Magazine article Editor & Publisher

To Separate or Integrate?

Magazine article Editor & Publisher

To Separate or Integrate?

Article excerpt

KNIGHT RIDDER IS LATEST TO SPIN OFF NEW MEDIA

Dot-com is catching in the newspaper industry, with Knight Ridder becoming the latest company to sift out its new media operations into a new entity. The creation of KnightRidder.com last week has only intensified the integration vs. separation debate.

The separation strategy could be risky, analysts say. "If you separate your new media business from your core business, how does the world perceive the core business?" asked Peter Zollman, a consultant with the Advanced Interactive Media Group. "You may be setting your core businesses up for damage in the stock market because they're perceived as dinosaurs, even if they're doing well. Nobody knows the answer yet."

Indeed, the phenomenon is new. Before May, no newspaper companies had officially separated their new media operations into new divisions (although several have quietly set up internal Internet shops). Then, that month, Belo, the New York Times Co., and the Tribune Co. all spun off their new-media operations.

Knight Ridder becomes the latest company to do so, but probably won't be the last. "The larger organizations will consider this because you have to work at Internet speed and you have to leverage your relationships differently in new media," said Michele Pelino, senior analyst with the Yankee Group in Boston. She cited Washingtonpost.Newsweek Interactive, the Web group for the Washington Post Co., as an example of another company that could easily spin off from the mother-ship. Post Co. executives have indicated that they would consider such a move.

Knight Ridder Chairman and CEO Tony Ridder called his company's move "a natural evolution of what began, more than six years ago, with the launch of [San Jose's] Mercury Center, the nation's first full-text newspaper online." Since then, Knight Ridder has begun development of the Real Cities network of regional portals. The company now runs more than 45 Web sites and employs more than 400 people.

Ridder said the division would allow the company to simplify its reporting structures, consolidate its Web activities, and facilitate faster decision making.

Company officials cautioned that the news shouldn't be viewed as a prelude to an initial public offering (IPO) for the new division. …

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