Alden Global Capital – Page 6

From COVID to our crisis of democracy, 2021 turned out to be a scant improvement over 2020

Hopes were running high when we all turned the calendar to 2021. Would the worst 12 months in anyone’s memory give way to the best year of our lives?

Not quite. Yes, it was better than 2020, but 2021 was hardly a return to paradise. The joy of vaccinations gave way to the reality that COVID-19 is likely to be with us for a long time. The economy recovered rapidly — accompanied by the highest rate of inflation in 40 years. Worst of all, the end of the Trump presidency morphed into a crisis of democracy that is starting to look as ominous as the run-up to the Civil War.

During the past year, I’ve been struggling to make sense of the highs, the lows and the in-betweens through the prism of the media. Below are 10 of my GBH News columns from 2021. They’re in chronological order, with updates on many of the pieces posted earlier this year. If there’s a unifying theme, it’s that we’re in real trouble — but that, together, we can get through this.

• The end of the Trump bump, Jan. 27. Even as he was denouncing journalists as “enemies of the people,” Donald Trump, both before and during his presidency, was very, very good for the media. Cable TV ratings soared. The New York Times and The Washington Post signed up subscribers by the bucketload. Several weeks after Trump departed from the White House, though, there were questions about what would happen once he was gone. We soon got an answer. Even though Trump never really left, news consumption shrank considerably. That may be good for our mental health. But for media executives trying to make next quarter’s numbers, it was an unpleasant new reality.

• Local news in crisis, Feb. 23. The plague of hedge funds undermining community journalism continued unabated in 2021. The worst newspaper owner of them all, Alden Global Capital, acquired Tribune Publishing and its eight major-market papers, which include the Chicago Tribune, New York’s Daily News and, closer to home, the Hartford Courant. When the bid was first announced, there was at least some hope that one of those papers, The Baltimore Sun, would be spun off. Unfortunately, an epic battle between Alden and Baltimore hotel mogul Stewart Bainum resulted in Alden grabbing all of them. Bainum, meanwhile, is planning to launch a nonprofit website to compete with the Sun that will be called The Baltimore Banner.

• The devolution of Tucker Carlson, April 15. How did a stylish magazine writer with a libertarian bent reinvent himself as a white-supremacist Fox News personality in thrall to Trump and catering to dangerous conspiracy theories ranging from vaccines (bad) to the Jan. 6 insurrection (good)? There are millions of possible explanations, and every one of them has a picture of George Washington on it. Carlson got in trouble last spring — or would have gotten in trouble if anyone at Fox cared — when he endorsed “replacement theory,” a toxic trope that liberal elites are deliberately encouraging immigration in order to dilute the power of white voters. A multitude of advertisers have bailed on Carlson, but it doesn’t matter — Fox today makes most of its money from cable fees. And Carlson continues to spew his hate.

• How Black Lives Matter exposed journalism, May 26. A teenager named Darnella Frazier exposed an important truth about how reporters cover the police. The video she recorded of Minneapolis police officer Derek Chauvin literally squeezing the life out of George Floyd as he lay on the pavement proved that the police lied in their official report of what led to Floyd’s death. For generations, journalists have relied on law enforcement as their principal — and often only — source for news involving the police. That’s no longer good enough; in fact, it was never good enough. Frazier won a Pulitzer Prize for her courageous truth-telling. And journalists everywhere were confronted with the reality that they need to change the way they do their jobs.

• The 24th annual New England Muzzle Awards, July 1. For 24 years, the Muzzle Awards have singled out enemies of free speech. The Fourth of July feature made its debut in The Boston Phoenix in 1998 and has been hosted by GBH News since 2013, the year that the Phoenix shut down. This year’s lead item was about police brutality directed at Black Lives Matter protesters in Boston and Worcester the year before — actions that had escaped scrutiny at the time but that were exposed by bodycam video obtained by The Appeal, a nonprofit news organization. Other winners of this dubious distinction included former Boston Mayor Marty Walsh, retired Harvard Law School professor Alan Dershowitz and the aforementioned Tucker Carlson, who unleashed his mob to terrorize two freelance journalists in Maine.

