How is a Newspaper Different from a Donut?

Okay, I already see that glazed look.  Extend the metaphor as you best like, remembering the all-important hole, the sugary coating, the consume-on-the-run characteristics, stories produced on assembly lines, etc. No Krispy Kreme jokes, please.

I've been thinking about this unusual question since I saw the mid-December story on Dunkin' Donuts being sold. Like most Left Coasters, I always thought of Dunkin' Donuts as something quaint, a prehistoric Starbucks, found in odd corners of New England. You gotta love the New Haven train station that has not much of anything -- except two Dunkin' Donuts, one on each level.

There was the NY Times story on the Dunkin Donuts sale:  "Three Firms Near  Deal to Buy Dunkin' Donuts for $2 Billion." Thomas H. Lee Partners, Bain Group and the Carlyle Group, three private equity companies, were teaming to buy the 600-store chain, which had its humble roots in a single store in Quincy, Mass., in 1950. I don't usually follow private capital a lot, but in my reading of the Journal and the Times, it's been hard to avoid. Other headlines have trumpeted how the companies are "awash in capital" and eagerly seeking targets of opportunity.

How awash has become painfully clear to those who care about the news trades, perhaps not quite as humble as the donut craft, but close. After PCM Capital Management pushed for a sale of Knight Ridder* on Nov. 1, the venture companies began to circle. Now with initial expressions of interest in, the potential buyers include the troika of Blackstone, Providence Equity and Kohlberg Kravis Roberts and such un-Gannett-like names like  Texas Pacific Group, Thomas H. Lee Partners, Madison Dearborn Partners and Spectrum Equity Partners. 

The smart buy-low, sell-high money is clearly intrigued. (And who knows,  Lee Partners could own both donuts and newspapers!)

What this means for newspapers -- and far more importantly, their readers -- is largely uncharted.

Observe the  history of our donut friends. Since starting as a mom-and-pop concern, Dunkin' Donuts, it's moved through a number of purchases and reorgs within conglomerates (its sisters are Baskin-Robbins and Togos).

Follow the history in the Times:  "Purchased in 1990 by Allied Lyons, whose forerunner, London-based J. Lyons & Company, had purchased Baskin-Robbins in 1973. In 1993, Allied Lyons Retailing was formed to integrate Dunkin' Donuts, and Baskin-Robbins.

Allied became Allied Domecq Retailing in 1993 when Allied partnered with Pedro Domecq, the leading spirit company in Spain and Mexico. Togo's joined the portfolio in 1997."

Is this the future of newspapers? To be tossed into and out of equity pools, rightsized, streamlined, pruned and preened for the next sale? To be in a portfolio of dog food companies, direct mail concerns and maybe, appropriately, waste management outfits?

Freedom Newspapers was the first major company to see private equity investment, a 40% stake bought by Providence and Blackstone in 2003. Knight Ridder's drama will be the next to play out, but it's clearly still an early act.

Is there anything inherently wrong, or worse, with private equity buying out public companies? Not necessarily, depending of course on who's running the private equity and who's running the public companies.

What's made Knight Ridder special over the years, to a greater degree than some (though not all) of the other public newspaper companies, is that those running it understood it wasn't just another public company.

What's the goal of any management of any public company? It's simply to maximize financial results for shareholders. The better newspaper companies, though, have understood the public trust to be built into their missions, into their very DNA. For those of us who managed newsrooms, we came to understand the tension that came with the job. You had to do the best by the company, as a profit-making concern, and you had to do the best by the readers. It is a delicious tension, one that we are lucky to be able to work through. It's not one though shared by many others in many other industries. It's not one that may survive as the economic prospects of newspaper companies (as we know them) decline, and the rubber band breaks.

A few companies -- the Times, the Post, the Journal -- created a two-tier share structure, which allows them to manage the tension differently, and for now, better. We all, those who have labored in the trade and those who have enjoyed the fruit of it as readers, are going to have to get more involved in coming up with new ideas about ownership, structure and the public trust.

While America may not care much about who owns and manages the companies behind our donuts, sandwiches and ice cream scoops, we must start asking more insistent questions -- and looking for better answers -- as public-interest newspapers fade into a private, all-it's-about-is-profit world.

*Disclosure: Ken Doctor is a retired Knight Ridder journalist and retains financial holdings in the company.