Remember Baghdad Bob? He was the Iraqi press spokesmen who caused much amusement in the West because of his unrealistically upbeat pronouncements when Iraq was invaded by the United States and its allies in 2003. Among Baghdad Bob's funnier announcements was his declaration that no Americans were in Baghdad at the same moment when American troops were patrolling the streets of that city just a few hundred yards from where he was holding that press conference. Well, the newspaper industry has its own Baghdad Bob in the form of McClatchy CEO, Gary Pruitt, who in early 2007 gave his own unrealistically upbeat reports to his company's employees on the purchase of Knight-Ridder in 2006. That purchase quickly turned into an utter disaster as evidenced that the former Knight-Ridder flagship newspaper, the Miami Herald, is now being put up for sale by McClatchy. Below are a few excerpts from the 2007 video of Pruitt performing his Baghdad Bob routine including a bizarre invocation of that great "philosopher," Lenny Kravitz:
Hi. I'm Gary Pruitt, CEO of McClatchy. This has been a busy year for all of us and I haven't been able to meet with as many of you as I'd like. I hope to start changing that. But for now I would want to spend a few minutes here talking to you about our company. Where we've been and where we're headed. Let's start with last year. Conventional wisdom is that 2006 was a catastrophe for the newspaper industry. That's just not the case.
"In Umm Qasr, the fighting is fierce and we have inflicted many damages. The stupid enemy, the Americans and British, failed completely. They're not making any penetration."
McClatchy posted advertising revenue growth for the first three quarters of the year and a decline in the fourth quarter. For the full year on a same paper basis, ad revenues grew 0.5%. Not a lot but nonetheless our fifth consecutive year of growth and our sixth consecutive year of outperforming the industry average. Print circulation fell but the total audience for all of our products grew when you factor in our increasingly popular websites.
"They are not any place. They are on the move everywhere. They are a snake moving in the desert. They hold no place in Iraq. This is an illusion."
Of course, one of the biggest events in our company's history occurred last year when we acquired Knight-Ridder. Unfortunately our deal corresponded almost precisely with the beginning of the current advertising downturn. Great timing, don't you think? Well, as a result, some people think the Knight-Ridder deal was bad for McClatchy. Don't you believe it. And don't confuse today's challenging operating environment with the deal itself. We would be weathering this advertising downturn even if hadn't acquired Knight-Ridder. In fact, it would be much worse.
"Maybe they will enter Umm Qasr and Basra, but how will they enter Baghdad? It will be a big oven for them. They can penetrate our borders but they cannot reach Baghdad. They will try to pull our army and troops out but we are well aware of their plans and they will fail."
Let's look at the facts. First, our cash profits are greater for having done the deal. Second, remember the advertising growth I mentioned earlier? Well, if we hadn't acquired Knight-Ridder, McClatchy would have suffered an advertising revenue decline last year instead of a gain. In other words, the Knight-Ridder papers have improved McClatchy's performance. Third, the Knight-Ridder deal made McClatchy a more formidable internet presence with expected internet revenues of nearly $200 million this year.
"We butchered the force present at the airport. We have retaken the airport! There are no Americans there!"
The new scale of our internet operations also allows us to advantageously partner with large technology companies. We'll be sharing news about this with you as partnerships emerge. Most important, with the Knight-Ridder acquistion, we added thousands of talented colleagues, outstanding newspapers, websites, and specialty publications, and more growth markets to our already strong, successful portfolio. The integration of McClatchy and Knight-Ridder has gone exceptionally well. We are bigger, stronger, more diversified, and more competitive than ever before.
"Nobody came here. Those America losers, I think their repeated frequent lies are bringing them down very rapidly....Baghdad is secure, is safe."
...A big part of the current ad downturn reflects the usual economic cycles we've seen many times before especially in the automotive and real estate categories. But there are more permanent structural changes taking place as well. As the internet matures, it takes share from all other media including newspapers, television, and radio. This process has been underway for a few years and will continue for several more. As a result, we along with all other media, face a more competitive future. At McClatchy we welcome this future with confidence. That confidence comes from operating the leading local media companies and markets growing 50% faster than the national average. Our newspapers are the last mass medium in their markets as other media outlets proliferate and audiences fragment. We operate the leading local internet business in each of our newspaper markets. All of that makes for a powerful combination.
"We blocked them inside the city. Their rear is blocked....They pushed a few of their armored carriers and some tanks with their soldiers. We besieged them and I think we will finish them soon."
...A company that was founded before the advent of electric lights is now one of the most successful internet news companies around. But the primary reason I feel good about the future is you, our employees. Some of the most talented, accomplished, and innovative in our industry. Every day you rise to the challenge presented by a rapidly evolving media world. 24/7 you're moving this company forward. Thank you for that. Because of you, I believe the best days of the McClatchy are still ahead.
Gary Pruitt leaves us laughing with his comedy quote of "philosopher" Lenny Kravitz:
Some of you know I like quoting philosophers and rock 'n' roll songs. Sometimes it's one and the same as with Lenny Kravitz's song from a few years ago, "Dig In." In it, Lenny's saying, "Once you dig in, you'll find it coming out the other side." And once you dig in, you're going to have yourself a good time. So that's my advice. Let's dig in, come out the other side, and have fun doing it. After all, this is our time. Let's live it. Thanks. And, oh, hit it, Lenny!
Somehow I don't think Gary Pruitt would really want to "dig in" to the lastest stock market report on the McClatchy company. Just under $2.50 per share, way down from over $70 as recently as 2005.
H/T: Bob Norman