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This is, to an extent, what happened to the Star. It hasn't been locally owned since 1977, when it was sold to New York–based Capital Cities Communications, which later merged with Disney, which in 1997 sold the Star to Knight Ridder. In June 2006, Knight Ridder sold the Star, along with 20 other newspapers, to the McClatchy Co., a Sacramento-based newspaper chain, for $6.5 billion. After the sale, McClatchy CEO Gary Pruitt came to Kansas City to give a customary newsroom pep talk.
"He's standing up behind this podium, giving this big spiel about how great of a purchase it was," says Jim Fitzpatrick, a former Star bureau chief in Wyandotte and Johnson counties, who was with the paper for 36 years. "When in fact McClatchy had bought all these papers at the exact wrong time and had taken on all this debt to do so. The previous few years with Knight Ridder had been pretty rough — lots of buyouts and layoffs. So I raised my hand and asked if he was planning any buyouts. He just laughed and said they were planning on expanding, not contracting. I just remember thinking, 'How the fuck am I gonna get out of here?'" (Fitzpatrick retired later that year.)
Newspapers are struggling everywhere, of course. But McClatchy papers are facing a particularly scary future. In 2005, McClatchy stock traded at $75 a share. Today, the share price hovers around $6. And the company still carries a staggering amount of debt from the Knight Ridder purchase: $1.5 billion in consolidated debt, as of its 2013 SEC filing.
The hope that the print business model might be replicated online fades more and more with each passing quarterly statement. Print advertising revenue and print circulation continue to drop as readers go online for their news. In theory, the Star could just transfer its ad rates and circulation fees to the Web. But online advertising fetches only a fraction of what print advertising does. The paper has erected a paywall online, called Star Plus. But the newsroom is thin from a decade of steady layoffs, and getting readers to pony up $120 a year to read an online Star is a tough sell.
"This is the big question for companies like McClatchy — the question of digital transition," says Ken Doctor, a newspaper analyst who writes the "Newsonomics Of" column for Harvard's Nieman Journalism Lab. "Can they cut the legacy costs — printing papers, operating presses, owning huge office buildings, trucks, the old circulation apparatus — and grow new revenues? Because there is no growth on the print side of things. You just have to try to manage the print side down while growing the digital side as much as possible. But you have to have enough news capacity to produce a substantial enough product to entice people to pay for all-access subscriptions, like the Star's Plus program. And that is the tough part."
McClatchy's only play at the moment, apart from filing for bankruptcy, is to unload assets and use the cash to pay down debt. It appears to be moving in that direction, having recently sold its stake in apartments.com, which netted the company $90 million. Cars.com, another digital classified company in which McClatchy shares ownership, is also being shopped around, reportedly for around $3 billion. McClatchy's share of such a sale, after taxes, would be $475 million. A windfall like that could greatly reduce McClatchy's debt burden. McClatchy stock rose at news of the potential cars.com sale, a sign of encouragement from the market.