Tag: Randall Smith

An elegant, comprehensive takedown of how Alden pillages local newspapers

Illustration by Thomas Nast

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.

Why revelations about Alden’s acquisition of Tribune should force a do-over

Photo (cc) 2012 by the Chicago Tribune

Could Alden Global Capital’s acquisition of Tribune Publishing be headed for a do-over? Julie Reynolds, who’s been reporting on the hedge fund’s evisceration of newspapers for years, has written a fascinating story for the Nieman Journalism Lab suggesting that the $633 million deal may have been illegal.

Alden, which already owned 32% of Tribune’s papers, pledged to pay $375 million in cash in order to bring its share up to 100%. But Reynolds reports that Alden didn’t actually have the cash, a fact that may have been known only to the three members of Tribune’s board who were affiliated with the hedge fund.

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As soon as the transaction was consummated, Alden forced the papers to borrow about $300 million. That included $60 million from Alden’s other newspaper chain, MediaNews Group, at an eye-popping interest rate of 13%. As everyone predicted, Alden has gone on a cost-cutting rampage, offering buyouts throughout the chain.

Nieman Foundation curator Ann Marie Lipinski, a former editor of Tribune’s largest paper, the Chicago Tribune, tweeted, “The scale of talent leaving the Chicago Tribune is staggering.”

Reynolds also reports that the full Tribune board may have been left in the dark about a private meeting that Tribune board member and Alden founder Randall Smith had with Baltimore hotel magnate Stewart Bainum last year.

You may recall that Bainum had initially worked out an agreement under which Alden would buy Tribune’s nine major-market dailies and then sell one of them, The Baltimore Sun, to Bainum, who planned to donate it to a nonprofit organization. After Bainum concluded that Alden was trying to gouge him, he tried to put together a bid for the entire chain. Most if not all of the papers would have been spun off to local buyers. But he was never able to put together a firm offer, and the board went with Alden instead. Alden is keeping all nine papers, including the Sun.

As Reynolds notes, the Tribune board spurned Bainum’s higher offer because the financing was not in place — and ignored the reality that Alden’s wasn’t in place, either. She writes:

Given the healthy profits Tribune has generated over the last several quarters, the cuts are there for just one reason: to achieve higher margins for Alden. Randall Smith will get richer while communities served by Tribune are starved of the information they need.

If Reynolds is correct in asserting that laws were broken in order to pave the way for Alden’s acquisition of Tribune, then the punishment ought to be more than a fine and a slap on the wrist. The sale should be voided and the Tribune board should be forced to vote again.

Maybe this time Patrick Soon-Shiong, the billionaire owner of the Los Angeles Times, can be persuaded to stop Alden. As a 25% owner of Tribune before the sale, Soon-Shiong could have said no. Instead, he abstained, and did it in a manner that allowed the transaction to go through.

I’m also lighting up the Bat Signal again for Jeff Bezos.

Previous coverage.

Can the union representing Tribune’s workers stop Alden Global Capital?

The union at most of Tribune Publishing’s newspapers are making a bold move to stop Alden Global Capital from destroying local journalism in their communities.

Lukas I. Alpert reports in The Wall Street Journal that the News Guild, which represents workers at seven of Tribune’s nine daily newspapers, is demanding that three of the members of Tribune’s seven-person board of directors step down for violating Securities and Exchange Commission rules. The three members were appointed by Alden, a New York-based hedge fund.

One of the three is none other than Randall Smith, the subject of a brutal takedown in The Nation several years ago for pillaging his newspapers and using the money to buy 16 homes in Palm Beach, Florida, for $57 million. (OK, you can’t prove that there was a direct transfer of funds. But money, as they say, is fungible.)

Alden denies any wrongdoing in the would-be Tribune deal, in which it would acquire a majority share of some of our most important newspapers, including the Chicago Tribune, The Baltimore Sun and the Hartford Courant, for an offer valued at $521 million.

Earlier:

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No, the Digital First approach to newspaper ownership is not defensible

Politico media columnist Jack Shafer has written, if you can believe it, a semi-defense of the hedge fund Alden Global Capital and its principal, Randall Smith, who are in the midst of running their newspapers into the ground. Alden owns the Digital First Media chain, whose Denver Post is the locus of an insurrection against hedge-fund ownership. The 100-paper chain also owns three Massachusetts properties: the Boston Herald, The Sun of Lowell and the Sentinel & Enterprise of Fitchburg.

