JimmyCsays: At the juncture of journalism and daily life in KC

When Kansas City Star management decided in 1977 to sell the then employee-owned newspaper to an up-and-coming, New York-based, publicly owned media company called Capital Cities Inc., Star employees were torn.

On one hand, we knew that after the sale was finalized, The Star — and its morning edition, The Kansas City Times — would never again be the close-knit, family-type operation that made it a secure place to work and where we never had to look beyond Kansas City to track our fate.

On the other hand, every employee who owned stock was getting $2 for every $1 in stock he or she owned. Several people became overnight millionaires. I remember one top manager waving his six-figure check around The New Stanley Bar in Westport and saying, “It would have been a lot more if it weren’t for the two ex-wives!”

I had only been at the paper eight years at the time and had been investing very modestly in the employee-purchase plan. Nevertheless, my approximate $10,000 in Star stock immediately turned into $20,000 — enough for me to make a nice down payment on a two-story house at 51st and Grand. I was 31, it was the first house I had ever owned, and I was walking on air.

None of us who made a significant amount of money was complaining. The paper had enjoyed a good, long run under employee ownership, and the change of direction had been dictated by a handful of people who made what was then — and what continued to be for many years — a wise financial decision.

Where the company had been making something in the range of $5 million a year, the profit margin more than tenfold in several years under new publisher Jim Hale, whom Cap Cities had brought in from the Fort Worth Star-Telegram.

The money was rolling in, circulation was up and the paper grew in thickness and substance.

And yet we employees always realized in the back of our minds that our destiny was no longer in local hands, not even those of the very popular Hale.

A lot of change occurred, gradually at first but then more quickly. And here we are now, more than four decades and three corporate ownership changes later (Walt Disney, Knight Ridder, McClatchy), and what do we have?

Truly, a big mess.

The Star is the most profitable of McClatchy’s 29 or 30 papers, and in some ways it’s a prisoner of its own success. McClatchy would be loathe to sell its biggest revenue producer for anything resembling fair market value. Thus, The Star and other McClatchy papers revolve slowly on the spit that impaled them 12 years ago.

My fondest hope and dream is that The Star, like a handful of other major U.S. dailies, will one day return to local ownership. What it takes, basically, is a “white knight” with oodles of money, a sense of outrage at what is happening to the once-proud local paper, and a commensurate sense of civic responsibility.

Fewer than a handful of people in Kansas City could pull something like this off.

Here are a few who conceivably could make a run at it…And let me preface this by saying I have no idea if any of these people has ever even thought about the prospect of buying The Star. Moreover, I’ve never heard any rumblings or rumors to that effect, which makes me think it’s extremely unlikely.

But nevertheless…

Don Hall Jr.

Don Hall Jr. Hall, chief executive officer of Hallmark Cards, ranks first for four reasons: 1) Incredible wealth; 2) Hallmark has a solid history of civic activism; 3) Hallmark already has a foot in the media business, with its ownership of Crown Media Holdings, whose businesses include the Hallmark Channel, and 4) Hall, who is in his early 60s, has age on his side.

Cliff Illig. Illig is vice chairman and co-founder of Cerner. He’s got the wealth, for sure, but unlike Hall he’s a first-generation success story and doesn’t have anything approaching the Hall family’s portfolio of civic activism. In addition, he already has a significant “extracurricular” investment, being part owner of Sporting Kansas City.

Barnett and Shirley Helzberg. Like the Hall family, the Helzbergs have a history of civic activism — especially with Shirley’s various projects — but I’m guessing the finances would be a tighter squeeze for them. Barnett was chairman of Helzberg Diamonds from 1988 until he sold the company to Warren Buffett’s Berkshire Hathaway in 1995. He’s now in his mid-80s, however, and probably content with what he’s done and where he is.

…Remember, I’m just throwing out names here, and I’ve talked to none of them about The Star. However, there are precedents for “white knight” purchases of major metropolitan dailies. Here are three examples…

Patrick Soon-Shiong

:: Most recently, in June, Patrick Soon-Shiong, a Los Angeles surgeon, entrepreneur and philanthropist, purchased the Los Angeles Times and the San Diego Union-Tribune from Tronc (formerly Tribune Publishing) for $500 million. It was probably an inflated price, but he did it because he could and he wanted to. Soon-Shiong also reportedly has eyes on establishing a California-based network of major dailies and is thought to favor a sale of Tronc (in which he’s a 25 percent owner) to McClatchy.

If that came to pass, he could have a big voice in the management of five major newspapers stretching 500 miles, from San Diego to Sacramento. (A hedge fund I wrote about recently, Chatham Asset Management, would also be a major player if a McClatchy takeover of Tronc became a reality.) In addition to the San Diego and Los Angeles papers, the formidable California line-up would include McClatchy’s Sacramento Bee, Modesto Bee and Fresno Bee. The latter three are aligned in California’s densely populated central valleys.

:: The Minneapolis Star Tribune is a paper that managed to gain its freedom from McClatchy about the time McClatchy bought The Star and the other Knight Ridder papers in 2006. McClatchy purchased the paper from Cowles Media in 1998 and sold it to a private equity firm in 2006. It went into bankruptcy in 2009 and was purchased by an investment group in 2012. In 2014, a Minnesotan named Glen A. Taylor, who had made a fortune in printing and electronics, purchased the paper for $100 million.

Glen A. Taylor

Like Soon-Shiong with the LA Times and the San Diego Union-Tribune, Taylor bought at a  premium. He did not take a managing role in the operation, although he appointed his daughter to the board of directors. In Sunday circulation, the Star Trib ranks among the nation’s top 10 newspapers.

:: The Philadelphia Inquirer and the Philadelphia Daily News are two other papers that escaped McClatchy’s clutches. They were included in McClatchy’s purchase of the Knight Ridder papers in 2006, but McClatchy immediately turned around and sold the papers to a group of local business people. The group filed for bankruptcy in 2009, and the papers changed hands a couple of more times before cable TV entrepreneur H.F. “Gerry” Lenfest bought them in 2014 for the unbelievably low price of $16 million. (That’s how far the papers had fallen.) Two years later Lenfest donated the papers to The Philadelphia Foundation and created an institute — now called The Lenfest Institute for Journalism — to oversee operation of the newspapers and their website, philly.com.

H.F. “Gerry” Lenfest

Although the Philadelphia papers went through hell, the ultimate outcome was a big win for the papers and the community. The Lenfest Institute is headed by a board composed mostly of journalism school deans and academic and foundation executives. The new ownership structure allows the newspapers and website to receive philanthropic donations to fund local journalism but also insures the papers’ independence.

After buying the Philadelphia papers and before seeing them under the umbrella of an institute, Lenfest was quoted as saying:

Of all the things I’ve done, I can’t think of anything more important. If we can put the operation of the newspapers in good hands, with responsible leadership and a good board of directors, then I think I will have accomplished a lot for Philadelphia.

Gerry Lenfest died Sunday, Aug. 5, at 88.