The Rittenhouse Review

A Philadelphia Journal of Politics, Finance, Ethics, and Culture

Wednesday, January 25, 2006  

When Paper is Shredded, It Only Makes a Pile

Could the incredibly shrinking Philadelphia Inquirer and Philadelphia Daily News get any smaller? Apparently top executives at parent company Knight Ridder Inc. think so. Peter Carey reports in today’s San Jose Mercury News, also a Knight Ridder paper (“Cut Labor, Paper Costs to Lift Profit, KR Tells Bidders”):

Knight Ridder is telling prospective buyers that its profits can be sharply increased by cutting jobs and benefits and reducing the size of some of its 32 newspapers. [...]

The figures Knight Ridder is giving potential buyers are similar to those in a Morgan Stanley research report published in November. The report, by analyst Douglas Arthur, said an outside buyer could reduce costs by $150 million a year through a 5 percent reduction in the workforce, cutting labor costs and chopping corporate overhead.

The company’s projections were reported in the Wall Street Journal on Tuesday and not disputed by Knight Ridder. According to the projections, a buyer could increase Knight Ridder’s earnings by about 20 percent over 2004 earnings in the next 18 months by cutting jobs and benefits, streamlining operations and reducing the size of some of its 32 newspapers.

The Journal reported that two people familiar with the matter described the forecasts as overly optimistic.

It’s difficult to disagree with that last statement, if by overly optimistic one is referring to the ability of thinly staffed newspapers, in this city and elsewhere, to maintain a respectable level of paying readership.

I wonder who was the original genius who determined that newspapers, a healthier business than many realize, should start gutting their way to oblivion?

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