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Sunday, November 20, 2005

Knight Ridder and the Fate of the 'Second-Rate'

Knight Ridder has been publishing mostly second-rate newspapers for as long as anyone can remember. Its strategy has been straightforward: Leverage de facto monopoly newspaper status in individual cities into ownership of the classified advertising business in those communities.
That's a line from a piece written by John Ellis for the editorial page of the Wall Street Journal (WSJ) and published Saturday for its Nov. 19-20 issue.

Ellis wrote that Knight Ridder will have a difficult time finding a deep pocketed buyer willing to acquire the whole company. If the whole KR company is purchased, Ellis and others have noted, it is likely to be at a discount so the buyer can then sell off the individual chunks at a premium.
This lack of enthusiasm for a company once regarded as a money machine is evidence of how thoroughly the Internet has disrupted media business models. And with broadband now reaching into more than half of U.S. households, disruption has morphed into menace.
Dave Friedman comments on the piece at his blog, Soul of Wit. He carries most of the WSJ column. More from the Ellis column:
Newspaper chains like Knight Ridder retain a competitive advantage in classified advertising (and thus remain profitable), but that, too, is about to change. Just 24 hours after Knight Ridder made its for-sale announcement, Google said it was taking aim at the classified ad business. Classifieds are estimated to be a $100 billion market. Is there anyone who thinks that Knight Ridder can really compete with Google, if Google decides to mount a full-scale offensive? On the Google side, the best code writers and software programmers in the world will work on making its classified advertising application as good as it gets. On the Knight Ridder side, they will leverage what they have, for as long as they have it, which won't be long, if the Wall Street talking heads are correct.
Ellis concluded:
Buying second-rate information providers makes no sense. The consolidation everyone expects may in fact more closely resemble a break-up of the old order, and the selling-off of its assets, piece by piece.
Ellis is identified by the WSJ as a former columnist for the Boston Globe and now a partner in Sand Hills Partners, a venture capital firm.

# posted by Mitch : 9:31 AM
Comments:
The WSJ Editorial Page commentary on K-R might be legitimate and reasonable or it might not. But, I'd view it with a great deal of skepticism. Knight-Ridder's reporting on Iraq, both in the run up to war and afterward has proven to be about the most accurate in the country. As I recall, the Knight-Ridder reporting was less apt to be stenography for the administration. As such, I doubt the company won many friends on the WSJ editorial page whose predictions and assertions about Iraq have not been quite so accurate.
# posted by Anonymous Anonymous : 2:03 PM
 
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