Wednesday, March 04, 2009

Did McClatchy Buy A "Failing" N&O?

A former top McClatchy Co. exec say, "Yes." The N&O's business editor in 1995 when McClatchy bought the N&O from the Daniels family says, "No."

Below are excerpts from blogger and former Raleigh N&O business editor G. D. Gearino's post today with my comments below the star line.

Gearino begins - - -

I read the most bizarre thing yesterday, something so absolutely contrary to the known facts that it left my jaw gaped in astonishment. And the most bizarre thing was that it was written by somebody who purports to traffic in trustworthy information.

First, some background: Until a few months ago, Howard Weaver was the top editor at McClatchy Newspapers, the California-based company which owns the News & Observer.

Weaver, now retired, has positioned himself as an industry theorist, offering guru-ish insights into journalism on a Web site carrying the awkward name Etaoin Shrdlu. In a post a few weeks ago, Weaver declared … well, it’s hard to figure out what exactly he wanted to say, frankly. ...

His post can be found here. Feel free to take a whack at a 25-word summary.

In any event, Weaver’s post prompted an impassioned response from former N&O columnist Dennis Rogers, who asserted McClatchy had “ruined” the Raleigh newspaper. In a reply to Rogers, Weaver said:

We didn’t ruin you. (The News & Observer was a failing business when McClatchy bought it. The Daniels didn’t believe in its future and it wasn’t doing well.) And no matter who owned that paper, the loss of advertising and revenue crash would have screwed them.
I know a little about this matter, since I was the N&O’s business editor in 1995 and co-authored the article announcing its sale.

McClatchy paid a quarter-billion dollars for the paper — top dollar at the time — and additionally agreed to take on approximately $120 million of N&O debt.

The Daniels family sold the paper for three reasons:

(1) There was no clear successor within the family to take over the company, a common fate among family-owned enterprises;

(2) the N&O needed to launch an expensive circulation-building campaign to keep up with the Triangle’s growth, but preferred to use cash flow to pay down debt; and

(3) as a well-regarded newspaper in a flourishing market, the family could command a premium price for the company.

In short, it was the right time for the Daniels family to cash out.

The N&O was by no means “a failing business.” In fact, I’d be willing to bet that even today, in the midst of this historic economic downturn, it still posts an operating profit. What’s dragging it down is the $2 billion debt McClatchy has heaped upon its newspapers — a debt Weaver helped create. ...

Gearino's entire post's here.


My Comments:

I sometimes agree and sometimes disagree with Gearino, but almost always find him interesting.

Weaver impresses me as someone who does much more rationalizing than thinking. He preens a lot, too.

That said, and without in this post taking a firm "Yes" or "No" position on the question of whether the N&O in 1995 was a "failing business," there's information I want to share with you that certainly bears on the questions of whether in 1995 the N&O was a "failing business," and whether its been one since.

The N&O has a multi-county circulation area; the circulation numbers I'm about to cite are total circulation numbers.

But the population numbers I'm about to cite are only for the N&O's home Wake County, which includes NC's capital, Raleigh.

I'm citing only Wake population numbers because the N&O has over the years changed areas where it makes home deliveries, had local bureaus, etc.

By restricting the population numbers to only Wake, where the N&O has its home office and which has always been its prime circulation-base, I'm making sure no one can claim I "shuffled" population numbers.

Also, in every case where I use a circulation number, I use the largest one I could find for the time cited whereas for the population numbers I cite are an undercount of the actual population in the N&O's total circulation area at all times cited.

Even allowing for that, I think you may be surprised - even shocked - to see how N&O total circulation growth has fallen far behind Wake's explosive population growth.

Let's look at the numbers:

Last Nov. 25 the N&O carried on its front page a five-column-wide photo of the above the fold portion of the N&O's May 28, 1957 front page as part of a story relating to 1957.

I noticed a small item boxed in the upper right-hand corner of the reproduced 1957 front page. It read:
Yesterday’s Paid Circulation – 125, 401.

A July 1995 NewsInc report gave the N&O's circulation as
153,000. (All print circulation and U. S. Census numbers that follow are rounded to the nearest thousand)

According to the ABC [Audit Bureau of Circulations] … for the six-month period Apr-Sept. 30, 2008, the N&O had a daily circulation (M-F) of

The Census and Population page (All rounded Census number cited can be found at the page.)lists Wake's 1960 US Census population as

The 1990 Census reported Wake's population as

The 2000 Census reported Wake's population as

2007 Census Bureau estimate of Wake's population -

Thus, according to the Census Bureau, between 1960 and 1990 Wake's population grew by 257,000. (426,000 - 169,000 = 257,000)

Now if we subtract the 1995 NewsInc N&O circulation figure of 153,000 from the 125,000 (rounded) circulation figure from the May 1957 N&O, for the thirty-eight years leading up to its 1995 sale to McClatchy, N&O circulation grew by

As we've just seen during 30 of those years (1960-1990), Wake's population grew by

And the last five years of those 38 years (1990-1995) were part of a decade in which the Census Bureau reported Wake population growth of 207,000. ( 2000 pop. of 633,000 - 1990 pop. of 426,000 = 207,000.)

Given the explosive population growth in Wake during those 38 year as well as a very strong economy during most of them, the N&O's circulation growth during them may not give cause to call the N&O in 1995 a "failing business."

But given the booming population growth and generally strong economy in Wake and much of the rest of the N&O's circulation area during those 38 years, it's reasonable to ask whether the N&O's circulation growth during those years wasn't at best anemic and a sign of what was certainly a flagging news company?

I'm going to stop here because this post has gotten long.

I'll post tomorrow taking a look at what I think the N&O's circulation numbers from 1995 going forward to the near present suggest about it and McClatchy as business entities.

I'm sending G. D. Gearnino, Dennis Rogers, Howard Weaver and McClatchy Watch links to this post inviting them to weigh in on this post. I'll offer to publish on the main page their responses.

Your comments are certainly welcome,too.

Hat tip: Locomotive Breath


Anonymous said...

Howard Weaver's web site is named for the first two columns on the Linotype keyboard (used in the days of "hot metal" type for newspapers).

Anonymous said...

If you get Weaver to respond, ask him what he thinks of the N&O's inflammatory coverage of the lacrosse frame in March 2006.

McClatchy Watch said...

The incident of Howard Weaver condescending to a N&O employee called to mind Howard Weaver's profane online rant against Jeff Jarvis days before Weaver left McClatchy.

It's low-class for Weaver, now in retirement, to yell at loyal McClatchy employees in Raleigh who are left cleaning up the mess that the McClatchy management team left them.

Employees across McClatchy have a right to be angry at MNI's mismanagement. And Weaver should get his fare share of blame. Howard spent the last few years of his career talking about the potential of the internet for newspapers -- almost promoting himself as a digital guru -- but what does he have to show for it? Nothing at all. McClatchy's online presence has fallen far behind the competition. And MNI's online results are getting worse: there were 1.2 million fewer hits in January 2009 than December 2008. It's simply too late for MNI to catch up.

Here's a prediction for you: Howard will go berserk, again, the next time a McClatchy employee calls him to account.

Kevin Gregory
McClatchy Watch