Monday, June 30, 2008

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.


  1. Anonymous11:08 AM

    You are quite correct that times have changed in two years, and manageable debt has become harder-to-manage debt in the process. I don't want to be a grumble-guts, but I do seem to recall there wasn't a huge scramble for KRI when it was put on the block because it was regarded as a bag of snakes that not even Tony Ridder could bring under control. And one reason KRI went up for sale was pressure from an investor who felt the company had no future and no vision.
    Vision is what Howard was hired to provide, and that is what many of us are now looking for here. Times change, and with MNI stock hovering in the range of 6 today, I believe there are others inside and outside of the company also questioning what MNI's vision is of its future.
    It is indeed heart-warming to hear journalism mission brought up in this discussion by any newspaper executive today. Those words have been sorely missing from the recent cutback saga. I hope that the powers that be look around at other companies and see the dire consequences on the core mission brought by trying to cut your way to profitability. In considerable sadness and shame, I can hold up Tony Ridder's once-prized San Jose Mercury News. What a sad and sorry remnant of a newspaper it is today.
    So what is the vision, Howard? Is it to shiver in the rain until the sun returns and the effects of Career Builder and Classified Ventures kick in? I never took an economics course, but I just don't understand how any for-cost venture can possibly compete against the for-free Craigslist (which, incidentally and ominously, is expanding into smaller markets). Monster is now such a presence that it will be difficult for any job-search effort to replace it.
    So how do we get the real estate ads back, or at least keep what are left that haven't yet found Zillow or new advanced sites realtors themselves (Trulia) are developing?
    And most importantly for newsrooms, how do we retain our core mission of journalism when under our feet the driving rains keep eroding the support structure?

  2. Anonymous2:09 PM

    aDid the rains put out the fire on the bridge?

  3. Anonymous2:42 PM

    In our dreams, Anon209.

  4. Anon526: FYI, CareerBuilder is much bigger than Monster already in North America. (a Classified Ventures product) is a leader in its space, and is, I think, number two.

    Compete with craigslist? See this earlier post:

  5. Anonymous8:23 PM

    Go to Alexa and use their movers and shakers traffic graph. Type in and and you will see they are getting almost the same amount of traffic -- looks to be about 0.2 percent of Web traffic hits, which is not that great. and get a much, much lower fraction than that as you will see.
    Looks like Craigslist is getting about 1.5 percent.
    I agree with you about trust being a bulwark against Craigslist, and have been hoping that newspapers would do something with their brand. Craigslist has built its brand from nothing in the last five years and I know it has a lot of dodgy stuff on it that newspaper ad departments wouldn't accept. There is a value newspapers can tout, but they need to get hits on these sites up much more.
    BTW, while you are on Alexa, look on the right hand side at the top 100 Internet sites. Yes, you will find porn and music sites, but I was heartened when I looked to find the NYT and WaPo, plus the BBC's Web site in the top 100. I spotted none of the U.S. networks. What that tells me is that people are interested in quality news, and that there is a market there for quality news.

  6. Anonymous8:42 PM

    "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."
    Yes, and better track down who these dissidents and upstarts are to ensure their names head the layoff list. You are not fooling anyone.

  7. Anonymous5:25 AM

    The Alexa data also shows is sucking the exhaust of This is one of those trust issues, and shows the value of a brand. I haven't thought about cars for several years now, but when I searched for data on cars Edmunds popped up, and I remembered it for some reason. beats Carmax, which has seen its reputation eroded I would guess because of its extravagant used car prices.
    I also don't see how you can make that claim for Looks to me beats, but both are beaten by real estate sites like which offers both house sales and local rentals. You probably have access to proprietory data I don't have.
    I now see how you get your claim that CareerBuilder is bigger than Monster in North America, but think that the hit data shows it's much closer to a wash than ranking data.
    On other issues, I note the Miami Herald's mommy site has been discovered big time by Gannett.

  8. Anon842: way to jump to conclusions that aren't there. We're allowing anonymous participation on the wiki, too. Sorry to disappoint you.

  9. Anonymous1:56 PM

    howard, you just don't get it do you? these smug little smart ass replies to people pulling your shorts down (see above) shows your true feelings on how little you care about the folks working for scraps while you and pruett rake in the dough. pathetic.