Knight Ridder's Knight In Electronic Armor?

James K. Batten knows one newspaper story so well he could knock it out in his sleep: Advertisers are placing fewer classified and help-wanted ads in papers. Retailers and airlines are going bankrupt, and their display ads are vanishing with them. For Batten, a newspaper reporter who rose to become chairman and CEO of Knight-Ridder Inc., it means another miserable year for his industry. Third-quarter profits at Knight-Ridder, the nation's third-largest newspaper chain, plunged 23% from last year.

So why hasn't Batten lapsed into the pessimism of many old newspaper hands? For one thing, he's just back from Europe, where Knight-Ridder is aggressively marketing its financial-information service, MoneyCenter. The service, which transmits financial data and news from the company's own financial newswire, is one of several data services offered by Knight-Ridder. Batten thinks he can become a formidable player in this business because "what's carried us so far is being good at news."

HELP NEEDED. Indeed, Knight-Ridder's reputation is still rooted in its 28 daily newspapers, which include The Philadelphia Inquirer, The Miami Herald, and other Pulitzer prize winners. But with ad linage way down at most of them, Batten wants to make Knight-Ridder less dependent on the fortunes of the newspaper business (charts). Newspapers still account for 86% of the Miami-based company's $2.3 billion in revenue. By 1993, though, Batten says business-information services will contribute 21% of sales.

It's a risky strategy: MoneyCenter is a distant third in a business dominated by Reuters Holdings PLC and Dow Jones & Co.'s Telerate service. Moreover, the industry's growth has slowed as such customers as banks and financial-services companies have undergone a sharp contraction. Skeptics also point to Dow Jones's tribulations with Telerate. It shelled out $1.6 billion to buy the company, which has since been pummeled by rival Reuters.

Similarly, Knight-Ridder has been investing heavily in information services. It paid a hefty $353 million in 1988 to buy Dialog, an on-line data base. But the company's business-information revenues grew just 7% in the first nine months of 1991, down from 14% in 1990. And some analysts say Knight-Ridder is still too small to compete effectively."If they want to be a global player," says Dennis Waters, publisher of industry newsletter Inside Market Data, "they need to grow much more rapidly."Still, Knight-Ridder has avoided several missteps. Unlike Telerate, it has preserved MoneyCenter's technological edge by unveiling new software that alerts subscribers to smart trades made in the markets. And Knight-Ridder financed the Dialog deal by selling its eight TV stations at the peak of the market, at a net gain of $67 million. What's more, a recent stock offering opens the way for more acquisitions.

MIDAIR REPAIR. Batten may have little choice but to plunge deeper into information services. Revenue at Knight-Ridder's newspaper division was down 9% in the first nine months of 1991. The Herald, its hometown paper, is being battered by a loss of retail advertising and competition from Tribune Co.'s Sun-Sentinel in nearby Fort Lauderdale, Fla.

Faced with similar challenges in several markets, Batten is trying almost anything to keep his papers competitive. At the St. Paul Pioneer Press, for example, Knight-Ridder is trying to expand the newspaper's advertising reach with an experiment called AdLab. The program produces an "advertorial" health magazine and sponsors trade fairs and events linked to the paper. If it is successful, it could be expanded to other Knight-Ridder papers.

The company is also retraining its sales staffers. The idea is to make them more persuasive with clients who might otherwise shift ads into direct mail or other more targeted media. At The Charlotte Observer, ad sales reps can now grant advertisers an instant credit of up to $1,000 to compensate for errors in ads. Newspaper chains generally haven't invested much in such sales services, but the current ad crisis is forcing many to rethink their most basic approaches. "We're repairing a 747 at 39,000 feet," concedes Jerome S. Tilis, vice-president for marketing. The changes go much further than how ads are sold. Among its long-range projects, Knight-Ridder is studying "tailored newspapers." For example, the company would add an editorial section on "parenting" to papers distributed to households with children.

Knight-Ridder is also scrambling to win over an increasingly elusive readership: time-pressed baby boomers, many of whom don't read newspapers regularly. In Boca Raton, Fla., Knight-Ridder spent $3 million to produce a boomer-friendly newspaper. Among its features: front-page articles that don't jump to inside pages, splashy graphics (including a pink flamingo on the masthead), and easier-to-read classified ads and movie listings. Despite three price hikes, the paper's circulation is up 2% on weekdays and 6% on Sundays. "In an industry not known for strategic planning," qays newspaper analyst John Morton of Lynch, Jones & Ryan Inc., "Knight-Ridder has moved to the forefront."

But the flurry of activity is not without its critics. Newsroom staffers fret that Knight-Ridder will try to impose the Boca Raton formula on its other papers. Some have also been rankled by Batten's habit of referring to readers as "customers" -- especially since he's a former newsman. Jennie Buckner, Knight-Ridder's vice-president for news, insists that Boca Raton isn't the model for the rest of the chain. But she does want to make its papers more reader-friendly.

HIRING FREEZE. Editorial staffers also worry about the company's relentless cost-cutting, which some say threatens its lustrous editorial reputation. At The Philadelphia Inquirer, for example, no new reporters have been hired in over a year. "We've had to look at everything we do and avoid hitting an artery," says Deputy Editor Gene Foreman. Former staffers also say a new $300 million color printing plant, set to open next year, should have been up and running years ago. Batten concedes that the plant could have been built sooner.

Knight-Ridder will certainly have to be nimbler in the future. A recent U. S. Supreme Court decision to allow the regional Bell phone companies to enter information services means even more rivals. To stay ahead, Batten is already exploring services such as electronic classifieds. One idea: providing a code with newspaper stories that allows readers to get more information by phone or computer. At the same time, Batten is chary about repeating the mistakes of Viewtron, a primitive videotex service that folded in 1986, after costing Knight-Ridder $50 million. Viewtron failed in part because customers had to use a costly and complex keyboard.

Still, with few media observers forecasting a quick rebound in ad spending, Batten is unlikely to stop innovating. Says Rolfe Neill, publisher of The Charlotte Observer: "Jim Batten knows we have to make the cash register ring in order to do the journalism we want to do." For a newsman who has exchanged deadlines for bottom lines, striking that balance will be no mean feat.

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