Buzz Merritt on Knight Ridder, Prizes and Profits, and Where Next?

Buzz Merritt

Davis “Buzz” Merritt retired in 1999 after 43 years working for Knight Ridder, including 23 years as editor of the Wichita Eagle. Over those years, he watched as the news business generally, and Knight Ridder specifically, became increasingly driven by the bottom line. Earlier this month, his book about this change, Knightfall: Knight Ridder and How the Erosion of Newspaper Journalism is Putting Democracy at Risk was published by AMACOM.

Editor’s note: CJR Daily staff writer Susan Q. Stranahan worked for the Philadelphia Inquirer, a Knight Ridder paper, from 1972 until 2001.

Susan Q. Stranahan: In your book, you describe the different attitudes toward journalism of the Knight and the Ridder families, with the Knights believing journalism was a calling and the Ridders that it was a business that just happens to be manufacturing newspapers. The Ridder approach has won out, you say, and the institution has suffered. You argue that newspapers aren’t like any other business, and thus should not be held to the same standards. Explain.

Buzz Merritt: I use the example of a coat hanger company. The variable in deciding how you’re going to make and sell coat hangers comes down to quality. There is a need for cheap hangers as well as expensive hangers. In the newspaper business, however, if you make quality a variable, what suffers is journalism. If profits become the variable in the newspaper business — and this is hard to get business people to understand — the end product is bad journalism. There shouldn’t be a market for bad journalism, but unfortunately there is.

SQS: You’re saying there are higher stakes in play when it comes to journalism?

BM: Good journalism is essential to good democracy. They are totally interdependent. One can’t exist without the other, and if the quality of journalism deteriorates, the quality of democracy also deteriorates in lockstep. … Journalism is different from any other business that you can think of. I don’t know of any other that democracy is so dependent upon.

SQS: Does it say something about the future of the news business today that this issue even has to be debated?

BM: Newspaper companies these days are not run by journalists. Organizations like the New York Times, the Wall Street Journal and the Washington Post are different because they have two-tiered stock, and the voting stock is still controlled by insiders and family members. They can tell Wall Street, “If you want more than 15 percent in profits then buy someone else’s stock.” The bigger companies, the Tribune Co., Gannett, Knight Ridder, only have one tier of stock. Family members who held that stock back in the 60s are gone and the stock is now all held by institutional investors. Institutional investors don’t care about good journalism, they care about profits.

When maximizing profits is the sole driving force in a newspaper company, you’re back to the coat hanger analogy.

SQS: Is that a conflict the people who run large media companies understand?

BM: Not at all. When you say companies — the New York Times, Wall Street Journal, Washington Post, as well as McClatchy Co. and the Newhouse papers [Advance Publications] — I think they are holding to the standards that they can afford to hold to. That doesn’t mean they don’t have economic pressures — of course they do, and they all are seeing an erosion of their circulation, but that’s not because they’re putting out bad newspapers.

Newhouse is a shining light. … Doug Clifton, the editor at the Cleveland Plain Dealer, told me that the attitude [at Newhouse] is: We’re going to put out a good newspaper. That’s one of the little hopeful possibilities that I mention in the book. These huge media conglomerates, if they choose, can say we’ll make our money off movies and magazines and TV, and we’ll let our newspaper divisions get by with profits less than 30 percent. Unfortunately, however, conglomerates aren’t known for their public service attitudes, which is one of journalism’s hallmarks.

There’s an important thing here that is the core to the idea of my book. We’re not going to need newspapers at some time in the future, and we’re not going to have them. We’re not going to need newspapers, but we will need newspaper journalism. There may be a time when we don’t have to kill trees to provide information. That’s not bad as long as the principles and values, the layered process of editing, remains.

But what most [newspaper] companies are producing today and the values they operate under are not likely to create the next generation of serious newspaper journalists. That pipeline is thinning down. It’s a real race against time. The guy in his basement in his undershorts typing away at 3 a.m. is not producing news stories.

The Internet offers unlimited possibilities for newspaper companies while preserving the kind of journalism I’m talking about. All they need to do is to figure out how to make money. No one has figured out how to marry the old principles with the new tech.

