Previously published at GBH News. It’s rather late in the game to ask whether hedge funds can be stopped from buying up every last one of our local newspapers. After all, about half of us are already stuck with a paper that is owned by, or is in debt to, the likes of Alden Global Capital (Tribune Publishing and MediaNews Group), Apollo Global Management (Gannett) and Chatham Asset Management (McClatchy).
Still, with Alden having now set its sights on Lee Enterprises, a chain that owns 77 daily newspapers in 26 states, we need to take steps aimed at preventing what is already a debacle from devolving into a catastrophe.
So what can be done? Steven Waldman, the co-founder of Report for America, which places young journalists in newsrooms, has some ideas. At the top of his list: redefining antitrust law.
“In general, antitrust law for the past three or four decades has focused on whether mergers would hurt consumers by raising prices or reducing competition,” Waldman wrote recently for the Washington Monthly. “But before that, antitrust regulators looked at mergers more broadly, including whether they would hurt communities. And that’s what needs to happen here.”
Waldman would also provide tax incentives for nonprofit organizations seeking to buy newspapers as well as tax credits to make it easier for news organizations to hire or retain journalists. That latter provision is part of the Build Back Better legislation, whose uncertain fate rests in the hands of Sens. Joe Manchin and Kyrsten Sinema.
“This will strengthen local news organizations of all shapes and sizes, making them less vulnerable to vultures,” Waldman argued. “The legislation could be a powerful antidote to the sickness spreading within local communities.” Trouble is, the tax credits would benefit the Aldens and the Gannetts just as much as they would the independently owned news organizations that are struggling for survival. Still, it seems like a step worth trying.
The problem with hedge funds owning newspapers is that such funds exist solely for the purpose of enriching their investors. Newspapers, of course, aren’t exactly lucrative. But they still have advertising and circulation revenues, even if they are much smaller than they were, say, 20 or 30 years ago. Cut expenses to the bone by laying off reporters and selling real estate, and you can squeeze out profits for the enrichment of the owners.
Alden is notorious for being the most avaricious of the bunch. Which is why shock waves ripped throughout the journalistic community last week when Rick Edmonds of the Poynter Institute reported that Alden — just months after feasting on Tribune’s nine major-market dailies — was making a bid for Lee, whose papers include the St. Louis Post-Dispatch, The Buffalo News and the Arizona Daily Star. (Julie Reynolds, an investigative reporter who has been dogging Alden for years, recently spoke about the hedge fund with Ellen Clegg and me as part of our podcast, “What Works: The Future of Local News,” at Northeastern University.)
Lee’s papers also include the Omaha World-Herald, and therein lies a sad story. The World-Herald was at one time the flagship of hometown boy Warren Buffett’s newspaper chain, which he began assembling in 2012. But despite Buffett’s self-proclaimed love for newspapers, he failed to invest in their future, cutting them repeatedly and eventually selling out to Lee. Now they face the possibility of a much worse fate.
Or not. Several days after Alden offered to buy Lee in a deal valued at $141 million, the Lee board of directors adopted a poison pill provison. As reported by Benjamin Mullin in The Wall Street Journal, Alden — which currently holds about 6% of Lee stock — would be forbidden for the next year from increasing its share above 10%. If nothing else, the move provides some time for other buyers to emerge. Perhaps the chain will be broken up, with some of Lee’s papers being acquired by local owners.
As Waldman suggests, there is nothing inevitable about local news being destroyed at the hands of venture capital. About two and a half years ago, I wrote about The Salt Lake Tribune, acquired from Alden by local interests and converted into a nonprofit news organization. Now, according to Lauren Gustus, the Tribune’s executive editor, the paper is adding staff and resources. “We celebrate 150 years this year and we are healthy,” she wrote in a message to readers recently. “We are sustainable in 2021, and we have no plans to return to a previously precarious position.”
Alden’s acquisition of Tribune Publishing (not The Salt Lake Tribune; I realize there are a lot of Tribunes to keep track of here) was an avoidable tragedy, made possible by a board that placed greed above the public interest. Since closing the deal, the hedge fund has been hacking away at Tribune newspapers that were already much diminished, including the Chicago Tribune, New York’s Daily News and the Hartford Courant.
Yet some good may come out of it, too: Stewart Bainum, a hotel magnate who had competed with Alden for Tribune, is starting a well-funded nonprofit news site, The Baltimore Banner, that will compete with Tribune’s Baltimore Sun. Maybe that will lead to similar efforts in other Tribune cities.
Meanwhile, Lee Enterprises’ newspapers are safe, at least for now. What will happen a year from now is anybody’s guess. But as long as the vulture can be kept outside the cave, there is hope for the millions of readers who depend on a Lee newspaper to stay informed about what’s happening in their community.
6 thoughts on “With Alden on the prowl again, it’s time to stop hedge funds from destroying newspapers”
Interesting point here about antitrust. But a more practical shorter-term and achievable solution presents itself: How about not sending government money to HELP Alden cannabilize local papers for a profit? The very same bill cited here to boost nonprofit alternatives seems like it could be a huge windfall for … Alden, rewarding the hedge fund for cutting newsrooms to a small enough level to qualify for tax breaks for the employees it keeps on, thereby prolonging the process by which vulture capital guts newsrooms to extract remaining value before it’s gone altogether. While I do support stronger antitrust provisions, I also wonder if sometimes (like here) the goal might be to avoid trying to help vulture capital prop up failing business models (chain corporate-owned legacy local, or really regional, for-profit newspapers) and focus instead on the positive of supporting innovative truly local nonprofit and/or subscriber-supported newsrooms
Paul, Alden has wreaked destruction from coast to coast without the assistance of the Local Journalism Sustainability Act. I don’t see how not passing it will help.
I definitely see your point. My concern is whether the big impact of the Act will be to strengthen Alden and other hedge funds and equity fund buyers by subsidizing them at a scale that will dwarf the help given to smaller outlets — and if that prolongs the process by which Alden etc. wreaks destruction from coast to coast by lengthening the time the shells of the former newsrooms are kept on life support so Alden can continue to extra profits. I’m questioning if the Local Journalism Sustainability Act — which has good motives and will certainly help my newsroom, for which I’m appreciative — turns out to be a Hedge Fund-Owned “Local” Journalism Corporate Welfare Act. I know I could be wrong about this! I applaud everyone’s efforts to find a government solution to the changes in the news industry (and I admit I mourn the passing of some of the chain owned corporate for profit dailies less than others do, as long as more local public-interest alternatives exist). I just wonder if this is a case of unintended consequences that cause more harm than good.
Paul, you’re right to be concerned. I share those concerns. I’m willing to see how it plays out, but it could be exactly as you say.
And I do appreciate the advocacy you and others have engaged in to save local journalism. It could definitely NOT work out the way I’m predicting at all! Thanks for leading the fight; I’m sorry if I come across as negative.
Another way to put it: This excellent column seeks a way for government to intervene through antitrust to stop Alden from buying dying papers (often in favor of less venal corporate chains that bleed the newsrooms to death more gradually with no more commitment or connection to local communities). I do hope that very idealistic goal succeeds. In the meantime, it seems simpler and more immediately achievable to STOP government from intervening to HELP Alden and co. prosper by taking over dying papers. How in the world does a well0intentioned bill like this end up sending the biggest checks to Alden, Gannett, Hearst, etc.? If we can’t figure out how to avoid that, it seems even more challenging to figure out how to rewrite antitrust law (indeed a worthwhile goal) to prevent vulture capitalists from preying on newsrooms.
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