• How to help save local news, July 28. Since 2004, some 2,100 newspapers have closed, leaving around 1,800 communities across the country bereft of coverage. It’s a disaster for democracy, and the situation is only growing worse. The Local Journalism Sustainability Act, a bipartisan proposal to provide indirect government assistance in the form of tax credits for subscribers, advertisers and publishers, could help. The bill is hardly perfect. Among other things, it would direct funds to corporate chains as well as to independent operators, thus rewarding owners who are hollowing out their papers. Nevertheless, the idea may well be worth trying. At year’s end, the legislation was in limbo, but it may be revived in early 2022.

• Democracy in crisis, Sept. 29. As summer turned to fall, the media began devoting some serious attention to a truly frightening development: the deterioration of the Republican Party into an authoritarian tool of Trump and Trumpism, ready to hand the presidency back to their leader in 2024 through a combination of antidemocratic tactics. These include the disenfranchisement of Black voters through partisan gerrymandering, the passage of new laws aimed at suppressing the vote and the handing of state electoral authority over to Trump loyalists. With polls showing that a majority of Republicans believe the 2020 election was stolen, it’s only going to get worse in the months ahead.

• Exposing Facebook’s depravity, Oct. 27. The social media giant’s role in subverting democracy in the United States and fomenting chaos and violence around the world is by now well understood, so it takes a lot to rise to the level of OMG news. Frances Haugen, though, created a sensation. The former Facebook executive leaked thousands of documents to the Securities and Exchange Commission and spoke out — at first anonymously, in The Wall Street Journal, and later on “60 Minutes” and before a congressional committee. Among other things, the documents showed that Facebook’s leaders were well aware of how much damage the service’s algorithmic amplification of conspiracy theories and hate speech was causing. By year’s end, lawyers for Rohingya refugees from Myanmar were using the documents to sue Facebook for $150 billion, claiming that Mark Zuckerberg and company had whipped up a campaign of rape and murder.

• COVID-19 and the new normal, Nov. 17. By late fall, the optimism of June and July had long since given way to the reality of delta. I wrote about my own experience of trying to live as normally as possible — volunteering at Northeastern University’s long-delayed 2020 commencement and taking the train for a reporting trip in New Haven. Now, of course, we are in the midst of omicron. The new variant may prove disastrous, or it may end up being mild enough that it’s just another blip on our seemingly endless pandemic journey. In any case, omicron was a reminder — as if we needed one — that boosters, masking and testing are not going away any time soon.

• How journalism is failing us, Dec. 7. Washington Post columnist Dana Milbank created a sensation when he reported the results of a content analysis he had commissioned. The numbers showed that coverage of President Joe Biden from August to November 2021 was just as negative, if not more so, than coverage of then-President Trump had been during the same four-month period a year earlier. Though some criticized the study’s methodology, it spoke to a very real problem: Too many elements of the media are continuing to cover Trump and the Republicans as legitimate political actors rather than as what they’ve become: malign forces attempting to subvert democracy. The challenge is to find ways to hold Biden to account while avoiding mindless “both sides” coverage and false equivalence.

A year ago at this time we may have felt a sense of optimism that proved to be at least partly unrealistic. Next year, we’ll have no excuses — we know that COVID-19, the economy and Trumpism will continue to present enormous challenges. I hope that, at the end of 2022, we can all say that we met those challenges successfully.

Finally, my thanks to GBH News for the privilege of having this platform and to you for reading. Best wishes to everyone for a great 2022.

With Alden on the prowl again, it’s time to stop hedge funds from destroying newspapers

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.

Democratic leaders roll the dice with assistance for local news organizations

Sen. Joe Manchin. Photo (cc) 2017 by Third Way Think Tank.

The Local Journalism Sustainability Act (LJSA), which I’ve written about rather obsessively here, is built upon the foundation of a three-legged stool: a tax write-off for individuals of up to $250 for subscription fees or donations to local news organizations; a tax credit for advertisers in local news outlets; and a payroll tax credit for publishers that hire or retain journalists.

