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

A wise uncle once told me, “Expect the unexpected.”

I’ve witnessed the accuracy of those words more than once, but not today.

With a decision made by the McClatchy Co.’s board of directors, the expected has, indeed, come to pass: The company, with its 29 daily papers (including The Kansas City Star), will soon pass into the custody of the Chatham Asset Management, a hedge fund out of New Jersey.

Chatham, McClatchy’s largest shareholder and biggest creditor, has been sinking its claws more deeply into McClatchy the last several years.

After the U.S. Bankruptcy Court approves the transition, the McClatchy papers will be owned by the same company that owns the National Enquirer. That, in itself, is a fact that should make any self-respecting journalist shriek.

I’ve said before, Chatham is a shadowy company; they don’t even have a website. The company was founded in 2003, and its managing partner is a man named Anthony Melchiorre…I’ve searched the web far and wide and have never found a photo of the guy.

What this tells me is journalists and avid newspaper readers here and in cities like Miami, Fort Worth, Sacramento, Charlotte and Wichita (also with McClatchy papers) should be cringing. The newspaper industry’s angle of descent has just steepened.

News of the pending transfer of ownership came in a press release issued by McClatchy this morning. The bitter, hard-to-swallow lead of the press release said…

“McClatchy announced today that the auction held as a part of its court-supervised sale process has concluded with Chatham Asset Management deemed the successful bid.”

It went on to say…

“The proposed agreement positions McClatchy to exit Chapter 11 protection in the third quarter of 2020, having achieved a resolution and restructuring of the company’s complex legacy debt and pension obligations, while maximizing value for the company’s creditors.”

Let me put that sentence into plain, sterling English: McClatchy’s 2006 purchase of the Knight Ridder chain for $4.5 billion was an abject failure, and the vulture that first sought to capitalize on the mistake will now gorge on the detritus.

So The Star, which was employee owned when I arrived as a general assignment reporter in 1969, will now have its fourth ownership change since 1996.

The blissful era of employee ownership died in 1977, when a newspaper-TV-radio company called Capital Cities Inc. paid $2 for every dollar of employee stock ownership, or a total of $125 million, which seemed like an astounding amount at the time.

The Star prospered under Cap Cities ownership for nearly 20 years, but in 1996 things started going south. That’s when Cap Cities, which had earlier acquired the ABC network, sold to Walt Disney Co., which had no interest in newspapers and put The Star and three other Cap Cities papers up for sale within a year.

Knight Ridder, a longstanding, tradition-rich newspaper company seemingly came to the rescue in 1997. But that didn’t go as expected, and Knight Ridder, under pressure from an unhappy, major shareholder, sold to McClatchy in 2006. (For a variety of reasons, including x-ray vision into the future, I retired on June 30, 2006, exactly three days after McClatchy closed on its $4.5 billion deal.)

So, here we are again. Or, I guess I should say, here again are the current crop of KC Star employees — the 250 or so that remain of a legion that once numbered more than 2,000.

What’s in the future for these employees? Hard to say, but changes at the top and more staff reductions would not surprise me. The hedge fund model is to extract as much cash as possible from businesses they own and reinvest the money elsewhere, at a bigger return on investment.

Ken Doctor, the best industry analyst around, put it this way in a recent New York Times story…

“The truth is, to make a huge profit in the newspaper business, you have to cut, cut, cut, and be willing to see the product get worse year by year. They (the hedge fund operators) will have a number, and they will cut whatever they have to — to meet that number.”

You don’t see anything in that quote about quality journalism because that isn’t part of the equation. It’s just hitting the numbers.

McClatchy, at least, made a pretense of quality journalism, but now that’s gone, and everybody down at 1601 McGee should brace for more unsettling changes.

We’ll see what happens. In the meantime, so long, McClatchy, it wasn’t that nice knowing you.