Comstock's magazine 0618 - June 2018 - Page 46

n MEDIA Gary Pruitt shortly after joining McClatchy in 1984. “Knight Ridder is in play,” Pruitt wrote in the email. “Let the games begin.” Knight Ridder was an industry titan. The San Jose-based company posted more than double McClatchy’s revenue. News had leaked to Pruitt that Knight Ridder’s largest shareholder, dissatisfied with the company’s stock performance, was pushing its board to put the publicly traded company up for sale — a sign that economic headwinds had begun to constrain the newspaper business. Knight Ridder published The Mer- cury News, the Contra Costa Times and 30 other daily newspapers. The sale would mark the second largest takeover in U.S. newspaper history. McClatchy lacked the prestige of Gan- nett, the nation’s largest newspaper chain, and other industry giants like The Washington Post Company, but it was widely viewed as a rising star. From its Sacramento headquarters, McClatchy published the Bee and 28 other papers. It had seen 20 consecu- tive years of circulation increases 46 | June 2018 through 2004, and a decade of stock growth that outpaced all its peers. At the time, the U.S. newspaper indus- try was still yielding profit margins of about 20 percent — double the average of the Fortune 500. “[The purchase] was a little bit of empire building, but it wasn’t like everyone was greatly ambitious and wanted to become Rupert Murdoch,” Wiegand says. “The idea was to swal- low something big, or get swallowed by something big.” As McClatchy considered the biggest purchase in the company’s 149- year history, executives spent months filling up to seven days per week with exhaustive research. Upper manage- ment drew economic models to forecast every conceivable problem. They con- sidered economic recessions, hiccups in cash flow, weakening news markets and drops in advertising. “It was all thought out. It wasn’t reck- less or done for any ego reason,” says Weaver, former vice president for news. “We thought we could make McClatchy stronger and bring McClatchy journal- ism to new communities.” The Knight Ridder auction ini- tially attracted interest from major publishers like Gannett, but in the end, McClatchy was the only large news- paper company to submit a final bid. The $4.5 billion sale nearly tripled Mc- Clatchy’s revenue, but also saddled it with debt. After the company success- fully offloaded 12 of the Knight Ridder papers in slower-growth markets, its debt rested at about $3.2 billion. That year, the company rewarded Gary Pruitt with $5.6 million in total compensation, including a $1 million bonus for the Knight Ridder purchase. Pruitt’s team immediately began looking ahead to a near future when newspapers and advertising would be delivered on people’s cellphones. To this day, a debate persists about the outcome of the Knight Ridder