Friday, December 29, 2006

NonMonkey + Financial Stuff = Funny

Remember when you constantly heard the whining and kvetching of liberals about Clear Channel? About how it waas soooooo dangerous to have one company own so many radio stations?

The newspaper business is somehow exempt from the same sort of outrage on Planet of the Nonmonkeys:

When the McClatchy Co. got the keys to the Star Tribune in 1998, McClatchy's patriarch hailed the merger. James McClatchy called it a wedding of two newspaper traditions that shared "a deep-rooted commitment to building a just society."

You now are permitted to laugh derisively
.

Derisively, by the way, is the only way Nonmonkey will laugh.

Eight years later, hardly anyone in the newspaper business talks about anything other than building profit margins that would choke a robber baron.

The purpose of business is to make profits, Nick. I know that you and you're pals on the editorial side of the wall see the Strib as your own personal forum for insulting wide swaths of readers; but that can be somewhat incompatible with the primary purpose of any business venture: making money. So I see why you might be a little reticent of a new owner who thinks making money is good.

Don't fret. You could always start a blog.

Mercifully, Mr. McClatchy passed away in May and did not live to see the Sacramento-based company that bore his name disgrace his legacy by dumping its largest newspaper -- the most important one between Chicago and the West Coast, the one that serves 5 million Minnesotans and that can be a conscience, a scold, a cheerleader and an interpreter of life on the tundra.

My experience with the Strib has been that's its exclusively a scold.

On the day after Christmas, the McClatchy Co. took the Star Tribune to the return window and sold us to a company that removes medical wastes, drills for oil and (quoting its website) "operates four off-shore jack-ups, three mobile off-shore production units and one self-propelled completion and work over rig" in the Gulf of Mexico. Not to mention a newspaper in flyoverland.

Maybe we're an on-shore jack-up.

Or a for-sure jerkoff...

You are what you eat. So when McClatchy swallowed the larger Knight Ridder newspaper chain last spring, a lot of people worried that the $6.1 billion deal would spell trouble in the Twin Cities.

Both newspapers here were in play: the Star Tribune, as the "flagship" of McClatchy, and the Pioneer Press (where I worked for 17 years) as one of the Ridder heritage newspapers.

We were right to worry.

But, like I state way on top of this post, the "worry" wasn't caused by media consolidation, it was caused by...

First, McClatchy sold the Pioneer Press to MediaNews Group. Staff reductions followed, with threats of more to come.

Now McClatchy has dumped the Star Tribune.

...fear of getting sold off. And, understandably, their jobs. Oh, no - not for their sake, but for yours. Because they're noble or something...

While the outcome of all this cutthroat gambling is unclear, there are two possibilities:
1) A private equity firm with no newspaper experience will show the newspaper industry how to save itself.


Or:

2) A privateer thinks the Star Tribune, with 2,000-plus workers, is ripe for plucking and pillaging.

And here we introduce our new graphic, the Banaiaiaiaiaaian signal:



so that a guy who really knows stuff can explain to NM how improbable it is that this purchase was for the purpose of a Gordon Gekko style liquidation.

I hope it was the first option that attracted Avista Capital Partners to add us to its fleet of oil rigs.

But one thing is clear: A newspaper company abandoned its employees and readers, for profit, not principle.

No, Nick. It didn't abandon it's readers. It didn't even abandon you (though I would). McClatchy sold off a dead-weight asset because it needed cash. It happens all the time

McClatchy leaves Minnesota's newspapers weakened and in the hands of companies with no local ties.

If McClatchy left Minnesota's newspapers "weakened," then why are you lamenting its exit?

And with its departure, McClatchy is taking away important resources that a newspaper chain provides, resources that help each newspaper in the chain serve readers.

Here is some of what is going away: the Star Tribune Foundation, which has funded nonprofit groups in the Twin Cities for decades; and the Washington bureau and foreign correspondents, including those in Iraq. They'll still be working, but not for the Star Tribune. Also disappearing: the pooled financial resources a chain can use to gather news and resist the fickle winds of market forces.

"the pooled financial resources a chain can use to gather news and resist the fickle winds of market forces."

Translation: we want to continue to insult you with impunity.

Despite lip service to the cause of quality journalism, in the end McClatchy folded like a cheap lawn chair under a steady gale of Wall Street demands.

When it bought the Star Tribune in 1998, McClatchy was a second-tier chain that had 10 dailies and a profit margin of 13 percent.

Today, after buying its way into a far better club by using the Star Tribune for leverage, McClatchy has 32 papers and a profit margin of 26 percent.

But 26 ain't enough. It would be higher if not for the Star Tribune, which earns only about 19 percent, though its revenue has declined over the past year or so. That's still good for a newspaper its size, and two or three times the margin demanded 20 years ago. But it ain't enough. So McClatchy punted.

2 things:

1) If McClatchy left the newspaper "weakened" like you said (remember that - 6 short grafs ago?) HOW IN THE HELL IS IT PULLING IN A 19% MARGIN???? Oh, no weaseling out by saying that iits sold out here - because you also just said that a "pool of financial resources" - which come from...

-PROFITS-

...is one of the things that makes a chain of newspapers strong.

2) If the Strib is indeed pulling a 19% margin, then why did it sell the paper for 50 cents on the dollar? Desperation for cash can't account for all of it. You can afford to wait for a better price as long as your asset is making you money.

Could there be something else? I'm betting on it. And I'm also betting that you were afraid to ask what it might be for fear of ruining a perfectly cathartic rant-column.

Which shows that the McClatchy Co. lost more than a patriarch when James McClatchy died. It lost its compass.

Oh gag.

McClatchy CEO Gary Pruitt did not bother to come to Minneapolis on Tuesday to say he surreptitiously had sold the paper and to kiss us goodbye.

But McClatchy brass gave us some nice parting gifts from afar, complaining that the Star Tribune had lost value (and proving it in a secret auction at fire-sale prices), calling the flagship a drag on profits and saying McClatchy would have shown a one-percent increase in ad sales if the Star Tribune weren't included. One percent! Huzzah! Sound the trumpets!

Er. If I had 1% of McClatchy's money, I'd burn my own. It's not nickles and dimes we're talking about here, and the board of any corporation owes one fiduciary duty above all others to its shareholders:

Maximize their profit.

There's the market for you: The Star Tribune held down ad sales one percent. So One-Percent Pruitt axed his best newspaper. Brilliant.

Somehow, I don't forsee NM ever doing a guest analyst appearance on CNBC.

"The Star Tribune is one of the best newspapers in this country," Pruitt said in 1998. "The Twin Cities is one of the most attractive newspaper markets in the country. And it was a near-perfect fit in terms of values and traditions."

We didn't change. But you, Mr. Pruitt? We don't recognize you anymore. So long.

Don't bother to write.

Yeah, because NM might send you one of those embarrassing replies he's so famous for.

No comments: