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Saturday, November 19, 2005

Media Deconsolidation, Part 11: Knight Ridder's Coming Crackup
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This week, newspaper giant Knight Ridder announced that it was putting itself up for sale. In a sign of just how much the media universe has changed in just the past few years:

(1) the announcement received almost zero front-page attention in other papers; word of the sale was buried in the obscure back pages of most papers; and, more importantly,

(2) almost no one in the media business community expressed any interest in buying the giant paper chain.

Five years ago, such an announcement would have made front-page news and been greeted by a wave of offers from other media operators. Today, by contrast, the "ho hum" reaction is another indication that the Internet / media revolution is set to claim another old media victim.

For many years, newspaper industry analysts have predicted a contraction in this sector. As circulation continued it long, steady decline, and papers slowly began losing their lock on classified ads, market watchers have argued that consolidation would be the likely end result. If smaller papers were to be saved, bigger ones (owner by the biggest chains) would likely need to come to the rescue.

But it may be too late for that scenario now. In this weekend's Wall Street Journal, venture capitalist John Ellis, who was also formerly a columnist at the Boston Globe, argues in an editorial entitled, "For Sale--Mostly Second-Rate Newspapers," that "The consolidation everyone expects may in fact more closely resemble a break-up of the old order, and the selling-off of its assets, piece by piece."

Ellis continues:

"This lack of enthusiasm for a company once regarded as a money machine is evidence of how thoroughly the Internet has disrupted media business models. And with broadband now reaching into more than half of U.S. households, disruption has morphed into a menace. ...

With high-speed broadband and wireless access now a fact for most Americans, consumers are no longer at the mercy of second-rate information providers. They can get better, more reliable information, faster, on their computer or on their hand-held devices. Unsurprisingly, they are abandoning second-rate information providers at an escalating pace."

His scathing critique continues as he asks, rhetorically: "Is there anyone who thinks that Knight Ridder can really compete with Google if Google decides to mount a full-scale offensive" on the classified business in particular? [Read these old blogs of mine about the threat Google and Yahoo pose to traditional media operators.] Ironically, Ellis notes, "all these big newspaper companies had the opportunity to buy Yahoo! for a song and to invest in Google at its inception. Today, Knight Ridder is hoping that Yahoo! or Google or Microsoft will buy it at a premium and relieve its management of the pain of trying to navigate a newspaper company in the Internet world."

Make sure to read this important editorial by Mr. Ellis because, in my opinion, it is the first in many obituaries that will be penned for old newspaper giants in coming years.

[P.S. To read previous installments in my regular "Media DE-Consolidation" series, begin here.]

posted by Adam Thierer @ 8:37 AM | Mass Media

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