The media business analyst Alan Mutter once memorably asserted that newspapers’ “Original Sin” dates back to the mid 1990s, when they started giving away their journalism for free on the internet. Margot Susca, though, argues that the real fall from grace came roughly a decade later, when Fortress Investment Group paid $530 million to acquire Liberty Group Publishing, renaming it GateHouse Media. That transaction marked the beginning of the private equity era in journalism, an era defined by hollowed-out newsrooms and ghost newspapers that lack the resources to provide the communities they purportedly serve with the news and information they need.
Susca, an assistant professor of journalism at American University, tells the sad story of how private equity wiped out vast swaths of the newspaper business in “Hedged: How Private Investment Funds Helped Destroy American Newspapers and Undermine Democracy.”
Update II: And the paragraph has been restored. I’m told there was nothing nefarious about its disappearance.
Update: Oh, my. The nutty last paragraph that prompted this post has been deleted. Not a good look, Harvard.
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In an otherwise unremarkable story from Harvard Business School about a study into the effects of local newspaper closures on corporate wrongdoing, I ran into this bizarro closing paragraph. The story quotes Professor Jonas Heese, a co-author of the study:
Saving local newspapers isn’t Heese’s specialty, but he points to a recent trend of hedge funds buying up distressed local media outlets as having the potential to stabilize the market and resurrect local news. And that makes him wonder: “Is this a reason to be hopeful?”
No, Professor Heese. It is not a reason to be hopeful. I suggest you stick to statistical analysis, which you seem to be pretty good at. Here’s the abstract, from the Journal of Financial Economics, titled “When the Local Newspaper Leaves Town: The Effects of Local Newspaper Closures on Corporate Misconduct”:
We examine whether the local press is an effective monitor of corporate misconduct. Specifically, we study the effects of local newspaper closures on violations by local facilities of publicly listed firms. After a local newspaper closure, local facilities increase violations by 1.1% and penalties by 15.2%, indicating that the closures reduce firm monitoring by the press. This effect is not driven by the underlying economic conditions, the underlying local fraud environment, or the underlying firm conditions. Taken together, our findings indicate that local newspapers are an important monitor of firms’ misconduct.
Reading this leads me to think about our work at The Daily Times Chronicle in Woburn, when we uncovered a massive toxic waste problem in the early 1980s that may have led to an outbreak of childhood leukemia and other illnesses. Charlie Ryan’s reporting was crucial to breaking the story wide open. In 1998, he recounted in The Boston Phoenix the sequence of events that led the world to understand that Woburn had an environmental and public health disaster on its hands:
Ryan’s most important story came in December 1979, on a development he thought he’d been beaten on. The state’s Department of Public Health was about to release the results of a study on Woburn’s leukemia rate, and Ryan arranged to interview DPH officials. That morning, the Boston Herald American published a front-page story reporting that the leukemia rate was within the normal range for a city of Woburn’s size.
“I was a little pissed,” Ryan remembers, “but I went in there anyway.” He sat down with a DPH statistician, who explained the results to him: essentially, the DPH had taken the number of leukemia cases and divided it by the total population of Woburn, based on the 1970 census. Ryan stopped him. 1970? The population of Woburn, Ryan knew, had fallen from 40,000 to around 36,000. Ryan asked a simple question: What would happen if the lower figure were used? The statistician recalculated the numbers — and, all of a sudden, the number of leukemia cases appeared to be “statistically significant,” the bland-sounding phrase used to describe what was obviously a very real problem.
“That story drastically changed everything,” says Ryan, who got out of journalism a few years ago and now helps run the computers for Essex County Newspapers. “To that point, everyone had considered Anne Anderson to be just a hysterical mom. I think without that story, the Centers for Disease Control, the Environmental Protection Agency, and the state never would have pushed that hard.”
Yes, local journalism is crucial in holding corporations to account, just as it is in keeping an eye on government and other large institutions. But no, hedge funds are not the solution. They’re the problem.
It looked like a one-off last month when The Denver Post rebelled against its hedge-fund owner. In publishing an editorial and several commentaries denouncing Alden Global Capital as “vulture capitalists,” the Post’s journalists took what was seen by most observers as a courageous but futile stand.
But now the rebellion is starting to spread. And there is hope, however slight, that Digital First Media — the newspaper chain controlled by Alden — can somehow be pushed into doing the right thing. As CNN media reporter Brian Stelter writes, there were protests scheduled for today in Denver and New York City, the latter to take place outside Alden’s headquarters.
