Hedge funds grab withered local newspapers under COVID-19 cuts
If things weren’t going well for the local newspaper industry before the pandemic, COVID-19 may have officially brought it to its knees.
Over the past few years, the newspaper industry has been slowly taken over by deep-pocketed financial firms that believe they can cut costs, move to digital distribution, and generate better returns. Now, as coronavirus-induced layoffs multiply in local newspapers, journalists and industry watchers fear the pandemic could pave the way for further consolidation.
Chatham Asset Management, the New Jersey-based hedge fund best known as owner of the National Enquirer, announced over the weekend that it had reached a deal to acquire McClatchy, the nation’s second-largest newspaper publisher.
The acquisition comes after last year’s mega-merger of powerhouse Gannett, which owns USA Today, the Arizona Republic, the Detroit Free-Press and dozens of other newspapers, with the publishing giant GateHouse Media – an agreement that 1 in 5 daily under control of New Media Investment Group, a hedge fund.
Another private equity firm, Alden Global Capital, owns a stake in Tribune Publishing, which publishes newspapers such as the New York Daily News and the Chicago Tribune.
“Newspaper acquisitions by hedge funds are usually followed by aggressive, for-profit austerity measures, in particular job cuts,” said Victor Pickard, professor at the Annenberg School for Communication at the University of Pennsylvania. “This is bad for journalists, bad for media diversity and bad for communities at a time when we desperately need more local journalism, not less.”
Download the NBC News app for the latest news and politics
McClatchy, which dates back to 1857, serves nearly 30 communities and has historic titles such as The Kansas City Star, The Sacramento Bee, and The Miami Herald – which unveiled the story of Jeffrey Epstein.
Julie Brown, the Herald investigative reporter who spent years doggedly pursuing Epstein, said staff were worried about the newspaper’s future because McClatchy had already cut the newspaper to the bone.
“We hope they understand that the time has come to invest in local journalism, not to keep slashing and burning it,” she said.
But it remains to be seen whether Chatham will continue to support expensive journalistic research projects as it seeks to increase margins – and where any editorial bias will lie.
“For me, it took a local newspaper to have the courage to do [the Epstein story]. I wonder if Chatham, given that he owns the National Enquirer, would ever have hired us to do a story like that. killed several stories who portrayed Donald Trump unfavorably in the 2016 election.
Chatham, who has previously pledged to McClatchy as a creditor and shareholder, was one of only two buyers at the Chapter 11 bankruptcy auction for the beleaguered news publisher.
“As long-time investors who support McClatchy, we are pleased with the outcome of the auction. Chatham is committed to preserving the jobs in newsrooms and independent journalism that serve and inform local communities during this important time, “Chatham said in a statement.
As the pandemic continues, readers and viewers alike are researching their local media and increasing their audiences. The New York Times added 600,000 subscribers in the first quarter of 2020, exceeding 6 million, the newspaper reported. According to a recent Pew survey, 46% of those polled sought information on COVID-19 from local sources.
“We are seeing a doubling of the local media audience because local media is a place people turn to when something like COVID happens. National reporting only gets you so far,” said Ken Doctor, information industry analyst at the Nieman Lab at Harvard. University.
And yet, in the first weeks of the pandemic, 36,000 information industry workers were laid off or laid off or suffered pay cuts, according to the New York Times.
Rich Zahradnik is President and Founder of Pelham Examiner, a student-run and owned digital local news destination that replaced local newspapers that had closed in Westchester, a suburb of New York City.
“There is a lot going on in local government,” Zahradnik said. “The planning councils decide what is built next to you. The village councils decide if the garbage should be picked up. They oversee the police. There are a lot of people who want to sit in their basements and write about Trump, but bloggers in the basement won’t cover planning advice, and without being watched – and I don’t think everyone is dirty – there will be corruption. And there is a lot of ‘money in local government. “
Ultimately, finding readers isn’t the problem – finding income is.
“The problem hasn’t been the public. It’s the publicity lost to Google and Facebook,” Doctor said. While readers used to browse the classifieds for a local plumber or a new home, they are now searching online. It devastated newspaper revenues, leaving the door wide open for “vulture capitalists,” like Pickard, of the Annenberg school, called the investment firms that buy out struggling newspaper publishers.
The McClatchy acquisition represents the end of family ownership among local news companies, Doctor said.
“One of the first questions will be: what are they doing with the CEO? Will they retain current CEO Craig Forman or will they choose theirs? And who they choose will tell us a lot about the strategic direction of the company, ”he said.