Newspaper 'Cold War' Ends in Carolina after McClatchy Deal

Article excerpt

For more than a century, two North Carolina newspapers -- The News & Observer in Raleigh and The Charlotte Observer -- have dominated their respective regions. These two old lions had marked their territories, and were not above a good scratching match.

But that all changed in March 2006, following the announcement of McClatchy's industry-shifting acquisition of Knight Ridder. In that transaction, McClatchy's News & Observer was suddenly thrown into the company of its sometime competitor, the former Knight Ridder-owned Charlotte Observer. Now executives at both papers are working together to achieve that much-loved Wall Street buzzword: efficiency.

Charlotte and Raleigh, along with McClatchy's five South Carolina papers, are tasked with identifying overlaps in every aspect of their business, from circulation and advertising to news coverage and distribution. "We really see this as a way to improve both papers," says Lynn Dickerson, McClatchy's vice president of operations who oversees the company's southeast properties.

It's in the newsrooms where the partnering has accelerated the quickest. Reporters once pitted against each other now share stories and ideas. "It's the North Carolina journalism equivalent of life immediately after the cold war," says Mark Johnson, a Charlotte Observer reporter who covers government from the Raleigh bureau.

"It's strange," agrees Bill Krueger, state capital editor at the News & Observer. "It goes against some of your basic wirings. Part of what drives you is competition, and part of that is competition with the Observer."

Rick Thames, the Charlotte Observer's editor, readily admits that making nice with Raleigh after a century of competition hasn't always been easy, but adds, "I think it's ended up being a good move in an era of strained resources."

Along with Raleigh and Charlotte, McClatchy also owns five dailies in South Carolina: The State in Columbia; The Herald in Rock Hill; The Island Packet in Hilton Head; The Sun News in Myrtle Beach; and The Beaufort Gazette. All are involved in the ongoing effort to achieve corporate "efficiency," but Charlotte and Raleigh deal primarily with each other since they are the largest papers in the group.

One new relationship crosses state borders, however. Terry Plumb, the former editor at the Herald in Rock Hill, a stone's throw from Charlotte, describes the paper's current attitude toward the Observer: "You have defined someone as your enemy for years, and now you're kissing cousins."

Collectively, the Carolina papers do their share of heavy cash-lifting for the company. The Charlotte Observer and News & Observer are the company's fifth and sixth largest papers, respectively, in terms of revenue. In 2006, McClatchy reported the Charlotte Observer's pro forma total revenue as $176 million, while the N&O's total revenue was $136 million.

Dickerson says the southeast, which includes some papers outside the Carolinas, represents 24.7% of the company's total revenue. So the deal McClatchy made for Knight Ridder did not just change the face and size of the company -- it also gave it a strategic advantage in a lucrative market area. Rick Edmonds, media business analyst with the Poynter Institute, tells E&P, "I would say close observers of McClatchy have felt all along that part of the appeal of the whole deal is the notion that McClatchy would own the Carolinas."

McClatchy CEO Gary Pruitt has said the timing of the Knight Ridder takeover was lousy -- since last March, newspaper advertising revenue has taken a nosedive -- but that the company still believes very much in its strategy of investing in growing markets. Still, there is a lot of pressure on McClatchy, perhaps much more than its industry peers, to cut costs in order to pay back the $3.75 billion debt Pruitt & co. used to finance the deal.

According to News & Observer Publisher Orage Quarles III, any roadblocks he encounters -- including a temporary hold on constructing a new headquarters building -- are a reflection of the industry's turbulence, and nothing more. …