What’s happening matters nationally, and it matters locally. Digital First is one of our largest newspaper chains, controlling nearly 100 newspapers on both coasts and at points in between. Locally, Digital First operates The Sun of Lowell, the Sentinel & Enterprise of Fitchburg, and, since earlier this year, the Boston Herald. So intent is Digital First on cutting costs that it actually closed the Sentinel’s offices, switching to a “virtual newsroom,” which is apparently now acceptable corporate-speak for “no newsroom.”
The rebellion against Digital First got a boost last week when Ken Doctor, citing documents he had obtained, reported in the Nieman Journalism Lab that the company had run up a profit margin of 17 percent in the 12-month period that ended on June 30, 2017. The Lowell and Fitchburg papers were particularly lucrative, with a profit of 26 percent. The numbers were shocking, as they demonstrated that the papers are generating more than enough money to cover their communities if only it wasn’t being siphoned off by Alden principal Randall Smith to buy mansions in Palm Beach, Florida.
At the moment, there are no signs of protests coming to Massachusetts — but that could change. And Colorado continues to be a hotbed of unrest. In his latest, Doctor reports that former Post owner Dean Singleton, known as a brutal cost-cutter when he was at the height of his powers years ago, is so appalled by the cuts that he’s resigned as chair of the Post’s editorial board. “At the end of my career, I don’t want to be a part of it,” Singleton said. “The Post has been totally gutted of news coverage and of editorial coverage. That’s a fact.”
Several others also resigned, including editorial-page editor Chuck Plunkett, who was the force behind the Post’s anti-Alden Capital package last month. The reason: Ownership refused to let him write about another Digital First property in Colorado, the Daily Camera of Boulder, where editorial-page editor David Krieger was fired after he self-published a rant that criticized Alden. Doctor writes that the Camera might simply eliminate the editorial pages — which, I’m told, has become common practice at Digital First’s smaller papers. Back in Denver, some 55 Post journalists signed an open letter, saying they were “outraged” at the silencing of Plunkett.
The uprising against Alden Capital demonstrates that there is still money in newspapers. In fact, though the technology-driven changes that have decimated newspaper revenues over the past 25 years are very real, they are only half the story. Debt-free newspapers that are rooted in the community, and that are not forced to ship their revenues off to greed-crazed owners, can still manage to turn a profit. And though virtually all newsrooms have shrunk in response to the changing economics of journalism, a 17 percent margin obviously requires a lot more blood on the floor than, say, a more modest goal of 5 to 10 percent.
The challenge is that corporate chain ownership, accompanied by unrealistic profit expectations, remains the prevailing business model in the newspaper business, notwithstanding a few wealthy owners who are trying to buck the tide. Locally, for example, more than 100 papers, including key dailies such as the Telegram & Gazette of Worcester, the Providence Journal, The MetroWest Daily News of Framingham, and The Patriot Ledger of Quincy, are owned by GateHouse Media, which is controlled by yet another hedge fund, Fortress Investment Group.
GateHouse has its own well-earned reputation for operating its newspapers on a shoestring. Unlike Digital First, though, GateHouse appears to be committed to staying in the newspaper business rather that choking out the last drop of value — which is why a lot of us thought GateHouse would be the lesser of two evils when Digital First emerged as a last-minute bidder for the Boston Herald. (As it turned out, Gatehouse won anyway: Digital First moved the Herald’s printing operation from The Boston Globe’s facility in Taunton to the Providence Journal.)
The only hope now is that outrage against Digital First will harm Alden Capital’s bottom line. Economic pressure combined with the emergence of civic-minded local buyers could provide these papers with a fresh start — as happened several years ago in Pittsfield, when Digital First sold the Berkshire Eagle (and several affiliated papers in Vermont) to a group of local business leaders.
If nothing else, the rebellion against Digital First should help educate the public that it doesn’t have to be this way. Run properly, newspapers can still make money while fulfilling their mission of holding government and other institutions to account. Getting the hedge funds out will not solve journalism’s long-term economic challenges. But it would be a welcome start.
The end may be near for one of the most widely watched experiments in local journalism.
Early today, Ken Doctor reported at the Nieman Journalism Lab that Digital First Media was pulling the plug on Project Thunderdome, an initiative to provide national and international content to the company’s 75 daily newspapers and other publications and websites. Soon, Doctor added, Digital First’s papers are likely to be sold.
Judging from the reaction on Twitter, the news came as a shock, with many offering their condolences and best wishes to the top-notch digital news innovators who are leaving — including Jim Brady, Robyn Tomlin and Steve Buttry. But for someone who has been watching the Digital First story play out in New Haven for the past five years, what happened today was more a disappointment than a surprise.
