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

The man who ushered in the era of corporate journalism — in which family- and employee-owned newspapers gave way to conglomerates and then hedge funds — died last Wednesday at his home in Rye, NY.

Thomas S. Murphy, who initiated corporate creep with his company’s purchase of The Kansas City Star and Times for $125 million in 1977, was a business genius as chairman and chief executive of then-little-known Capital Cities Communications. He was 96.

When Cap Cities, as it was known, bought the employee-owned Star, it owned mostly mid-level metro newspapers, along with TV and radio stations, and operated out of a small office in New York.

Murphy’s biggest coups came in two giant Monopoly-board steps, the first in 1985 when Cap Cities acquired the much larger American Broadcasting Co for $3.5 billion, the second in 1995, when he decided to sell CapCities-ABC to Disney for $19 billion.

Each move rocked the media world and made Murphy and many Cap Cities-ABC shareholders very wealthy.

In a news story about Murphy’s death last week, Douglas Martin of The New York Times wrote…

Mr. Murphy’s business success can be summed up in a single statistic: Capital Cities stock increased in value 2,000 times between 1957, when the company first sold stock to the public, and 1995, when Disney bought it.

**

That’s the overarching, national story, but now let me give you the up-close story from my perspective as a Star employee who started in 1969 at a salary of $550 a month.

When I arrived as a general assignment reporter, working from 4 to midnight, I didn’t really understand the significance of employee ownership, that is, that the owners, working in the newsroom every day, were in charge of the paper’s destiny.

A secretary named Grace Grafton used to meet annually with individual employees and ask us how much of our salaries we wanted to dedicate to stock ownership. I would always shrug, Grace would suggest a number, and I would go along.

Between 1969 and 1977, I built up $10,000 worth of stock. Other employees, many of whom had been at the paper for decades, had accumulated tens or hundreds of thousands of dollars worth of stock.

When Capital Cities and Tom Murphy came knocking in 1977, it rocked the newsroom. All of a sudden we lowly employees realized that things would be changing in a big way. Most of us were not happy about it and would have preferred that the paper remain employee owned, but, on the other hand, Cap Cities was offering $2 for every $1 worth of stock.

As suddenly as I realized big changes would be afoot, I also realized I was going to have more money than I’d ever thought about having. (After the sale, I used the $20,000 I cleared from the Cap Cities purchase to make a healthy down payment on a house at 51st and Grand. It was my first opportunity to buy a home.)

The company’s seven directors, who owned 11 percent of Star stock, agreed to the deal, and the other employees who had significant stakes followed their lead.

A group of 20 or so employees became overnight millionaires. After the deal closed, Cap Cities brought in James H. Hale, a Texan who was publisher of the Fort Worth-Star Telegram — which Cap Cities had bought in 1974 — to run The Star and The Times. Hale subsequently hired an editor named Gerald Garcia, who, on a Monday, called those nascent millionaires into a room and told them they were all fired. Within a year or so, Garcia himself was out — akin, it seemed in retrospect, to the Mafia hiring a hit man and then eliminating him after he’d accomplished his task.

Hale brought in excellent editors, for the most part, including Mike Davies and Mike Waller from The Courier-Journal in my hometown of Louisville, and the two papers began excelling both journalistically and financially. (A third editor who came from Louisville wasn’t so good. He was a chubby guy named Chris Waddle, who pronounced his name wa-dell in order, I believe, to disassociate himself from the way he walked and the way his last name probably was meant to be pronounced.)

Those were the days when owning a major metropolitan paper, and running it with any degree of skill, was like printing money. The Star and Times went from making about $5 million a year to making something like $30 million to $40 million a year.

The good times rolled for 19 years, until 1995 when Murphy engineered the blockbuster sale to Disney.

Despite Michael Eisner, Disney c.e.o. coming to The Star’s newsroom and saying he did not intend to sell the paper (the morning and afternoon papers had merged in 1990), the paper was on the block a year later.

We employees felt things would get back on the right track when Knight Ridder, a respected, all-newspaper company, purchased The Star and the other papers Disney had picked up with ABC.

Things went along fairly well for several years, but then in 2006, Knight Ridder — pressed by an unhappy, major stockholder — decided to sell out. That’s when McClatchy, which owned a majority of its papers in California, bought the Knight Ridder papers for $4.5 billion and took on $1 billion in debt, including the $199 million cost of The Star’s glass printing plant that opened the year of the transaction.

**

By then I’d had enough. We were coming under new ownership for the third time in 10 years, and while I didn’t see on the horizon the precipitous decline that ensued (not only with The Star but at most major metropolitan dailies) the future looked cloudy to me.

It turned out I left at the most fortuitous time: Two years later the layoffs started, and they continued for 11 years, until 2019. Had I stayed, there would have been no sheet cake and pizza party for me; I would have been unceremoniously bounced like scores of other employees, I feel sure.

The trend Tom Murphy started in 1977 picked up steam in the 1980s, with such legendary papers as The Courier-Journal, owned by the Bingham family, and The Des Moines Register, owned by the Cowles family, being sold to the nation’s largest newspaper chain, Gannett.

Now, the journalistic landscape is littered with papers, like The Star, that are shells of their former selves.

I don’t blame Tom Murphy for what transpired. If it hadn’t been he, it would have been somebody else. And, like I say, he believed in putting out quality products that made good money because they were well managed.

Moreover, I feel sure he never envisioned the day when hedge funds would own slews of newspaper, including The Star.

**

Tom Murphy was a brilliant businessman, and we who worked for him — indirectly — had a good run under Cap Cities.

My only regret is that sometime back in the mid- to late-1980s, during a period when the stock market was languishing, I sold all my Cap Cities stock. Of course, the price soon jumped back up and continued its meteoric rise. I left a lot of money on the table.

I made another financial mistake in 2006 when, despite those clouds in the crystal ball, I bought thousands of dollars of McClatchy stock, only to see it plunge to a fraction of its per-share value in a few years.

I learned from those two mistakes, though, and will leave you with this tip:

Buy NYT. You don’t have to bother to look up what the stock-market experts have to say. In a sea of tattered and torn newspapers, that is one that has consistently been good and is one of very few that remains family controlled.

The Sulzbergers would never have sold to Tom Murphy. They might be the only newspaper people who are as smart today as he was back then.