Now the payroll credit has been carved out and added to the Build Back Better bill, which has passed the House and now faces uncertain prospects in the Senate. Marc Tracy reports in The New York Times that the provision would add up to nearly $1.7 billion over the next five years for newspapers, digital operations and broadcast operations.

Tracy notes — rather huffily, if I’m reading him accurately — that large newspapers like the Times would be excluded because they employ more than 1,500 in one location, but giant newspaper chains such as Gannett and those owned by Alden Global Capital would stand to benefit. As I’ve said before, I wish there were a way of restricting the benefits to independent owners; still, this strikes me as worth trying.

What I’m more concerned about is the political wisdom of adding just one part of the LJSA to Build Back Better, which — despite the optimism voiced by President Biden and other Democratic leaders — could be doomed given the seemingly endless demands made by Democratic Sens. Joe Manchin and Kyrsten Sinema.

There is at least some bipartisan support for the LJSA. Moreover, the tax write-off for subscriptions and donations strikes me as more interesting and creative than simply handing money to publishers for not laying people off. If Build Back Better passes, it will be with just 50 Democratic votes and Vice President Harris breaking the tie — and at that point it seems likely that the other two legs of the stool would disappear. If Build Back Better goes down to defeat, proponents of the LJSA will have to start from scratch.

Even so, the benefits that would be provided by the payroll tax credit are not insignificant. Art Cullen, editor of Iowa’s Storm Lake Times, tells The New York Times that the credit would mean $200,000 in just the first year for his struggling newspaper. “We’d be walking in tall cotton,” he’s quoted as saying. (Ellen Clegg and I spoke with Cullen recently on our podcast, What Works: The Future of Local News.)

Providing government assistance to journalism is fraught with concerns about the First Amendment and the need for an independent press. Yet journalism has always benefited from government help, starting with postal subsidies in the late 1700s. The LJSA is worth trying. I just hope that Democratic leaders haven’t outsmarted themselves by splitting up a bill that stood a decent chance of passing and grafting it onto a large package that they just can’t seem to get done.

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Alden’s latest move may be the final act in Warren Buffett’s newspaper misadventure

Warren Buffett. Photo (cc) 2011 by Fortune Live Media.

The final act is about to be consummated in Warren Buffett’s disappointing dalliance with the newspaper business. Despite the legendary investor’s self-professed love for newspapers, he ran the newspapers he acquired starting in 2012 as a hopeless cause rather than investing in them as his fellow billionaires Jeff Bezos did with The Washington Post and John Henry did with The Boston Globe.

Buffett eventually sold his papers — including his hometown Omaha World-Herald — to Lee Enterprises. And on Monday we learned that the predatory hedge fund Alden Global Capital is now attempting to purchase Lee’s 90 daily newspapers, which are located in 26 states. The death watch has begun.

I wrote about Buffett’s track record as a newspaper owner in my book “The Return of the Moguls.” Here’s an excerpt.

***

When Buffett’s Berkshire Hathaway investment company purchased 63 newspapers from the Media General chain in 2012 for $142 million, the news was greeted with the hope that the legendary octogenarian might be just the person to show the way forward. Buffett bolstered his new holdings by extending loans to those papers totaling $445 million. It was a generous gesture with which Aaron Kushner and his investors, who also wanted the papers, could not compete. A year earlier Buffett had bought his hometown paper, the Omaha World-Herald, along with six other papers for $200 million. He already owned The Buffalo News. And in those pre-Bezos days, he held a substantial number of shares in The Washington Post Co. “Does Warren E. Buffett want to be a media mogul?” asked The New York Times.

Certainly Buffett had the right pedigree. Not only was he a brilliant financial thinker, but he had long loved newspapers and had been a close adviser to the Graham family at The Washington Post for many years. He even had a hand in winning a Pulitzer Prize: in 1973, when he was the owner of the Omaha Sun, he helped his reporters investigate a local charity by finding documents, providing financial analysis, and even assisting with the writing. Katharine Graham praised Buffett fulsomely in her autobiography, saying that he became a trusted confidant after he invested in the Washington Post Co. “By the spring of 1974,” she wrote, “Warren was sending me a constant flow of helpful memos with advice, and occasionally alerting me to problems of which I was unaware.”

