By Stephen Mayne, candidate for the Fairfax board

As Fairfax journalists and critics continue to lambast the company for
its latest cost cutting moves, perhaps they should consider what is
happening at US newspaper giant Knight Ridder.

The company’s largest shareholder, Brian Sherman’s Private Capital Management, has written this extraordinary letter to the board demanding that they sell its newspaper chain due to the bleak outlook for the industry.

“In light of limited
revenue growth across the newspaper industry and the difficulties the Company
has faced in realising the fair value of the Company for its shareholders, we
believe the Board should now aggressively pursue the competitive sale of the
Company,” the letter from the 19% shareholder read.

“In our view, the actions taken to date have not adequately
addressed a number of significant issues facing the Company, including (i)
continuing consolidation among traditional sources of print advertising revenue;
(ii) the redirection of advertising dollars to other media; (iii) the Company’s
unexceptional operating margins; and (iv) the Company’s lack of a nationally
read paper capable of being leveraged in the online market.”

Ouch, that’s got to hurt. The problem is, who would buy it? Even the
Murdoch family dumped their direct newspaper stake in Queensland Press
last year in exchange for more News Corp shares, which now relies on
newspapers for less than 15% of earnings.

Fairfax journalists are planning a concerted attack on the board at the
AGM on November 18 for failing to come up with an adequate strategy to
deal with the internet threat. However, is there a newspaper company in
the world that has got it right?

Some problems don’t have an obvious answer and Fairfax is indeed facing
severe structural challenges. They could start buying internet
businesses “willy nilly” like News Corp, but this has done nothing for
its share price either.