Knight-Ridder, Inc.

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Knight-Ridder, Inc.

One Herald Plaza
Miami, Florida 33132
U.S.A.
(305) 376-3800
Fax: (305) 376-3876

Public Company
Incorporated: 1974 as Knight-Ridder Newspapers, Inc.
Employees: 20,000
Sales: $2.31 billion
Stock Exchanges: New York Tokyo Philadelphia Chicago Boston San Francisco Los Angeles Cincinnati

Knight-Ridder, Inc. is one of the largest newspaper groups in the United States, owning 29 newspapers, as well as an international information and communications company that offers news, graphics and photo services, and cable television. The company’s newspapers are well regarded in terms of editorial quality, and have won numerous Pulitzer Prizes. Despite these achievements, Knight-Ridder lagged the industry in profitability during much of the 1980s. To reduce its debt, it sold off several newspapers during the late 1980s, as well as five of its eight television stations. The company relies on newspapers for 86% of its profits.

The company began as two separate newspaper groups, which merged in 1974. The Ridder group originated in 1892, when Herman Ridder purchased the Staats-Zeitung, a New York German-language paper. The Knight group began in 1903 when Charles Landon (C.L.) Knight bought the Akron Beacon Journal, in Ohio, which the company still owns. He soon bought two smaller Ohio newspapers, the Springfield Sun and the Massillon Independent.

C.L. Knight, a brilliant writer, began training his son John at an early age to replace him. John S. Knight worked as copy boy and reporter, then went to college and fought in World War I. In 1919, at age 25, he joined the Beacon Journal’s staff, and became managing editor in 1925. He carefully observed the operations of better newspapers and applied his insights to the Beacon Journal. C.L. Knight died in 1933, in the depths of the Great Depression, leaving an estate of $515,000 and debts of $800,000 to his sons, John S. and James L. Knight. The Beacon Journal was facing stiff competition from another Akron paper, the Times-Press, owned by Scripps-Howard, and the Great Depression was at its most severe. John Knight froze family earnings and took on the Times-Press, running more news and features than his competitor to win over readers. He paid off the Beacon Journal’s debts within four years, and made it Akron’s leading newspaper.

John Knight’s first major test as publisher came during a 1936 Akron rubber strike. Rubber was the city’s major industry, and as the strike dragged on, money and advertising dried up. The Times-Press cut back on editorial pages, but Knight increased local news coverage and won readers from the Times-Press. When the strike ended, he kept the readers and won new advertising.

On October 15, 1937, John Knight became president and publisher of The Miami Herald, after purchasing it for $2.25 million. The business side of the paper had been run poorly before the Knights bought it, so James Knight, who had studied the business and production side of newspaper publishing, became operations manager. The Knights’s first move was to distance the paper from the Miami political establishment, with which it had previously had close ties. The Herald had two competitors. The Knights soon bought one, the Miami Tribune, which had been losing money. For a cost of $600,000 plus the Massillon Independent, the Knights bought the Tribune, eliminating a competitor and acquiring the Tribune’s building, new printing press, and other equipment. Knight closed the Tribune on December 1, 1937, taking six of the Tribune’s best people with him.

The Knights added more photographs, comics, and new columnists to the Herald. In the next two years two local stories— a kidnapping case and a controversy over pasteurized milk—received national attention and won 14,000 new readers for the Herald. Having turned the Miami Herald around, the Knights bought another paper, the Detroit Free Press, in 1940.

In 1941 Knight Newspapers, Inc. was incorporated in Ohio. World War II found German submarines off the Florida coast driving away tourists and the business that had supported the Herald. The paper lost much of its staff to the army, but several large military bases were set up in the Miami area, and the soldiers boosted the Herald’s circulation again. Lee Hills was brought in as news editor. He immediately recruited talented journalists from other Florida papers to make up for the staff the Herald had lost to the war effort. When a serious newsprint shortage created problems toward the end of the war, Hills and James Knight decided to cut advertising and circulation outside the Miami metropolitan area rather than editorial content, which wrested a large number of readers from its remaining competitor, The Miami News.

