There has been a lot of black ink on white paper over the last few days (and even the last few months) about the pending/potential sale of Knight Ridder. But is there any real news in all of the stories and columns?

At least one of my far flung correspondents does not think so. This long-time KR exec and observer emailed me last week, “There is volume but really no new substance since early in this process. The same list of buyers, all speculative and a few a la carte offers like the union and now the Lexington group. This all still tells me there is no real buyer and KR will go private and buy out the guys who are pushing for a sale. This will go down as one big non-event.”

The next couple of months will tell.

But while we wait, there are three items I want to comment on today:

The brief flurry of excitement about the Pew Trusts buying the Knight Ridder newspapers in Philadelphia.
The effort by the Communication Workers of America—The Guild to buy nine Knight Ridder newspapers.
A column by a 50-year employee of the Kansas City Star about what it is like to be going through yet another change of ownership.

What’s up in Philly?
I had thought there was a bit of news late last week when NPR’s All Things Considered reported that CEO Rebecca Rimel of the Pew Charitable Trusts had said Pew was considering buying The Philadelphia Inquirer, Knight Ridder’s largest paper. But then the next day The Inquirer reported that Rimel had denied the story, saying “buying the newspaper is “not on our screen” for an acquisition. (Rimmel) noted that the Pew Charitable Trusts has had ‘no conversations with an investor group; we do not even know if there is an investor group.”

So what the heck is going on here? Did the NPR reporter get it wrong? He did not disagree with Rimel’s correcton. Or was Rimel vocalizing something she had been thinking about but that the rest of the senior leadership of the organization had not yet approved? Was this a trial balloon, sent up to see how the non-profit/investor/journalism worlds would react? I suspect we will not know until Lori Robertson (or whoever) from AJR does a book-length report on all this twist and turns of this story, probably sometime next summer.

What the Guild thinks
The latest on the effort by the Guild to buy some Knight Ridder newspapers is from the British site The Guardian Unlimited. It includes the following quote from Linda Foley, national Guild President, about the nine newspapers the Guild would like to buy: “None of these newspapers loses money,” she said. “True, their margins aren’t as high as Wall Street would want, but they do make money. And we think they can make even more money if they again begin to invest in their workforces instead of depleting them.”

She’s right. They do make money. But when it comes to the three papers that are seen as margin drags on Knight Ridder—San Jose, Philadelphia and St. Paul—I can state pretty much without fear of contradiction that they would not be making money if they had not made salary and operating expense cuts in recent years.

I’ll try to keep this simple, but let me work through some of the numbers.

Here are the Morgan Stanley estimates of the revenue and operating profit for San Jose, Philadelphia and St. Paul:

San Jose—8% operating profit on about $235 million revenue, $18.8 million.
Philadelphia—9% operating profit on about $520 million revenue, $46.8 million.
St. Paul—10% operating profit on about $121 million revenue, $12.1 million.

In San Jose and Philly the average cost of an employee is about $100,000 a year. (St. Paul’s expenses are probably less, in proportion to the economy there.) This is salary plus non-salary expenses of 25% to 30%, which covers medical and other benefits, the company’s half of Social Security and other mandated government costs. Every 10 employees cost the company another million dollars a year. If staffs had not been cut, these newspapers would be losing money. That is unless there had been a massive infusion of revenue from some source or another. If someone knows where that revenue can be found please write me so I can spread the word or contact Tony Ridder directly.

What owners can do
C. W. Gusewelle wrote Sunday 01-01-2006 in the Kansas City Star about what it is like to be facing the sale of his employer for the fourth time since 1977. He is a 50-year employee of the newspaper who notes in his column: “Without question, those who invest in a company are perfectly entitled to take their money out. They are not entitled to demand that managers gut the staff and disfigure the product simply to sweeten the take.”

That’s wrong. The investors own the company and they can do pretty much whatever they want, within the boundaries of the law. You’d think somebody who worked at a place for 50 years and been through multiple changes of ownership would have learned at least that much.

A couple of other recent pieces from about Knight Ridder you might find of interest:

The Silicon Valley/San Jose Business Journal has named Tony Ridder as one of the newsmakers to watch in 2006.

Mike Needs, public editor of the Akron Beacon Journal had a column Sunday about how readers have reacted to changes in the newspaper resulting from budget restrictions.

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