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McClatchy's Gary Pruitt Scales The AP Mountain

|Includes:GCI, The McClatchy Company (MNI), PSO, TRI

Associated Press board members -- the newspaper CEOs who populate the board -- opted for one of their own when they picked McClatchy CEO Gary Pruitt as their new leader .

By historical measure, it's a strange move. A large newspaper company CEO is captain of his own ship, at a pinnacle of American company life and compensation. The Associated Press, on the other hand, has been something else indeed, a wire, about as unsexy as a news company can be. Retiring CEO Tom Curley came over to AP from his role as publisher of USA Today almost nine years ago. It's been a helluva nine years of transformation, of turning the quite traditional company he inherited from long-time head Lou Boccardi into a modern news company. He got it part way there.

Now Pruitt takes the baton, as most reports paint a picture of night falling on one of America's oldest industries. The Council of Economic Advisers has reported that the press is"America's fastest-shrinking industry", measured by jobs lost," and the Financial Times headlined its recent newspaper round-up, "Bleak outlook for US newspapers."

Why do it? Why trade in the sleepiness of California's capital city (Sacramento is McClatchy's headquarters) for the bright lights of Broadway, a long walk from AP's NYC offices?

Number one on list may be McClatchy fatigue. Pruitt and his CFO, now-successor Pat Talamantes, have rowed the third-largest U.S. newspaper company oh-so-gingerly around the bankruptcy shoals that have grabbed more than dozen of their peers. They've had to make devastating cuts in staff and other expenses along with other companies, but get some points for greater efforts to keep newsroom size and spirit going in the face of that bleak reality. It's important to note that McClatchy has found no special sauce in transforming itself for the digital age, performing on par, sometimes better, sometimes worse, than its peers. Pruitt is getting this job not on the basis on being a proven transformative player, but on being a known, highly respected news exec who understands the challenges of the times.

Almost exactly six years ago, Pruitt seemed like a big hope for higher-quality, newspaper journalism in the transitional print/digital age. On March 6, 2006, which seems like two eternities ago, McClatchy bought Knight-Ridder, then the second-largest newspaper company in the country, and my work home for 21 years through 2005. Though Knight-Ridder's quick demise was shocking, Pruitt's commitment to journalism was reassuring. I remember the conference call the company did to tout the purchase, and the optimism and commitment in Pruitt's voice:

"Opportunities like this come perhaps once in a company's lifetime, and we're thrilled to have this chance to extend McClatchy journalism and our proven newspaper operations to 20 high-quality newspapers in high-growth markets. Our two companies operate in the finest traditions of American journalism, devoted to independent, public interest reporting and the highest ethical values. Combining the two creates a company particularly well-positioned to lead the way in a changing media landscape. It's truly a chance for McClatchy to do more of what it does best."

We hoped Pruitt would become a strong public leader for those values in this difficult age. Fending off bankruptcy, challenged by new non-family shareholders and consumed by month-to-month survival, that leadership went underground. There was little percentage in asserting journalistic values in that environment, it seemed.

So now: AP. Certainly, the company owns its own set of life-and-death challenges. The non-profit cooperative, owned by newspaper companies, is still somewhere betwixt and between a wire and a global media company.

One thing Pruitt trades in: a non-national company of diverse properties for a worldwide media play. In a word: Scale.

AP is one of the Digital Dozen companies I wrote about in the Newsonomics book. The digital business is all about scale: do something better than others and then take it out, at very low incremental costs, to the rest of the world. The Wall Street Journal, BBC, the New York Times, Bloomberg, Guardian and a half dozen others fit that definition; many will be the winners when we look back from 2020. Yet AP isn't in that league.

Though only about 20% of its revenues these days (down from 40% when Tom Curley arrived in 2003) are paid by member newspapers, those newspapers control the direction of the non-profit company. Understandably, member/owners haven't wanted AP to directly compete with them in the digital, death-of-distance age, but they've often been far stronger in what they didn't want AP to do, than in what they wanted it to do.

AP's been essentially a B-to-B company, with one of its prime customer revenue bases eroding so quickly. AP has made up part of that deficit by selling national content to web portals and upped its broadcasting and global businesses, but, like its owners, it has had to cut. The company's made smarter investments in mobile lately, revamping what had been ho-hum, if early-to-market, iPhone and iPad apps. Those products offer glimmers of hope that the power of AP, and its members, can be realized by consumers. Mobile is the only area in which AP is going direct to consumers, with the goal of being the go-to site for news in the U.S. That's a tall goal, with lots of competition.

So what should be at the top of Gary Pruitt's to-do list?:

  • In one word: Leadership. Yes, a sky (print) is falling. Yet, we've never more needed strong, courageous leadership in the news industry. What journalists -- and not just those employed by daily newspaper companies -- do is hugely importantly to their democracies and their communities. Tom Curley tried to make those points; too often his comments were received as those of the Old Guard simply trying to hold on. It's not easy to change the conversation, but before the public, Congress and the industry, Gary Pruitt must step forward with an optimistic, inclusive view of the future of the news business.
  • Embrace Big Story storytelling: Check out the new Big Stories section on the new AP Mobile app. It only contains five topics now, but its larger principle is important. AP is probably the second-largest company, by staff, in the world, with about 2700 journalists, second to Reuters' approximate 3000. It made its reputation of getting it first, globally. That's still vitally important. Yet, its ability to move beyond a commodification of sorts -- for publishers, taking AP's first story, then come behind it with a deeper story -- is essential if it's going to climb the mountain of value and charge more. As AP escapes from the age of Last In, First Out into a web of greater contextual value to its business and consumer customers, the more it can claim a place in that Digital Dozen.
  • Master advertising: McClatchy is an advertising company; AP's not. AP, if it is to be global player, needs to develop and bring in-house -- quickly -- advertising chops. Yes, its content-buying customers will sell their own advertising, but AP needs capacity to do that same, and not be wholly dependent on those buyers to create -- and share value.
  • Leverage global connections: The world's news agencies employ 10,000 or more journalists among them. Collectively -- if they were working even more closely together -- that would be the largest journalistic workforce on the planet. Finding ways to leverage more and more any journalistic synergies (technology can help here) is an opportunity AP's competitors don't have. Some of those news agencies have found more alternative funding sources than others, though all are struggling with their core businesses. Learning from them is essential.
  • Play paywall pool: With Lee's embrace of paywalls, we're now seeing pay systems become the default at U.S. dailies. Paywalls aren't only a digital circulation revenue move; they reconfigure customer relationship and should force re-thinking of product portfolio. Consequently, figuring out where AP fits into the new paywalled world (and as more than in-front-of-the-wall, bulk-up-the-free content) has suddenly increased in priority.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: MNI, GCI, PSO, TRI