Yet Buffett, astute financier that he is, expressed skepticism about prospects for the newspaper business after it entered its long decline. In 2009, for instance, he said he had no interest in purchasing papers, because their financial outlook was so grim. “For most newspapers in the United States, we would not buy them at any price,” he said. “They have the possibility of going to just unending losses.” And though he later reversed himself, his acquisition strategy gravitated toward papers of the type that still do reasonably well: those in medium-sized markets where the local paper is the principal source of regional and community news and where competition from the internet is less a factor than it is in large cities. Buffett’s papers carry little debt and are profitable. In the spring of 2016, though, he admitted that the picture was continuing to darken for the newspaper business and that he was no closer to finding a way out than anyone else.

“We haven’t cracked the code yet,” he told USA Today. “Circulation continues to decline at a significant pace, advertising at an even faster pace. The easy cutting has taken place. There’s no indication that anyone besides the national papers has found a way.” He added that even though all of his papers were making money (at that time he was up to 32 dailies and 47 weeklies), that might not be the case in future years. “If you have a problem in five years, you have a problem now,” he said. Buffett doubled down on those remarks in early 2017, telling CNBC that The New York Times, The Wall Street Journal, and possibly The Washington Post were the only newspapers he believed had an “assured future,” explaining, “They have developed an online presence that people will pay for.”

Less than two months later, the hammer came down at BH Media, the company Buffett had set up to manage his newspapers. BH Media announced the termination of 289 positions throughout the chain, including the elimination of 108 vacant jobs. The BH Media president and chief executive officer, Terry Kroeger, told the Omaha World-Herald that Buffett had been informed of the reductions but that “his opinion was not sought or offered,” in keeping with Buffett’s hands-off investment philosophy. Kroeger blamed the papers’ declining revenue on changes in retail advertising, and especially on the move to online shopping — an irony given how the most successful of the new breed of newspaper owners, Jeff Bezos, made his money. Buffett’s World-Herald did not suffer any cuts at that time. But then, in May, BH Media reduced the size of the Omaha paper and eliminated three jobs, according to a memo to the staff from the executive editor, Melissa Matczak.

For a self-confessed newspaper fan whose net worth was roughly the same as that of Bezos (more than $60 billion apiece in mid-2016), Buffett’s role in helping to figure out the future of journalism might be considered disappointingly modest. Perhaps it would be too much to expect someone in his mid-80s to dedicate himself to figuring out the future of the newspapers he had acquired. But he was ideally positioned to bring in the sorts of minds who might apply themselves to the task of saving smaller papers in much the same way that Bezos and Henry were attempting to reinvent their much larger properties. Surely Buffett understands as much as anyone that readers and advertisers will put up with an ever-diminishing paper for only so long before an irreversible downward spiral sets in.

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The Salt Lake Tribune, now a nonprofit, reports that it’s healthy and growing

Salt Lake City. Photo (cc) 2011 by Jazz Spain.

You sometimes hear that nonprofit status is not a solution to the local news crisis. After all, just because a media outlet is a nonprofit doesn’t mean it’s exempt from having to bring in revenue and balance its books.

True. But nonprofit ownership also means local ownership invested in the community. Which is why the latest news from The Salt Lake Tribune, the largest daily paper in Utah, is so heartening.

According to a recent update from Lauren Gustus, the executive editor, the Tribune is growing. The newsroom, she writes, is 23% larger than it was a year ago, with the paper adding a three-member Innovation Lab reporting team and beefing up its reporting, digital and editing operations. After cutting back to just one print edition each week, it’s adding a second. The Tribune is also taking care of its employees, she says, providing much-needed equipment to its photographers as well as a 401(k) match and parental leave.