I first visited the New Haven Register, a regional daily, in 2009. I was interviewing people for what would become “The Wired City,” a book centered on the New Haven Independent, a nonprofit online-only news site that represents an alternative to the broken advertising-based model that has traditionally supported local journalism. The Register’s corporate chain owner, the Journal Register Co., was in bankruptcy. The paper itself seemed listless and without direction.
Two years later, everything had changed. Journal Register had emerged from bankruptcy and hired a colorful, hard-driving chief executive, John Paton, whose oft-stated philosophy for turning around the newspaper business — “digital first” — became the name of his blog and, eventually, of his expanded empire, formed by the union of Journal Register and MediaNews, the latter best known for its ownership of the Denver Post.
Just before Labor Day in 2011, Matt DeRienzo — then a 35-year-old rising star who had just been put in charge of all of Journal Register’s Connecticut publications, including the New Haven Register — sat down with me and outlined his plans. His predecessor had refused my requests for an interview; DeRienzo, by contrast, had tracked me down because he’d heard I was writing a book. It seemed that a new era of openness and progress had begun.
The openness was for real. The progress, though, proved elusive. For a while, John Paton was the most celebrated newspaper executive in the country, the subject of flattering profiles in the The New York Times, the Columbia Journalism Review and elsewhere. Media reporters were charmed by his blunt profanity, as when he described a presentation he gave to Journal Register managerial employees. “They were like, ‘Who’s the fat guy in the front telling us that we’re broken? Who the fuck is he?'” Paton told the CJR.
In 2012, though, Journal Register declared bankruptcy again — a necessary step, Paton said, as it was the only way he could get costs such as long-term building leases and pension obligations under control. After Journal Register emerged from bankruptcy in 2013, Paton’s moment in the national spotlight seemed to have passed, as media observers turned their attention to a new breed of media moguls like Amazon.com founder Jeff Bezos (who bought The Washington Post), Red Sox principal owner John Henry (who bought The Boston Globe), greeting-card executive Aaron Kushner (who acquired the Orange County Register) and eBay founder Pierre Omidyar (who launched a new venture called First Look Media).
Although Digital First’s deepening woes may have escaped national attention, there were signs in New Haven that not all was well. Some positive steps were taken. The print edition was redesigned. The Register website was the beneficiary of a chain-wide refurbishing. Nasty, racist online comments were brought under control, and the newsroom embraced social media. But larger improvements were harder to accomplish.
Among the goals Matt DeRienzo had talked about was moving the paper out of its headquarters, a hulking former shirt factory near Interstate 95, and opening a smaller office in the downtown. In 2012, the Register shut down its printing presses and outsourced the work to the Hartford Courant. The second part of that process never came, though. Just last week, the New Haven Independent reported that the Register had backed away from moving to a former downtown mall facing New Haven Green. Two months earlier, according to the Independent, the Register and Digital First’s other Connecticut publications laid off 10 people.
Neither development should be described as a death knell. The downtown move is reportedly still in the works. And the 10 layoffs were at least partly offset by the creation of six new digitally focused positions. But rather than boldly moving forward, the paper appears to be spinning its wheels. And now — or soon — it may be for sale.
One of the biggest problems Digital First faces is its corporate structure. Can for-profit local journalism truly be reinvented by a national chain whose majority owner — Alden Global Capital — is a hedge fund? People who invest in hedge funds are not generally known for their deep and abiding affection for the idea that quality journalism is essential to democratic self-goverance. Rather, they want their money back — and then some. Preferably as quickly as possible.
No matter how smart, hard-working and well-intentioned John Paton, Jim Brady, Matt DeRienzo et al. may be, the Digital First experiment was probably destined to end this way, as chain ownership generally does. I wish for a good outcome, especially in New Haven. Maybe some civic-minded business leaders will buy the paper and keep DeRienzo as editor. And maybe we’ll all come to understand that the best way to reinvent local journalism is at the local level, by people who are rooted in and care about their community.
The media business analyst Alan Mutter once memorably asserted that newspapers’ “Original Sin” dates back to the mid 1990s, when they started giving away their journalism for free on the internet. Margot Susca, though, argues that the real fall from grace came roughly a decade later, when Fortress Investment Group paid $530 million to acquire Liberty Group Publishing, renaming it GateHouse Media. That transaction marked the beginning of the private equity era in journalism, an era defined by hollowed-out newsrooms and ghost newspapers that lack the resources to provide the communities they purportedly serve with the news and information they need.