In 1944 the Knights bought the Chicago Daily News for $3 million, and took on the paper’s $12 million debt. The Daily News had won a reputation for having the most thorough foreign news section of any Chicago paper, but John Knight found the stories too long and poorly written. He ordered the stories to be made more succinct, creating a brief storm of protest among some writers and readers.

The population of Dade County, Florida, nearly doubled in the years 1940 to 1950, and the Herald’s circulation grew apace, from 86,313 in 1941 to 175,985 in 1951. In 1946 Lee Hills began the Clipper Edition, a streamlined version of the Herald that was distributed in 23 Latin American countries. The paper won prestige and readership in Latin America, while the Herald’s Miami edition began to specialize in coverage of Latin America. Because of these early efforts, the paper is considered by many to have the best Latin American coverage of any U.S. newspaper.

In 1948 the Herald’s printers began a lengthy, sometimes violent strike over wages and the length of their work week. They were among the best paid printers in the country, but wanted to receive the same wages for working 35 hours as they were getting for working 40. The strike dragged on, and on October 1, 1949, the paper’s newsprint warehouse burned down in a mysterious fire. Because of the strike, the Herald experimented with alternative production methods, and ended up with production methods years ahead of those at most other papers. In 1950 the paper won its first Pulitzer Prize for fighting government corruption in southern Florida. The next year Hills became executive editor of the Herald and the Detroit Free Press. He encouraged individual style and quality writing and drew a large number of excellent reporters and columnists from other papers.

In 1960 Knight took a gamble and built a $30 million building, containing offices and printing presses, for The Miami Herald. At the time it was the biggest building in Florida, and the biggest newspaper printing plant ever built. It reflected the Knights’s belief that the Herald—ana Miami—would continue to grow, which they did.

In 1955 Knight bought The Charlotte Observer, in North Carolina, purchasing its rival, The Charlotte News, in 1959. In the same year, the Knights sold the Chicago Daily News to Marshall Field for $17 million.

As the group grew larger, the Knights wanted to increase financial coordination among the newspapers. At the suggestion of Lee Hills, the Knights formed an executive committee in 1960 to undertake quarterly reviews of the operations of Knight Newspapers. They also hired finance man Alvah H. Chapman Jr. as James Knight’s assistant; he rose within ten years to be president of the Herald and executive vice president of Knight Newspapers. He introduced computers for administration, layout, typesetting, and production; and for improving the operation of the circulation, advertising, and business departments. Chapman mandated budgeting at all Knight newspapers, which was rarely done at small- and medium-sized newspapers up to that time.

Knight Newspapers began an aggressive acquisition campaign during the same period, looking for newspapers in growing cities with at least 50,000 inhabitants. In 1969 the son of Moses Annenberg, the former Miami Tribune owner who sold that paper to the Knights, Walter Annenberg, sold The Philadelphia News and The Philadelphia Inquirer to Knight Newspapers for $55 million. Knight Newspapers added the Tallahassee Democrat, in Florida, to the group in 1965. The five papers Knight bought in 1969 continued the company’s strategy of owning more than one newspaper in a market, thereby eliminating competition. In 1969 Knight’s combined daily circulation was 2.2 million, and it made $12.7 million in profits on revenue of $162.8 million, largely on rising advertising revenues. It had come to be regarded as a well-managed, highly profitable, and very aggressive group, although its editorial content was not top quality. In 1969 Knight Newspapers, Inc. went public, the first offering immediately selling out at $30 a share.

Knight acquired five more dailies in 1973: the Lexington Herald and the Lexington Leader, both in Kentucky; the Columbus Ledger and the Columbus Enquirer, both in Georgia; and The Bradenton Herald in Florida.

Herman Ridder, founder of the Ridder group, worked his way up through that ranks at the Staats-Zeitung, purchasing that New York newspaper in 1892. He was a founder and president of the Associated Press and an early supporter of the American Newspaper Publishers Association, becoming its president in 1907. His sons Bernard, Joseph, and Victor bought the New York Journal of Commerce and the St. Paul Dispatch-Pioneer Press in 1927. Ridder Publications was incorporated in Delaware in 1942.

