The Associated Press has a new CEO. So how does the AP cover it? Not very well.
AP hired McClatchy CEO Gary Pruitt to be its new CEO, which raises a couple of obvious questions. First: The AP hired an old-line newspaper executive to be their digital-age CEO? Second: They hired McClatchy’s longtime CEO?
If you’re reporting on this, you’d want to look at Pruitt’s business background and how his company has fared under his leadership. And the AP does half of that, sort of:
Pruitt led McClatchy in its 2006 acquisition of much larger competitor Knight Ridder Inc., a deal valued at $6.5 billion, including $2 billion in assumed debt. The purchase and subsequent sale of some of Knight Ridder’s holdings made McClatchy the nation’s third-largest newspaper publisher. The company publishes 30 daily newspapers, including The Miami Herald, The Sacramento Bee and the Fort Worth Star-Telegram.
Under Pruitt, Sacramento-based McClatchy also expanded its digital business, adding stakes in online ventures including job site CareerBuilder.com and auto-focused Cars.com. Digital advertising now accounts for about 20 percent of McClatchy’s total ad revenue.
How did that Knight Ridder acquisition pan out, AP?
We’re not told. It’s not like you have to do any deep reporting to figure it out, either. A glance at McClatchy’s shriveled market capitalization, now at $250 million, shows you that the deal was an utter disaster. If you pay for $4.5 billion worth of equity and your market cap a few years later is 94 percent less than that, you made a very bad deal.
Nobody can predict the future, obviously, but when you make a bet-the-company play, you’d better make sure it works. And it’s critical context when talking about a CEO getting a new CEO job.
This is not someone who was in charge of McClatchy for a little bit. Pruitt has been CEO of the company since 1996—a very long tenure for a chief executive. That points to another hole in the AP’s story: How McClatchy’s stock performed under Pruitt.
That’s an 85 percent loss. It’s down 96 percent from the stock’s all-time high in 2005 and it’s down 95 percent since the announcement of the Knight Ridder deal a year later (and this is after a furious rally has nearly tripled MNI share price from four months ago). Yes, the newspaper industry has been hammered in the last six years, but it’s possible to perform better. Gannett shares are down 53 percent over the same time and The New York Times is off 58 percent. It’s also worth noting that other companies have performed worse or gone bankrupt.
It’s no fun to point out the new boss’s flops and covering yourself is hard. Pruitt may turn out to be the right person for the AP, and I’m not asking for a muckraking exposé of his business past—just for reporting easily attainable facts.
Facts that would lead a reader to wonder: If he couldn’t turn around one media company, what makes the AP’s board think he can turn around another?
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.