McClatchy Takes (Some of) KR

McClatchy won its bid for Knight Ridder. But KR fits into McClatchy’s plans less as a traditional newspaper company, than as part of a long-term transition to direct marketing, with the news playing an increasingly smaller role. The Internet, however, looms ever larger.

McClatchy’s leadership is secure and unsentimental. It doesn’t place a premium on ‘size for size’ sake. Instead, it hopes to re-impress Wall Street with fast growth across multiple channels, including print, the Web, direct mail –and possibly directories.

As The New York Times noted in its coverage, “the average rate of household growth for the dozen papers that McClatchy plans to divest is 4.8 percent for the next five years; for the 20 papers the company would keep, the growth rate is 11.1 percent. Including the 11.9 percent growth rate of the current 12 McClatchy papers, the new company’s papers will have an average household growth rate of 11.4 percent.”

The Impact of AT&T/BellSouth on YP

AT&T and BellSouth is a $67 billion telecom rollup, but local advertising is involved too. The telcos’ respective Yellow Pages will be impacted by the rollup, as well as their ties with Yahoo, vendors and the Yellow Pages trade associations.

For starters, the deal makes the selloff/spinoff of the Yellow Pages units all-but-inevitable. The telcos needs tens of billions to install fiber-to-the-curb for IPTV, and it has made sense to sell off the YPs to produce some of the revenue. But this seals the deal.

As for side effects of the deal, some fallout is likely at Yahoo. Both companies sell for Yahoo Yellow Pages and Yahoo Local. And in return, Yahoo doesn’t sell against them. But maybe the arrangement has run its course.

Tribune-KR-Gannett: After Knight Ridder

Everybody knows Knight Ridder is “over,” as a former executive recently put it to me. But what does that mean to “TKG,” Tribune, Knight Ridder and Gannett’s joint venture to pump hundreds of millions of dollars into CareerBuilder, a successful recruitment portal; ShopLocal, a fast-growing but jury’s still-out online inserts and sales portal; and Topix, an online news sorter that is cutting edge but commercially undeveloped.

Also at stake, but more peripherally, are Knight Ridder’s 1/6 role in Classified Ventures, which produces Cars.com, Homescape and apartments.com, and recently purchased HomeGain. It also holds a minority share in Tribe Nets, a social network that is experimenting with games but is a probable write-off.

If Knight Ridder is sold, TKG has change of control provisions in place that could provide allow the other partners to buy CareerBuilder and the other online properties under their market value. If Gannett is the buyer, it would be a relatively seamless change, although Gannett would become a very dominant part of the consortia, to the discomfort of Tribune. If McClatchy is the buyer or a venture firm, it isn’t as clear. One assumes that McClatchy or other buyers would maintain the CareerBuilder affiliation, but might not participate as partners.

Daily Candy Tempts Local Media Companies

Daily Candy, the fashion-and-trends newsletter with local editions in eight markets and copy right out of “Sex and The City,” is on the block for $100 million. The value seems high, but its young, trendy, female readership could be a good fit with media companies like Fox or IAC that want to hit the local marketplace in non-traditional, non-journalistic formats.

Our guess is that it would be less of a fit with strait-laced, sales-oriented sites like ShopLocal; online Yellow Pages like Verizon SuperPages that are trying to create a retail connection; or the increasing number of newspapers that have developed online shopping verticals. But that’s ok. The latter, especially, would balk at the price, and the journalism.

Daily Candy was started in New York in 2000. After receiving a $3.5 million cash infusion from former AOL President Bob Pittman in 2003, the site has now expanded to Boston, Chicago, Dallas, Washington D.C., Los Angeles, San Francisco, London and starting in March, Atlanta.

Thomson: Life After Newspapers, Up Value Chain

Thomson President and CEO Richard Harrington opened his keynote at SIIA’s Summit in New York Jan.31 by noting that Consultant Lee Greenhouse praised him as “the best newspaper guy I know. You got out of it.”

Indeed, Thomson bailed out of the newspaper industry in 2000, selling 150 daily and community papers at a peak price of $3.5 billion. “In 2000, newspapers were going into a seven year cycle,” he said. “I don’t know if they’ll come out of it. But people aren’t betting on it.”

The sale was accompanied by the sale of Thomson’s travel business. Summing up the divestiture of two core businesses, Harrington noted: “We did not see how they would be sustainable businesses. We chose to go after high-end knowledge workers.”

Today, Thomson is the second largest information company (after Reed Elsevier) with 2005 revenues estimated by Outsell Inc. at $8.81 billion – more than $2.58 billion bigger than Gannett. More than 70 percent of its revenues come from electronic services. More than half are on the service side.

Shareholders to Knight Ridder: Sell or Else!

Knight Ridder may not be the best managed company, or a great place to work. But can another media company do a better job of leveraging its 29 newspapers? This is the assumption behind a challenge by two major shareholders, who want to get rid of 65-year-old Chairman Tony Ridder and either sell the company off to the highest bidder, or break it up.

Legg Mason’s Private Capital Management (PCM), which owns 19 percent of the company, complains in a letter to the board that Knight Ridder is underperforming, even compared to the rest of the newspaper industry. According to PCM, the company has failed to deal with “continuing consolidation among traditional sources of print advertising revenue; the redirection of advertising dollars to other media; its unexceptional operating margins; and its lack of a nationally read paper capable of being leveraged in the online market.” PCM’s complaint has been joined by Harris Associates, which owns 9 percent. Tony Ridder, meanwhile, holds just 1.9 percent.

The specter of a possible bidding war for Knight Ridder has caused the company’s battered stock to do a quick jump. But one assumes that PCM and Harris’ complaints are about more than just a short-term stock boost. The question is why PCM thinks that other newspaper companies would achieve better results.