Knight Ridder may reorganize Net business

Knight Ridder, the nation's second-largest newspaper publisher, is considering a restructuring of its Internet business--largely to benefit from the hefty premiums that Wall Street is attaching to Net properties, CNET News.com has learned.

One plan calls for combining Knight Ridder's new media businesses--from its new media arm and newspaper holdings--into a separate business line, so it can take advantage of these valuations and better compete against other Internet companies, sources said. The plan is being actively discussed internally, both in meetings and in memorandums.

The sources cautioned, however, that no decisions have been made on timing or a financial structure, such as offering an IPO, spinning off the unit or issuing a tracking stock. In coming months, Knight Ridder will draft a restructuring proposal, seeking input from its managers.

A Knight Ridder corporate representative declined comment except to say, "We constantly explore options for our businesses," and no announcement is imminent.

If it goes forward, Knight Ridder would join other media companies including the New York Times Company, Forbes, and Time Warner in exploring these options. The rapid growth of the Internet has forced established media companies to rethink their business plans, both to expand and to keep start-ups from eroding their circulation and revenue base.

Disney and NBC already have launched plans to highlight their Internet holdings, largely to capture the valuations placed on Net companies by Wall Street.

Analysts think such a restructuring would be overdue at Knight Ridder, which began electronic publishing in 1993 but has yet to maximize the value of its Web holdings. In the meantime, Internet companies have launched that have eroded Knight Ridder's classified advertising revenues and hired away some of its editorial talent.

"The New York Times, Forbes, and Business Week have aggressive strategies in terms of putting a lot of effort, assets, and money toward [Internet] initiatives," said Jill Frankle, analyst for Gomez Advisors. "Knight Ridder is a big media company, but I don't think they've been as aggressive."

Knight Ridder's Internet businesses include its new media arm, Knight Ridder New Media, as well as new media operations at individual newspapers, such as the San Jose Mercury News.

Knight Ridder New Media includes 27 online local sites. In October 1997 Knight Ridder introduced newspaper and city-resource sites dubbed Real Cities. But newspapers such as the Mercury News also have launched sites of their own, such as SiliconValley.com, which focuses on technology news.

Last month, Knight Ridder launched an expanded network of local Web sites under the Real Cities umbrella. It also has beefed up its new media management ranks.

Media companies, including the New York Times and Forbes, already are struggling with the restructuring of their Internet businesses, not only from a financial but also from a personnel perspective.

Many longtime workers worry about being excluded from the financial benefits that come with a restructuring, such as the granting of stock options and other perks. In some cases, online staffers are being labeled "option-aires" by disgruntled print workers.

Another issue concerns choosing which editors will run these businesses.

News.com's Jeff Pelline contributed to this report.