Shafer’s argument is a simple one: the end is at hand for the newspaper business, no one has figured out how to reverse its shrinking fortunes, and so therefore Smith can’t be blamed for squeezing out the last few drops of profit before the industry collapses. “Smith may be a rapacious fellow,” Shafer writes, “but his primary crime is recognizing that print is approaching its expiration date and is acting on the fact that more value can be extracted by sucking the marrow than by investing deeper or selling.”

Now, it’s possible that Shafer is right. But I’m considerably more optimistic about the future of newspapers than he is. Let me offer a few countervailing examples.

1. I certainly don’t want to sound naive about GateHouse Media, a chain of several hundred papers controlled by yet another hedge fund, Fortress Investment Group. GateHouse, which dominates Eastern Massachusetts, runs its papers on the cheap, too, and I’ve got a lot of problems with its barebones coverage of the communities it serves.

But GateHouse, unlike Digital First, is committed to newspapers. That’s why both insiders and outsiders were hoping GateHouse would buy the Herald. I genuinely think the folks at GateHouse are trying to crack the code on how to do community journalism at a profit for some years to come — and yes, its journalists are underpaid, and yes, I don’t like the fact that some editing operations have been centralized in Austin, Texas. But it could be worse, as Digital First demonstrates. For some insight into the GateHouse strategy, see this NPR story.

2. Smaller independently owned daily papers without debt can do well. The Berkshire Eagle is in the midst of a revival following its sale by Digital First to local business interests several years ago. In Maine, a printer named Reade Brower has built an in-state chain centered around the Portland Press Herald that by all accounts is doing well.

3. Large regional papers like The Denver Post are the most endangered. Transforming The Washington Post into a profitable national news organization, as Jeff Bezos has done, was a piece of cake compared to saving metros. As I describe in “The Return of the Moguls,” billionaire owner John Henry of The Boston Globe is pursuing a strategy that could result in a return to profitability: charging as much as the market will bear for print delivery (now up to more than $1,000 a year) and digital subscriptions ($30 a month). Globe executives say the paper is on track to pass the 100,000 mark for digital subscriptions in the first half of this year, and that the business model will start to look sustainable if it can reach 200,000.

In other words, reinventing the newspaper business is not a hopeless task. Randall Smith and Alden Global Capital have taken the easy, cynical route — but not the only route. There are better ways.

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The Denver Post is mad as hell and isn’t going to take it anymore. Will DFM care?

Previously published at WGBHNews.org.

It was an unprecedented rebellion against the most notorious of the bottom-feeding newspaper chains. Over the weekend The Denver Post, gutted beyond recognition by Digital First Media, its hedge-fund-backed owner, published an editorial and a package of commentaries protesting endless rounds of cuts in the paper’s reporting staff. The editorial referred to the paper’s corporate overlords as “vulture capitalists” and said in part:

We call for action. Consider this editorial and this Sunday’s Perspective offerings a plea to Alden [Global Capital] — owner of Digital First Media, one of the largest newspaper chains in the country — to rethink its business strategy across all its newspaper holdings. Consider this also a signal to our community and civic leaders that they ought to demand better. Denver deserves a newspaper owner who supports its newsroom. If Alden isn’t willing to do good journalism here, it should sell The Post to owners who will.

Unfortunately, that doesn’t seem likely — at least not until Alden has squeezed every last penny out of the Post and the nationwide chain of newspapers it owns, ranging from The Mercury News of San Jose and the Orange County Register on the West Coast to, locally, the Boston Herald, The Sun of Lowell, and the Sentinel & Enterprise of Fitchburg.

As I’ve noted previously, Alden is controlled by an ultrawealthy financier named Randall Smith who, according to investigative reporting by Julie Reynolds in The Nation, plundered his newspapers in order to amass the $57 million he needed to purchase 16 mansions in Palm Beach, Florida. Digital First has also been accused of diverting hundreds of millions of dollars into investments managed by Alden, according to Reynolds.

The allegations against Digital First and Alden may be shocking, but they also underscore an important fact that casual observers often miss: there’s still plenty of money in newspapers, even though the business continues to shrink. Indeed, as the editorial in The Denver Post pointed out, Digital First was “solidly profitable” last year. Yet the Post’s newsroom has shrunk from more than 250 several years ago to fewer than 100 today — and will soon sink below 70.

Among those who contributed to the Post’s anti-Digital First package was Greg Moore, a former managing editor of The Boston Globe who worked as editor of the Post for 14 years, quitting two years ago rather than continuing to slash his reporting staff. “The Post cannot do its job starved of resources the way it is now,” Moore wrote. “Deep investigations can take months, running down news tips can take days, gathering and analyzing records can cost thousands of dollars, and getting the right photograph that tells a story better than words ever can takes patience. All of that is at stake with the relentless cutting taking place.”