“We celebrate 150 years this year and we are healthy,” she writes. “We are sustainable in 2021, and we have no plans to return to a previously precarious position.”

The Tribune was acquired from the hedge fund Alden Global Capital in 2016 by Paul Huntsman, part of a politically connected Utah family. As I wrote for GBH News in 2019, Huntsman, like many civic-minded publishers before him, discovered that owning a newspaper isn’t as easy as he might have imagined. He was forced to cut the staff in order to make ends meet before hitting on the idea of transforming the Tribune into the first large nonprofit newspaper in the country.

Nonprofit ownership makes it easier to raise tax-deductible grant money from foundations, and it transforms the subscription model into a membership model. Done right, the audience feels invested in the news organization in a way that it generally doesn’t with a for-profit newspaper.

One disadvantage is that nonprofit news organizations are constrained from some traditional newspaper functions, including having a robust editorial page that endorses political candidates. On the latest episode of our podcast, “What Works,” Storm Lake Times editor Art Cullen told Ellen Clegg and me that’s why he and his older brother, John, the publisher, have kept their paper for-profit.

What the Cullens have done instead is set up a nonprofit organization called the Western Iowa Journalism Foundation that can receive tax-deductible donations to support the Times and several other papers. It’s a model similar to that used by news outlets as large as The Philadelphia Inquirer and as small as The Colorado Sun and The Provincetown Independent.

The local news crisis will not be solved by a single model, and there’s plenty of room for nonprofits, for-profits and hybrids. What’s taking place in Salt Lake is important, and is sure to be watched by other news executives.

“The Tribune will welcome more journalists in 2022,” writes Gustus, “because you’ve told us many times over that this is what you want and because if we are not holding those in public office to account, there are few others who will.”

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Hedge fund owner, its feelings apparently hurt, cuts ties with Report for America

Report for America photojournalist Olivia Sun on assignment with The Colorado Sun. Photo (cc) 2021 by Dan Kennedy.

In April 2020, I questioned whether Report for America should be placing journalists at newspapers owned by cost-cutting corporate chains.

RFA is a program that enables news organizations to hire young journalists for about two years at a fraction of the cost, with a grant from RFA and additional fundraising covering 75%. The dilemma is that though these news organizations clearly need help, and the communities they cover benefit from that help, there is at least a theoretical chance that their chain owners will take it as an incentive not to hire someone at full cost.

At the time, RFA co-founder Steven Waldman defended those placements, saying in part that “half of our placements are in nonprofit, and others are in locally owned commercial entities. But we do indeed have some placements in newspapers that are owned by chains. Our primary standard is: Will this help the community?” (His full answer, as well as comments from the other co-founder, Charles Sennott, are here.)

Now Report for America has encountered an unexpected hazard to doing business with chain owners. McClatchy, owned by Chatham Asset Management, a hedge fund, has decided not to apply for any RFA journalists next year. The apparent reason, according to Feven Merid at the Columbia Journalism Review: Waldman hurt their feelings in an op-ed piece he wrote for the Los Angeles Times earlier this year. Merid writes:

Sources tell CJR that McClatchy’s decision came in response to Waldman’s hedge-fund criticism. Kristin Roberts, McClatchy’s senior vice president of news, would not confirm the company’s plans, and did not respond to questions concerning the company’s reaction to Waldman’s hedge-fund critiques.

McClatchy owns several dozen papers in 14 states, including important outlets like the Miami Herald, The Sacramento Bee and The News & Observer of Raleigh, North Carolina. The chain staggered under piles of debt for many years before finally collapsing into bankruptcy a few years ago. Chatham bailed them out and has thus far proved to be a more benevolent owner than, say, Alden Global Capital, the most notorious of the hedge-fund owners. Indeed, Waldman’s op-ed specifically mentioned Alden.

But if Merid’s sources are correct, then it seems that Chatham executives have a bad case of rabbit ears.

