether this trip, this lunch was to fill a quota for his MBO. He said yes.'

The same kind of corpocracy mars the company's hiring tests. Passing these tests, says one reporter, is like "a red badge of courage.' They began in the late sixties under the direction of Byron Harless, now retired from the Knight-Ridder board. Harless's views of testing were shaped during World War II when he evaluated soldiers to put together the most cooperative bomber crews. By all accounts he is very sensitive to employee frustrations. David Lawrence, publisher of the Detroit Free Press, recalls that in 1974 Harless spent nights in the press room talking to workmen when the paper switched to a new printing system. That kind of attention has earned Knight-Ridder a place in The 100 Best Companies to Work for in America.

The hiring tests do have some valuable aspects--by having, for instance, copy editors copy edit they can uncover diamonds in the rough. But the battery of exams is mostly remembered for its comprehensive psychological test, designed to measure ten skills like "thoughtfulness' and "personal relations' abilities. How exactly are these qualities measured? Knight-Ridder won't release the questions, but some have entered company lore. One asks employees to draw three pictures: one of a man, one of a woman, and finally, one of themselves. Wonder how Bob Woodward might do on that one.

"I remember this one question where you had to agree or disagree: "I feel sorry for a bird with a broken wing.' I mean, it was stupid,' said one reporter. "Another asked if you agreed or disagreed: "Big business is bad for America.' You could put neutral, but I'd heard that you were supposed to avoid neutral.'

"I remember there was a question about whether you were the kind of person who would rather throw a party or go to a party,' recalls a reporter for The Philadelphia Inquirer.' "But what I remember most is looking at questions that were scratched out. Maybe they were watching to see if you would look at them.'

About the best thing you can say about the personality tests is that few managers take them seriously, aside from the full-time Ph.D.s who devise the exams. In fact, several reporters confessed that they didn't have to take the exams, that the editors who recruited them told them not to worry about it.

The same touchy-feely quality taints Knight-Ridder's lavish training program at its corporate headquarters in Miami. Editors and business managers can take seminars on graphic design, headline writing, expanding suburban coverage, and other worthwhile topics. But alongside "Newspaper Production Techniques' and "Advertising Sales Management' there's "Effective Human Relations' and "Interpersonal and Organizational Skills.' Highlights of the latter include the "Verbal and Non-Verbal Communications Process' and "Face-to-Face Communications Techniques.' The training institute's pamphlet features a cover photo of managers stacking boxes. "That's game-playing exercise, that builds leadership,' explained Ivan Jones, a staff Ph.D.

In one exercise, said a graduate of the institute, you get to play editor. "You have an in-basket and an out-basket, and a couple of hours to delegate all these decisions to your subordinates. Anyway, you get to the last memo in the box and you're told that one of your subordinates has died. You have to go through and re-delegate everything quickly.'

Jojo the Weather Chimp

It is these kinds of practices that remind you that Knight-Ridder is a big corporation, and corporations, even those that turn out great papers, can never quite take the place of the nation's great publishing families. The history of American newspapers is replete with families that not only put out good papers, but did good work in their communities. Barry Bingham of the Louisville Journal and Courier helped his city slip the bonds of Jim Crow. In Charleston, West Virginia, Publisher Ned Chilton fought corruption in state government as only a native son could. And there are quirks of local ownership that are worth preserving if only for sake of diversity. Jojo the Weather Chimp was a staple of the Charlotte Observer before Knight-Ridder took over. He's gone now.

We can't bring back the age of the family paper. But at least Knight-Ridder shows that the dominance of chains need not mean a nation full of McPapers and weekly shopping guides. And there are signs that the other chains are learning. Not shirking competition, Times-Mirror's New York Newsday has hired 225 editorial employees in an effort to give the Big Apple a flashy but serious paper like the old Herald Tribune. If they pull it off, it will be as dramatic as Knight-Ridder's Philadelphia coup. Hearst used to be Californian for schlock; now the San Francisco Examiner is beefing up its reporting. When Gannett bought respected dailies in Detroit, Louisville, and Des Moines, a wake seemed appropriate. So far they haven't been gutted. (Even USA Today has things to recommend it, like a sports section that more than justifies the paper's high 50 cent price. Of course, Gannett still has a perverse pride in its banality; it runs an ad with the USA Today logo nestled between the special sauce, lettuce, cheese, and pickle of a Big Mac.)

Perhaps most reassuring, Americans seem to want more. There's a temptation to see the success of Gannett and other chains as proof that those dumb hicks can't handle the serious stuff. But the huge circulation of Knight-Ridder alone belies that notion. And two years ago, the Newspaper Readership Project, an industry group, completed an encouraging study of what Americans wan in their newspapers. A 1979 report had revealed a craving for more lifestyle sections and jazzier graphics--and influenced the look of papers across the country. The most recent report found that while Americans still devour crossword puzzles, comics, features and cooking sections, they want more. More than anything else they want "news, hard news, real news whether its national or state, regional or local.' Knight-Ridder, at least, is listening.
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Author:Cooper, Matthew
Publication:Washington Monthly
Date:Sep 1, 1987
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