January 03, 2008

Newspaper Shake Up in 2008

There is no doubt that 2007 was a tough year for the Newspaper Business. McClatchy Co. the second largest chain in the country, saw its stock drop over 70% in 2007. The Gannet Company fared somewhat better dropping only 35%. "Controlling costs" ie. slashing staff and the size of the product in most markets stemmed the flow somewhat but at some point these efforts have a diminishing return.
While the rest of the industry has bled, McClatchy has hemorrhaged. Their troubles can be traced to the decisions of whiz kid CEO Gary Pruitt who jettisoned the McClatchy formula of slow growth through the acquisition of mid sized papers in profitable markets and plopped down $1.4 billion for the Minneapolis Star Tribune in 1998 then sold it 8 years later for half that amount. Followed in 2007 with the purchase of the Knight Ridder chain for $4.5 Billion at a time when readership and revenues are in the tank.
One can only hope that they are capable of changing course this year. If not, those that have relied on this industry for their livelihoods and pensions will be left holding an empty bag long after Gary Pruitt and the other CEO's make off with their severance packages.

McClatchy stock taking a beating. Sacramento Buisness Journal

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