Waldman’s op-ed, headlined “How to Stop Hedge Funds from Wrecking Local News,” calls on Washington to take steps that would encourage chain-owned newspapers to divest their holdings and make it easier for independent local owners to step up. He wrote:

It could offer incentives for owners to sell these papers to local interests by waiving capital gains taxes if the acquirer is a local nonprofit organization or public benefit corporation. It could give a time-limited payroll tax break to the acquiring organizations. Congress could also, through the Small Business Administration or Commerce Department, provide loan guarantees for low-interest financing for such transitions or special tax credits, similar to those available to businesses operating in enterprise zones.

Antitrust action to break up the chains could be in order as well, according to Waldman.

At the moment, 31 RFA journalists work at 21 McClatchy news outlets. The chain’s decision to spurn future RFA journalists won’t hurt the prospects of young reporters and photographers, since there will no doubt be plenty of other newsrooms that participate. But it will hurt the communities that those papers serve unless the chain suddenly decides to go on a hiring spree.

It’s an absurd situation, and I hope the folks at Chatham and McClatchy come to their senses.

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Julie Reynolds on Alden and the botched vote that gave it control of Tribune

On our latest “What Works” podcast, Ellen Clegg and I interview the investigative reporter Julie Reynolds, the scourge of Alden Global Capital. Reynolds gives us the lowdown on Tribune Publishing’s legally dubious vote to sell its nine major-market newspapers to the hedge fund as well as Alden’s relationship with Cerberus Capital Management, the “shadow bank” that helped finance that acquisition.

Other topics include Rocky, Bullwinkle and pink slime. You’ll find more details — and information on how to subscribe to the podcast — right here.

The New Yorker examines the controversial career of the L.A. Times’ celebrity owner

Patrick Soon-Shiong. Photo (cc) 2018 by Steve Devol.

The New Yorker has published a long profile of Patrick Soon-Shiong, the celebrity surgeon who moonlights as the problematic owner of the Los Angeles Times. Most of Stephen DeWitt’s article focuses on how Soon-Shiong became a billionaire — which appears to be based on a combination of brilliance and shady business practices. DeWitt writes:

Few figures in modern medicine have inspired as much controversy as Soon-Shiong. “He gets very enthusiastic, and sometimes he might exaggerate,” Hentz said. “He can embellish a little.” [Kate Hentz is the daughter of Lee Iacocca, whose first wife died of Type 1 diabetes and who was an important backer of Soon-Shiong’s work.] Outcomes for his diabetes treatment were disappointing, and one case ended tragically. While pursuing this therapy, he also began researching chemotherapy. At the center of his fortune is a cancer treatment that costs more than a hundred times as much as another drug, available as a generic, that is prescribed for some of the same conditions. Soon-Shiong has been repeatedly accused of financial misrepresentation, self-dealing, price gouging, and fraud. He has been sued by former investors and business partners; he has been sued by other doctors; he has been sued by his own brother, twice; he has been sued by Cher.

There’s a little bit on Soon-Shiong’s ownership of the Times and The San Diego Union-Tribune. I love this quote from Norman Pearlstine, the editor Soon-Shiong brought on board to right the ship after years of bad ownership: “He made the acquisition with very little due diligence, because he thought that it had to be easier than curing cancer. I’m not sure whether he still believes that.”

To Soon-Shiong’s credit, he has made some investments in his papers, although his interest seems to have wavered from time to time. His choice of Kevin Merida, late of ESPN and The Washington Post, as Pearlstine’s successor was a good one. Soon-Shiong also enabled Alden Global Capital to acquire Tribune Publishing earlier this year, which is unforgivable. But he saved the L.A. Times — at least for now — and that’s an important legacy.

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An elegant, comprehensive takedown of how Alden pillages local newspapers

Among those of us who have obsessively followed Alden Global Capital’s destruction of newspapers over the years, there was very little that was new in McKay Coppins’ 7,000-word magnum opus that The Atlantic published this week. Still, Coppins is a gifted writer, and he’s pulled together the full story in a manner that is both elegant and comprehensive.

