Dow Jones Dumps Its Wall Street Journal Publisher and Kicks Her Husband, the Company’s CEO, Upstairs Temporarily to Chairman, Wall Street Rejoices With A One-Day 10% Share Price Increase And With Knight-Ridder For Sale, Traders May Finally Be Seeing Some Results They Like From US Newspapers.

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All Wall Street Really Wanted to Finally Rocket US Newspapers Shares Up Was Some Good News, And This Week, Finally, The Industry Delivered. And so Did Wall Street
First it was the New York Times that reported, unexpectedly, that its November advertising revenue grew 5,8% from November, 2004. Then the Wall Street Journal announced a 34.3% gain in classified advertising from the same month a year ago. Sure, this year there are the Saturday editions but it was clear to Wall Street that something positive was happening.

US Newspaper Executives Tell Wall Street This Week Their 2006 Prognosis But the Real Story is That Knight-Ridder Won’t Be Presenting – It’s In the Midst Of Being Forced to Try and Sell Itself -- And That’s the Real Future That Many of Them Don’t Want to Talk About!
When the major US publishing companies give their various reports to the 33rd annual UBS Media Week Conference and to the Credit Suisse First Boston media meeting this week the shadow of who is not there will be overwhelming. Knight-Ridder’s prognosis is already known – its three main shareholders want it sold to gain shareholder value, and many of those other newspaper companies – especially those without family protection on their shareholdings – fear they could soon be in the same boat.

New York Times Company and Knight-Ridder Announce Further Layoffs Based on Glum Advertising Forecasts Triggering Major Sell-Offs As Major US Newspaper Groups See Their Shares Sink Below 52-Week Lows
It was only last May that the New York Times Company announced 195 layoffs so another internal “Arthur” and “Janet” note this week so soon afterwards announcing another 500 employees are to go – 4% of its workforce -- has rocked the US newspaper establishment. “Arthur” is Arthur Sulzberger Jr, chairman of the New York Times Company and publisher of the New York Times, and “Janet” is Janet Robinson, president and CEO. When they talk of hard times ahead the whole industry shudders.

Online Revenues Shine While Print Revenues Fade as Two Large US Media Groups Prove Their Internet Investments Were the Right Thing to Do
The New York Times and Dow Jones both made large Internet investments this year, and already they are successfully impacting the bottom line, with online ad revenue increasing for each company in excess of 25%, according to the Q2 earnings reports. Print, on the other hand, showed a low single digit increase at the Times and a decline for Dow Jones.

The REAL Story Behind Wall Street Journal Europe’s Planned Switch to Compact is NOT the Cost Savings, Or the Size of the Newsprint
It’s A Whole New Philosophy of Establishing a Truly Integrated Multi Platform 7/24 News Operation.

Could this mark the beginning of the needed shake-up in US newspaper senior management that results in Wall Street seeing a brighter financial future for the industry?

Dow Jones has spent the last year reducing costs. It extricated itself from its CNBC partnership, it reformatted its European and Asian WSJ products to compact size, cutting overseas staff at the same time, but it also invested by starting a Saturday WSJ edition and it bought Marketwatch.com for some $410 million.

But the newspaper’s circulation fell 1.1% to 2.1 million even though its subscription Internet service continued to do well.

But for all that there was no clear strategy for the way ahead. By appointing the current chief operating officer, Richard Zannino, as ceo effective February 1, and not replacing the WSJ publisher, the company was sending Wall Street a signal that its future plans called for closer integration between electronic media and print.

And Zannino is well known and respected on Wall Street. He has held a series of high-powered financial jobs at major companies like Liz Claiborne and Saks 5th Avenue and he is a known quantity. Dow Jones shares rose 10% on the announcement, whereas Knight-Ridder shares rose only 3% when its largest shareholders asked for the company to be sold..

But don’t feel too sorry for current Dow Jones ceo Peter Kann or his wife, Karen Elliott House, senior vice president and publisher of the WSJ. Kann gets to be chairman for one year until he reaches mandatory retirement at age 65. Ms. House, 58, will continue, for two years after her departure to be drawing her regular remuneration including all bonuses (and reportedly then some), plus various share options and the like meaning her package is worth several million dollars for her 32 years employment with Dow Jones.

It shows that Dow Jones is generous to its former senior management. It also shows what it is willing to pay to get that new management strategy in place quickly.

The Wall Street Journal is suffering from weak financial and technology sector advertising. Once Zannino takes over he is likely to merge the advertising sales force for online and the newspaper, or at the very least if two sales forces are maintained ensure there is cross media selling and proper incentives for the sales people to sell both services via a joint rate card, and to establish various advertising packages combining both mediums.

It is very likely the current senior vice president for electronic publishing will also be named as publisher of the Journal, cementing the relationship between the two sectors.

The move also probably puts an end to the speculation that the Bancroft family would sell Dow Jones. They have always said they had no such intention but from time to time the share price would go up whenever the market thought a sale might be in the cards.

By appointing a new ceo who has put forward a strategy of closely aligning print and the Internet activities the Bancrofts will give Zannino the time he needs to make such a strategy a success.

House, in her final “Letter from the Publisher” published last week in the WSJ gave some indications of the changes ahead. The Journal will finally reduce its size to the industry-standard broadsheet, a move perhaps prompted by an expected 12% increase in newsprint costs this year.

She said the new compact European and Asian editions have received “overwhelmingly positive reader reaction” but no firm statistics have been published yet on circulation or advertising gains. Both editions are promoting integration with the web site by pushing readers to the online site for further updates or additional information on stories. She said the Saturday edition of the Journal has also met with “widespread approval”.

The question now becomes that since one family-controlled newspaper empire has taken steps to improve the bottom line through a unified strategy can other similar companies be far behind. Think New York Times whose shares have been languishing near 52-week lows for most of the past 12 months, and the Washington Post. In both cases founding families have a special class of shares that give them control of the company.

Meanwhile back to Knight-Ridder. It has received preliminary bids from several bidders including the Texas Pacific Group and a group combining Blackstone Group, Kohlberg, Kravis & Roberts, and Providence Equity Partners Inc. Two newspaper companies -- Gannett and McClatchy - have expressed interest. The final selling price if a deal can be struck will likely exceed $4 billion.

Knowing venture capital companies are mostly interested in reducing costs within their investments so they may be sold at a large profit, the Newspaper Guild-Communication Workers of America put in a bid for those newspapers that have union affiliation. But the company turned down the offer saying it would consider bids only for all its assets.

Ridder, 65, has no special class of shares to protect the company that bears his name. But with his current holdings of about 670,000 shares worth some $43 million and options for another million shares that the board could vest immediately in case of a sale he will not exactly be hurting on the way to the bank.

Dow Jones Dumps Its Wall Street Journal Publisher and Kicks Her Husband, the Company’s CEO, Upstairs Temporarily to Chairman, Wall Street Rejoices With A One-Day 10% Share Price Increase And With Knight-Ridder For Sale, Traders May Finally Be Seeing Some Results They Like From US Newspapers.

They're Out!

He's In!