When is making 20 to 30 percent profit not enough? When the stock price of the company making it is too low to satisfy the firm's major shareholders. Profit, which used to be the measure of business success, has taken a back seat to share price, even if it means the destruction of the company.
That is what happened to America's second-largest newspaper chain, Knight Ridder. Private Capital Management LP, the investor that owns 19 percent of the newspaper chain, which operates some of the best and best-known papers in the country, is complaining that KR's stock is too damn cheap. The company, whose properties include the Philadelphia Inquirer, San Jose Mercury News, Miami Herald and twenty-nine other papers, has tried everything to raise its share price. It has bought back its stock, it has paid out dividends and doubtless consulted Tibetan wisepersons, but nothing had worked until the news broke that management might be selling the whole kit and caboodle. On the news of a possible sale share prices shot upward.
Knight Ridder is reputed to be a well-run outfit. Its papers have won more than its quota of Pulitzers and other awards, and it was the only major media outlet to express skepticism about weapons of mass destruction before the United States invaded Iraq. But quality doesn't pay in the news business. Often schlock doesn't either. In the six months ending October 1, eighteen of the nation's twenty largest papers, the good ones and the bad ones, continued the long-term trend by losing circulation yet again.
Even as newspapers continue to lose paid circulation, many are gaining readers. "The Philadelphia Inquirer has more readers than it has ever had if you factor in the Web. We have well over 1 million readers," says Anne Gordon, managing editor of the Inquirer, which has been losing paid circulation for many years. Online readership does nothing for the bottom line.
The stock of some companies, like the Washington Post's mothership, is high enough to keep its investors very happy, but no thanks to its famous prestige product. What keeps the Post company in the long green is its ownership of TV stations and Kaplan Inc., the megalithic educational services profit producer.