The arc of Coppins’ narrative is familiar. Alden, a hedge fund, got into the newspaper business about a decade ago. At first, Alden indulged the chief executive it inherited from one of the chains it acquired, John Paton, and then turned on him when he wasn’t willing to go along with the drastic cost-cutting they insisted on. I imagine Alden co-founder Heath Freeman was initially impressed with the blunt, profane Paton, who was not averse to slashing expenses to align them with revenues. The problem was that Paton actually cared about journalism and was not on board with Freeman’s insistence on endless rounds of cuts in order to enrich himself and the other co-founder, Randall Smith.

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One fact I hadn’t known previously is that Randall Smith, secretive and a generation or so older than Freeman, is the brother of Russ Smith, founder of the now-defunct New York Press. Russ also founded the Baltimore City Paper, the Washington City Paper and now runs the website Splice Today.

The New York Press was a big deal in the 1990s, as Coppins notes, publishing 10,000-word columns by Smith that attacked the elite media establishment. Smith also once published a lengthy takedown of The Boston Phoenix by another writer that infuriated all of us. I wish I still had a copy. No complaints by me about Smith, though — he wrote a favorable review of my first book for The Wall Street Journal, and I enjoy bantering with him on Twitter about music and baseball.

But back to our story. Coppins’ description of Freeman, the more active and public of the two partners in running Alden’s newspapers, is priceless:

People who know him described Freeman — with his shellacked curls, perma-stubble, and omnipresent smirk — as the archetypal Wall Street frat boy. “If you went into a lab to create the perfect bro, Heath would be that creation,” says one former executive at an Alden-owned company, who, like others in this story, requested anonymity to speak candidly. Freeman would show up at business meetings straight from the gym, clad in athleisure, the executive recalled, and would find excuses to invoke his college-football heroics, saying things like “When I played football at Duke, I learned some lessons about leadership.” (Freeman was a walk-on placekicker on a team that won no games the year he played.)

And Coppins’ description of Alden’s business model is right on target:

What threatens local newspapers now is not just digital disruption or abstract market forces. They’re being targeted by investors who have figured out how to get rich by strip-mining local-news outfits. The model is simple: Gut the staff, sell the real estate, jack up subscription prices, and wring as much cash as possible out of the enterprise until eventually enough readers cancel their subscriptions that the paper folds, or is reduced to a desiccated husk of its former self….

Alden’s calculus was simple. Even in a declining industry, the newspapers still generated hundreds of millions of dollars in annual revenues; many of them were turning profits. For Freeman and his investors to come out ahead, they didn’t need to worry about the long-term health of the assets—they just needed to maximize profits as quickly as possible.

Where I have a bit of a problem with Coppins is that though he credits some of the earlier reporting he relies on, he’s haphazard about it. I winced at his sole reference to Julie Reynolds, whom he quotes indirectly a single time and identifies only as a former reporter for the Monterey Herald in California. In fact, since leaving the paper Reynolds has been indefatigable in reporting on Alden. It was because of her 2017 cover story for The Nation, for instance, that we know Randall Smith used his ill-gotten newspaper gains to buy 16 mansions in Palm Beach, Florida. Just recently she reported for Nieman Lab that Alden’s acquisition of Tribune Publishing was tainted by dubious gamesmanship of the sort that should have prompted a do-over.

Then there’s the Baltimore hotel magnate Stewart Bainum, whose bid to buy Tribune fell short this past spring. In August, Rick Edmonds of Poynter reported that Bainum was launching a well-funded digital news nonprofit in order to compete with Alden’s Baltimore Sun. Coppins writes about that without giving any credit, and it’s being repeated in media circles as though it was his scoop.

But these are quibbles. Coppins is a gifted writer and has done a prodigious amount of reporting of his own.

Recently The Atlantic published an essay by Elaine Godfrey about the damage done to her hometown newspaper in Iowa by Gannett, the country’s largest newspaper chain. (Alden’s holdings come in second.)

The Atlantic deserves credit for using its prestige to focus on the local news crisis, and on the Wall Street greed that has transformed it into a catastrophe.

Staying optimistic about local news amid the damage wrought by corporate chains

Providence, R.I. Photo (cc) 2017 by Kenneth C. Zirkel.