SQS: In the mid-1970s, Knight Ridder instituted a program called “Management by Objective” in which top editors’ compensation was tied to performance, a strategy that had been in use for years in the corporate world. And you describe in the book the problems it created. Why does this pose an inherent conflict?

BM: Because everybody wants to be financially successful. Editors have families and ambitions; they’re human beings. The whole trick with the MBOs was the [performance] goals set. At Knight Ridder, they went from purely journalistic to almost purely financial. That was the Ridder influence. When the goals express only financial achievements, you are inviting the editor and publisher into a terrible conflict of interest. When revenue is flat or declining, the only way to increase the profits is by cutting costs. When you cut costs, you cut journalistic quality. There’s no way around it.

In the book I tell the story of how my publisher [at The Wichita Eagle] wanted to reward me for coming in under our newsroom budget. If I had agreed, not only would that have been a conflict of interest, but it would have undermined my position with my staff. From then on, any news decision I made — if we decided not to cover something, for example — could always be attributed by them to me wanting to pump up my MBO results by cutting costs.

Measuring performance [from a purely journalistic standpoint] is difficult, but you can always measure the bottom line. In the early 1980s, there was a publishers’ revolt at Knight Ridder. Most of the goals set out by the editors then were purely managerial, and the publishers, financial. At the time, the editors and people below them [in the newsroom] were getting bonuses [for meeting their MBO goals] but the publishers and business side people were not meeting their financial goals. The response from Knight Ridder was: We have to make the editors also feel responsible for the bottom line, too.

SQS: In the book, you compare the number of Pulitzer Prizes won by Knight Ridder papers with profit margins recorded. As profits went up, prizes went down.

BM: First of all, we know that politics sometimes influences who wins a Pulitzer. That said, here are the numbers: In the decade of the 80s, what I call the Big Five — the Los Angeles Times, the New York Times, the Washington Post, the Wall Street Journal and AP won 26 percent of the 136 Pulitzers awarded. Knight Ridder newspapers won 23 percent, and all other newspapers won 51 percent. Between 2000 and 2004 [with 70 Pulitzers], the Big Five won 60 percent, Knight Ridder 6 percent and all others 34 percent. During the 80s, the operating return at Knight Ridder averaged 11 percent. Between 2000 and 2004, the operating return averaged 19 percent.

As soon as Knight Ridder began to reach into 18-20 percent [profit margins], they virtually stopped winning. This is ominous, and not just for Knight Ridder. The Big Five are relatively protected from market forces, except for AP, which is a different category. The numbers aren’t just the decline in Knight Ridder’s performance. The scary thing is that all other newspapers also are being hurt [by profit pressures]. It doesn’t prove anything, but it is interesting to look at.

SQS: In your final chapter, you borrow a phrase to describe what the news industry is engaged in now: “harvesting market position.” Explain.

BM: In a mature industry (and obviously newspaper journalism is a mature industry), where you don’t see ever-increasing growth and expansion, or some other force that can change the environment in which you operate (in this case technology), you have a couple of choices. One is to somehow try to raise the money to get back on track and get engaged and develop that technology over time. The other is to harvest your seed corn, in effect. You cut costs and the bottom line until you can get all the money out that you can because you’re persuaded there is no viable future. Rather than taking a 20 percent profit, you insist on 30 percent and the only way you can achieve that is to cut costs further.

Nobody in the business will admit to doing this, but it’s clear that some of it is going on. If we can push a mid-range choice and say, okay, we’re going to have to make 25 percent operating returns, but we’re going to take 10 percent of it and reinvest in our future, that’s acceptable. But I don’t see anybody doing that.

SQS: Does the public play a role in this?

BM: Sure. Just like you get the kind of democracy you demand, you get the kind of journalism you demand. But there’s isn’t a lot of demand out there. People are pretty disengaged.

SQS: Would you go into a journalism career today?

BM: I think I would. I might be a whole lot more interested in the Internet side of it, but you can’t make much of a living doing that. I think that will change over time. The question is, when we get to that time, will there be any talent pool out there?

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Susan Q. Stranahan wrote for CJR.