If it's raining, learn to work wet and then get dry

Great comments have been arriving here with increasing frequency over recent weeks. Last night two particularly good ones -- Jim Richardson (again) and Anonymous 5:26pm -- moved me to this longer reply.

(I'm now working on moving this whole conversation to a more compatible setting -- some kind of wiki/collaboration site where we can have a better organized, more accessible discussion. There are too many good ideas and too much passion here to let any go to waste. Watch this space for an announcement soon.)

In the meantime I’d like to explore Anon526's comments.

Fundamental to Anon526's observations and many other comments is the mistaken impression that The Present Troubles arise primarily from strategic or management mistakes. There's obviously no way for me to talk about this without being self-serving, but choke that back for a moment and hear me out. The fact is that while managers across many industries (including me) have screwed up plenty, that's not the primary problem.

Anon526 asks, "who set the bridge on fire?” Wrong question. Sorry to mix metaphors here, but as I often say in newsroom conversations, it's important to realize it's not raining on us, it's just raining. The economic and competitive dislocations engendered by the emergence of a networked global information exchange are transforming all media (and much of the rest of society, too). Sony, Disney, NBC, Warner, the Washington Post ... you name it. The ability to make free, perfect copies and distribute them ubiquitously changes everything. The wide dissemination of cost and pricing data empowers consumers. The elimination of barriers to entry (the cost of starting Craigslist versus starting a newspaper) bring transformative challenges to old, quasi-monopolistic industries.

These are not bad things; on balance they're good for us all, and even if they weren't it wouldn't matter. It is what it is: raining. Nobody can withstand this kind of change without changing themselves. The winners will be those who learn to work wet and then get dry.

And while everybody would agree it's good to avoid "crushing debt," as Anon526 reminds us, the definition of "crushing" has changed dramatically since McClatchy bought KRI just two years ago. The price we paid was a bargain by any historical measure, the papers we bought and kept have actually outperformed the Classic McClatchy titles since the purchase, and the debt was easily manageable with the projected, relatively conservative forecast of cash flow at that time of about $800 million for the newly configured company.

Our debt (which, btw, is declining steadily and is well on its way to meeting our year-end prediction of $2 billion), does indeed generate a lot of interest to repay, and it's harder to repay it when revenues are falling due to structural changes and new competition. Layer on the additional burden of a national advertising recession in key categories like real estate, auto sales and employment and you have ... well, what we're all facing today.

You can certainly argue that McClatchy would be less in today's headlines as the smaller, less indebted company it was before the KRI purchase. Yet in many ways, our competitive and prospective position could well be worse: with only the Classic McClatchy papers in our portfolio, California would have represented a far greater percentage of our total company, and thus the real estate downturn would have hit us even harder. Add in Minneapolis and our revenue problems would have been profound.

We also would have lacked the internet clout we acquired: a sizable stake in Career Builder and a much larger share in Classified Ventures, primarily. These are high-performing, high value assets that will play a central role in our future. The national economic troubles have masked their performance and contribution, but economic downturns don't last forever.

I realize journalism isn't the central point of your comments, 526, but let me not leave this unsaid: we're a much stronger news enterprise as a result of merging two great journalism operations. Even under the strain of today's finances, we're winning Pulitzers, exposing national and international scandals, policing local governments and serving community interests from Anchorage to Miami.

Today's McClatchy is more diversified geographically and economically and stronger on the internet. Our total audience is growing. Our journalism is strong and mission-centered.

We have challenges, but we will overcome them. I agree with you that not every newspaper company will get across the bridge. But as I offered here before, if anybody wants to put his money where his mouth is and bet against McClatchy, I'm easy to find.