The Tragedy of Public Ownership: Newspapers Have Paid a Steep Price for Going Public

Article excerpt

The tragedy that has engulfed Knight Ridder, a company with a well-deserved reputation for publishing good newspapers, makes one fact abundantly clear--public ownership of newspaper companies is not good for journalism.

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A fundamental problem is that institutional investors, who inevitably wind up owning the vast majority of shares in publicly traded companies, have goals that basically are inimical to the journalistic mission of newspaper publishing. These investing institutions are mainly interested in financial return in the form of growth in profit and share price.

That newspaper companies might have some objective other than enriching shareholders--say, publishing excellent newspapers--is incidental to the concerns of institutional investors, if it is given any consideration at all.

Seeking a good return on investment is not evil. Indeed, it is at the heart of our free-market economy. But pursuit of a robust return to the exclusion of everything else can have evil effects on companies that provide services deemed essential to our democratic government. Newspapers, of course, provide such a service, being the sole type of media that gathers and distributes mass amounts of news to citizens.

How institutional investors' biases insinuate themselves into the appraisal of newspaper companies was illustrated by comments that Christopher H. Browne of Tweedy, Browne Co., a newspaper investor, made to the New York Times about P. Anthony Ridder, Knight Ridder's chairman. "He wasn't a good operator," Browne said. "Look at McClatchy, and it's night and day."

This is both cruel and misinformed. When Ridder ascended to the leadership of Knight Ridder in 1995, he took over a company with 33 dailies in 31 markets. Some of the markets had strong growth, others did not. While Knight Ridder subsequently did discard deeply troubled newspapers in Long Beach, California, and Gary, Indiana, and last year gave up papers in Detroit and Tallahassee to Gannett in exchange for cash and three high-margin Gannett dailies in the Northwest, Ridder mainly tried to keep the company together by publishing quality newspapers.

What Ridder did not do was cut news staffs to the bone in ways that would greatly imperil Knight Ridder's legacy of publishing lishing good newspapers. The company's papers generally had larger news staffs than is typical for the industry, which no doubt contributed to its legacy of quality. Knight Ridder, like other newspaper companies, has reduced staffs in recent years, and Ridder has been chastised in Knight Ridder newsrooms and by media critics. …