Limbo: Surprise and Tears in Akron; Journal Gazette: We're Not Going Anywhere

A little of what life is like for employees of the 12 Knight Ridder newspapers which will not be part of  McClatchy can be gleaned from a report in the Akron Beacon Journal today by Gloria Irwin and Jim McKinnon.  They reported on the staff meeting addressed by Akron Beacon executives.

First, McClatchy will not be taking any ownership in the 12 newspapers which have been identified by McClatchy as not fitting their desire for papers in growing markets.  The divestiture of the 12 will occur at the same time as the closing for the other Knight Ridder properties.

That means that the next several months until closing will be a period of limbo for employees of the News-Sentinel.  While the pension rights accumulated until closing of the KR sale are secure; employees will not know the status of future retirement and health benefits.

Indeed, employees will not know whether their jobs will be retained. It will probably be a very difficult period for replacing employees who leave. 

[Publisher] Crutchfield and Knight Ridder Vice President of News Carole Leigh Hutton urged employees to continue to produce a quality newspaper.

"This is a tough day for us because Knight Ridder is going away,'' Hutton told about 300 of the newspaper's employees.

"What you do here in this community is still going to be as important tomorrow and six months from now,'' she said. ``You really work for the community, and the community needs you as much tomorrow as it did yesterday.''

Some employees had tears in their eyes as they listened.

Further:

[Publisher Larry] Olmstead and Hutton said McClatchy's announced sale of 12 Knight Ridder papers was unexpected.

"We were all surprised that McClatchy would immediately be selling 12 newspapers,'' Hutton said.

Neither Knight Ridder nor McClatchy will be able to answer any questions which can only be answered by the ultimate purchaser of each of the 12 properties.  Some speculation has centered on Dean Singleton of MediaNews General (MNG) of Denver.

Mr. Singleton has visited many of the KR properties in person in the pre-sale period. Ms. Irwin told Fort Wayne Observed that to her knowledge, Mr. Singleton has not visited Akron.

The situation is very unknown for the orphaned 12.  While the News-Sentinel's fate is yet to be determined, its partner in the Fort Wayne Newspapers JOA is determined to remain a locally owned partner.  Julie Inskeep, publisher of the Fort Wayne Journal Gazette spoke with Fort Wayne Observed and reaffirmed:

"The Journal-Gazette is here to stay. We're a locally owned business and we're not going anywhere."

The Journal Gazette's Editorial Editor Tracy Warner noted the Knight Ridder sale on his weblog this morning: 

The price of $6.5 billion, or $67 a share, is above the "fire sale" price some newspaper analysts had feared and is about 25 percent higher than its stock price in November, when the chain said it was for sale. KR stock closed at $65 Friday. The prices gives some optimism that the death of newspapers is still being greatly exaggerated

I commented on his post, writing:

This is no price earnings multiple close to what Lee Newspapers paid for the Pulitzer chain. (P/E 13.5) However, a lot of investors thought Lee overpaid.

The Wall Street Journal reported this morning that "Goldman Sachs analyst Peter Appert, in a note to investors, says a price in the high $60's could prompt a rally in the industry as investors anticipate further consolidation. But absent such a catalyst, newspaper stocks appear 10% to 15% overvalued."

I am not sure there is anything glowing in either way that newspaper stocks are valued for those concerned about the quality of print journalism. Further consolidation will mean that expenses may need to be slashed to pay for the purchase price.

The flip side - that newspaper stocks are considered overvalued would mean that expenses would still be slashed to make the newspapers appear more profitable.

That's the general outlook for print across the country. Whatever northeast Indiana residents may think of the Journal-Gazette they should be thankful that Inskeeps and the other local investors such as Jim Shields are still the owners.

The JG investors should continue to hold on to the property as the media business continues to adapt to the new technologies over the next decade. The experience of other independent owners in various industries which have been subjected to "roll-ups" over the last 25 years is that it is a good thing to be one of the last independents standing.

Comments

I really feel sorry for the reporters at these 12 papers. There are a lot of talented people who have no idea what the future holds for them and that sucks. Lets just hope the new owner(s) of The News-Sentinel recognize the talent that is there and brings in more people to make it a competitive publication. Only time will tell.

I'm surprised the J-G isn't popping corks, but perhaps it would be unseemly to be celebrating the likely demise of the N-S. I can't see any newspaper company willing to pay money for the junior partner in a JOA, one which is locked into the afternoon slot. A couple months ago, Scripps Howard closed their Birmingham, Ala. newspaper that was in a similar situation. (and which had dwindled to a paid circulation of about 10,000, while the morning Newhouse paper had somewhere in the neighborhood of 175,000, IIRC).

[Mitch Harper, Editor]

Ed. note: Knight Ridder is the majority partner in the Fort Wayne Newspapers JOA.

The Fort Wayne JOA was created in 1950.

From a Knight Ridder news release:
May 5, 2003
Knight Ridder Signs Amendment Extending JOA in Fort Wayne
Knight Ridder today announced it and the Journal Gazette Company have signed an amendment to extend their joint operating agreement in Fort Wayne, Ind., to the year 2050. Under the amended contract, Knight Ridder, owner of The News-Sentinel, will increase its share of the agency from 55% to 75%, while the Journal Gazette Company, owner of The Journal Gazette, will have a 25% share. The joint operating agreement governs the partnership and operation of Ft. Wayne Newspapers, the agency that handles advertising sales, printing, distribution and administration of the two dailies.