After World War II the company expanded westward in search of well-priced properties in growing markets. They bought the Long Beach Press-Telegram, Long Beach Independent, San Jose Mercury News, and Pasadena Star News, all in California, as well as some smaller California papers; a 65% stake in the Seattle Times, in Washington; the Gary Post Tribune in Indiana; and radio and television station WCCO, in Minneapolis, Minnesota. The San Jose Mercury News was the most profitable Ridder publication. The company bought the Boulder Daily Camera in Colorado in 1969 and the Wichita Eagle and Beacon Publishing Company of Kansas in 1973.

Ridder’s 1973 earnings were $14.3 million on revenue of $166 million. Knight’s 1973 earnings were $22.1 million on revenue of $341.9 million. Their merger grew out of talks between friends Lee Hills and Bernard Ridder Jr., grandson of Herman Ridder, who were interested in expansion. Influenced by the success of the rival Gannett group, both the Knight and the Ridder groups had gone public in 1969 to raise capital for acquisitions. The groups described the potential benefits of a merger to their stockholders as “a broader and more diversified income base, greater newspaper size, mix and geographical distribution, and a stronger balance sheet.” The merger was accomplished through an exchange of stock, and five Ridder representatives joined ten from Knight Newspapers, to form Knight-Ridder’s board of directors.

The Knight group had focused on the South and East, while Ridder had focused on the West and Midwest. At the time of the merger, Knight owned 16 dailies in 7 states, while Ridder owned or had a substantial interest in 19 dailies in 10 states. The Ridder dailies were all in exclusive markets, while the Knight’s three largest revenue yielders—in Miami, Detroit, and Philadelphia—all faced competition. At the time of the merger, Time, July 22, 1974, reported that in general, “the Ridder papers do not have the heft and influence of the Knight dailies.”

When the groups merged on November 30, 1974, Ridder became a wholly owned subsidiary of Knight, and the renamed Knight-Ridder Newspapers, Inc. became the largest newspaper company in the United States, with newspapers from coast to coast. The new company had 35 newspapers in 25 cities, with combined circulation averaging 3.8 million daily, and 4.2 million on Sunday, total assets of $465 million, and profits of $36 million. Other large companies published newspapers, but they were diversified, while Knight-Ridder Newspapers focused on newspapers alone—Knight and Ridder had agreed to sell their radio and television holdings as part of the Federal Communications Commission’s conditions for merging. The new company continued to give its newspapers editorial autonomy while maintaining strict central control of business operations. It organized its new papers into three groups along geographical lines.

In 1976 Knight-Ridder Newspapers, Inc. became Knight-Ridder, Inc. Alvah H. Chapman Jr. was elected chief executive officer, succeeding Lee Hills, and Bernard H. Ridder Jr. was elected chairman of the executive committee, succeeding James L. Knight, who resigned. James L. Knight died in 1991 at the age of 81. John Knight also retired as editorial chairman in 1976. He died in 1981 at the age of 81. Lee Hills took his place until 1979 when he retired and Bernard H. Ridder Jr. succeeded him.

Beginning in the late 1970s, many media companies went on newspaper-buying binges, snapping up what turned out to be bargains while Knight-Ridder watched from the sidelines. The company had concluded that newspapers were a mature market and moved into other areas. It bought radio stations and started Viewdata Corporation, which offered news and financial services on home computers. Viewdata never did well, and was closed in 1986. By that time Knight-Ridder recognized that it had made a mistake, and that profit gains might come from newspapers. Knight-Ridder finally acquired more newspapers that year when it bought the six-paper State-Record Company, based in Columbia, South Carolina, for $311 million.

By the mid-1980s, Knight-Ridder had a stable of Pulitzer Prize-winning reporters and 34 newspapers. Yet its largest four newspapers—Miami, Detroit, Philadelphia, and San Jose—which accounted for 55% of company revenues, had problems at various times in 1980s, including a 46-day strike in Philadelphia in 1985. The company’s net profits fell 5.7% in 1985. They rose 5.5% in 1986, but competitors were doing far better in those years—Gannett’s profits rose 23%, while the Times Mirror Company’s rose 75%.