My research work on the local news crisis often feels like a race against time. On the one hand, I try to highlight independent community journalism projects that are keeping their heads above water or, in a few cases, are actually thriving. On the other hand, chain owners like Alden Global Capital and Gannett keep hollowing out the hundreds of newspapers they own across the country, not because they’re not making money but because they want to make more.

Last week came the odd news that Gannett is seeking to sell The Providence Journal’s printing plant for $8 million, as well as several other plants that it owns across the country. The story was broken by Alexa Gagosz of The Boston Globe, a former student of mine. What struck me as odd is that the Journal isn’t outsourcing its printing; rather, it intends to lease the plant back for a period of five or 10 years.

No doubt Gannett executives are thinking ahead to the day when the Journal goes all-digital. But the sell-and-leaseback provision seems hard to explain, especially for a paltry amount like $8 million. That doesn’t put a dent in the massive debt that Gannett is struggling with.

Also last week, The Atlantic published an essay about The Hawk Eye, of Burlington, Iowa, the oldest paper in the state, which was acquired several years by GateHouse Media — the predecessor to Gannett — and is now being dismantled. Written by Elaine Godfrey and photographed by KC McGinnis, it is a lovely piece, haunting and elegiac, conjuring a lost way of life as much as a newspaper that’s been hollowed out. But Godfrey has a keen sense of Gannett’s business model as well. This gets right to the heart of it:

Readers noticed the paper’s sloppiness first — how there seemed to be twice as many typos as before, and how sometimes the articles would end mid-sentence instead of continuing after the jump. The newspaper’s remaining reporters are overworked; there are local stories they’d like to tell but don’t have the bandwidth to cover. The Hawk Eye’s current staff is facing the impossible task of keeping a historic newspaper alive while its owner is attempting to squeeze it dry.

None of this was inevitable: At the time of the sale to GateHouse, The Hawk Eye wasn’t struggling financially. Far from it. In the years leading up to the sale, the paper was seeing profit margins ranging from the mid-teens to the high 20s. Gannett has dedicated much of its revenue to servicing and paying off loans associated with the merger, rather than reinvesting in local journalism. Which is to say that southeastern Iowans are losing their community paper not because it was a failing business, but because a massive media-holding company has investors to please and debts to pay.

So what’s lost? Consider the experience of Tom Courtney, a former state senator, who lost his re-election bid after he discovered that his constituents, lacking any reliable local news, were judging him on the basis of national stories instead:

In the absence of local coverage, all news becomes national news: Instead of reading about local policy decisions, people read about the blacklisting of Dr. Seuss books. Instead of learning about their own local candidates, they consume angry takes about Marjorie Taylor Greene. Tom Courtney, a Democrat and four-term former state senator from Burlington, made more than 10,000 phone calls to voters during his 2020 run for office. In those calls, he heard something he never had before: “People that live in small-town rural Iowa [said] they wouldn’t vote for me or any Democrat because I’m in the same party as AOC,” Courtney told me. “Where did they get that? Not local news!”

Also last week, the trade magazine Editor & Publisher ran a story about Gannett papers that have actually been bought back by local owners. Written by Gretchen A. Peck, the story looks in on four people who’ve acquired former Gannett papers and are now reinvesting in news and in their communities.

Still, it hardly looks like a trend. Peck spoke with newspaper broker Sara April, who said Gannett is selling just a few papers here and there. “All the markets are typically smaller. Look at the size of the towns. That has been the charge: To find quality local companies, with high regard for journalism, to take ownership of these newspapers so they can continue to serve their communities,” April was quoted as saying. No doubt the papers don’t fit with Gannett’s current strategy, which seems to be filling up its papers and websites with regional news so it doesn’t have to put too much into local coverage.

The good news — and there’s always good news — is that local independent journalism is thriving in many parts of the country. The bad news is that the corporate chains and the hedge funds continue to strangle news organizations that would otherwise be doing much better.

An earlier version of this post was part of last week’s Media Nation Member Newsletter. To become a member for just $5 a week, please click here.