Part of the reason for the company’s declining profits was that it had lost touch with its readers. Hispanics accounted for half the population of the Miami area, but only 20% of them read The Miami Herald. In 1986 several of the Herald’s offices were closed. In 1987, it redesigned the Spanish version of the paper, El Nuevo Herald, to win Hispanic readership. The Detroit Free Press, locked in a cutthroat price war with the rival Detroit News, lost $74 million between 1981 and 1987, prompting the company to request a joint operating agreement from the U.S. Department of Justice. The agreement would have allowed the Free Press and News to share advertising and production operations. Citizens’ groups challenged the request on the grounds that the measure was anti-competitive and that both papers could coexist healthily if they raised their prices. The opposition created long delays and several more years of losses. The joint operating agreement was finally granted in 1989, when the Supreme Court approved the agreement.

By 1988 Knight-Ridder’s business-information services division was growing three times as fast as its newspapers. The company had also moved into computer-based graphics services. The Knight-Ridder Graphics Network went on line in October 1985, at first servicing only newspapers in the group. It began to offer a full-scale daily service to papers outside Knight-Ridder in 1986. Within a year it was used by 28 of the chain’s newspapers and had 110 outside subscribers in North America and Europe. Subscribing newspapers paid $50 to $300 a month, depending on their circulation, for the privilege of using the system.

Beginning in 1987, Knight-Ridder undertook a cost-cutting campaign headed by Tony Ridder, president of the newspaper division. However, by 1989, the company’s debt approached $1 billion, fed by the 1988 purchase of Dialog Information Services, Inc. for $353 million. In 1988 Jim Batten was appointed chief executive officer, replacing Alvah Chapman, and Tony Ridder was named president of the company. To reduce debt, Batten sold the company’s broadcasting group and the Pasadena Morning Star News netting $425 million. Still, the company was sufficiently wary of a takeover for its shareholders to vote a “quality of journalism” amendment to prevent a buyout by a media baron like Rupert Murdoch.

Knight-Ridder’s options for increasing its profitability were limited. In 1989 it derived 88% of its revenue from newspapers, and 50% of that came from the Philadelphia Inquirer, the Miami Herald, and the San Jose Mercury. Some of the company’s papers faced stiff competition from suburban newspapers and expanding big-city papers. Part of the problem lay in the newspaper field itself, where readership had been sinking for two decades, but part of the problem lay with Knight-Ridder. For the last five years of the 1980s, the company’s operating margins averaged 14.3%, while the average for the 16 largest publicly traded media companies was 18.8%. As the 1990s began, however, media analysts predicted significant improvement in Knight-Ridder’s earnings.

Principal Subsidiaries

Aberdeen News Company; The Beacon Journal Publishing Company; Boca Raton News, Inc.; Boulder Publishing, Inc.; The Bradenton Herald, Inc.; Cir-com Corporation; Detroit Free Press, Inc.; Drinnon, Inc.; Grand Forks Herald, Incorporated; Journal of Commerce, Inc.; Keynoter Publishing Company, Inc.; KR Newsprint Company; Knight News Services, Inc.; The Knight Publishing Co.; Knight-Ridder Business Information Services, Inc.; Knight-Ridder Cablevision, Inc.; Knight-Ridder Investment Company; Lexington Herald-Leader Co.; Macön Telegraph Publishing Company; The Miami Herald Publishing Co.; News Publishing Company; Nittany Printing and Publishing Company; Northwest Publications, Inc.; Observer Transportation Company; Philadelphia Newspapers, Inc.; Portage Graphics Co.; Post-Tribune Publishing, Inc.; PressLink Corporation; The R.W. Page Corporation; Ridder Publications, Inc.; San Jose Mercury News, Inc.; The State-Record Holding Company; Tallahassee Democrat, Inc.; Tribune Newsprint Company; Twin Cities Newspaper Service, Inc.; Twin Coast Newspapers, Inc.; VU/TEXT Information Services, Inc.; Wichita Eagle and Beacon Publishing Company, Inc.