Ironically (or perhaps not ironically), the Post on Friday published a preview of the baseball season in which it ran a six-column photo of Citizens Bank Park in Philadelphia instead Denver’s own Coors Field. Now, yes, it’s the sort of mistake that any 12-year-old baseball fan should have caught. But it’s also the sort of mistake that a demoralized, skeletal staff seemed almost destined to make. (The Post blamed it on a “production error.”)

So what can be done? Moore offered several suggestions: forming a public-private partnership, creating a foundation, or somehow persuading Digital First to spend a little more on journalism and a little less on Randall Smith’s mansions and speculative investments. The most promising of Moore’s ideas, though, is to find another buyer. If Smith and his hatchetman at Alden — Heath Freeman, likened to the fictional Wall Street villain Gordon Gekko in a recent Bloomberg View column by Joe Nocera — can be persuaded to sell now rather than wait for the last profits to trickle in, then perhaps journalism in Denver can be saved.

Just recently the Los Angeles Times, laid low by the corporate depredations of a chain known (seriously) as tronc, with a lowercase “t,” was purchased by a billionaire surgeon named Patrick Soon-Shiong. It’s too early to know what Soon-Shiong’s intentions are, but, if nothing else, he could give the Times a chance to grow again. Billionaire ownership has also benefited The Washington Post, which claims to be turning a profit under Amazon founder Jeff Bezos, and The Boston Globe, which is holding steady under financier and Red Sox principal owner John Henry.

Digital First’s initial reaction to the Denver uprising was more hands-off than one might have imagined. According to Sydney Ember of The New York Times, the company decided to let the commentary remain online and to go ahead with plans to include it in the Post’s print edition. The editorial-page editor, Chuck Plunkett, who conceived of the package, will remain on board.

But it remains to be seen whether what happened last weekend was the start of something big — or a futile gesture, quickly forgotten and not to be repeated as Digital First’s newspapers continue their long, not-so-slow slide to oblivion.

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The rise and fall of Digital First; or, how to get rich plundering newspapers

Previously published at WGBHNews.org.

The Nation recently published a splendid takedown of Randall Smith, a little-known Wall Street tycoon whose avarice has hollowed out daily newspapers from coast to coast. By “gutting” his papers, Julie Reynolds reports, Smith was able to amass the $57 million he needed to buy 16 mansions in Palm Beach, Florida. “Don’t just blame the Internet for journalism’s decline,” she writes. “Old-fashioned capitalist greed also strangles newspapers.”

The name of Smith’s newspaper empire is Digital First Media, an ironic moniker for an enterprise dedicated to the proposition that every last penny should be squeezed out of the shrinking print business. But the name isn’t just ironic — it’s also iconic. Although Reynolds doesn’t mention it in her story, it wasn’t that long ago that Digital First was created by a charismatic, foul-mouthed executive who was hailed as a possible savior of the news business.

If you’re a newspaper junkie, you’ll remember him: John Paton, celebrated by The New York Times and the Columbia Journalism Review, a man given to florid pronouncements about the need for newspapers to adapt to digital as rapidly as possible lest they die of irrelevance. As the CJR put it in 2011: “To those who complained that digital ad prices were so low compared to print ads that it was like ‘trading dollars for dimes,’ he retorted with his catchphrase, ‘Start stacking dimes.’”

Paton was put in charge of two moribund newspaper chains: the Journal Register Co., whose flagship was the New Haven Register, and MediaNews Group, whose largest paper was The Denver Post. He called the amalgamation Digital First, and he vowed either to save the business or to go down trying.

My first encounter with the Digital First aura came in the summer of 2011, when I interviewed Matt DeRienzo, then the young new editor of the Register, who’d already made his mark at a smaller Journal Register paper by opening a café and inviting the public to attend news meetings. “‘Digital First’ to me means putting journalism first, and it means putting community first, or readers first,” DeRienzo told me. “Readers don’t need to come to us as this exclusive voice on high, like the nightly news. There are 8 million sources of information out there for us, and our job is to sift through that for them and curate and aggregate and do original reporting as well, and to work with them at every step of the process to connect them with that. And we’re the better for it, I think.”

Paton’s most ambitious initiative was something called Project Thunderdome, whose mission was to create common content and production platforms for Digital First’s papers, allowing local journalists to focus on covering their communities. But the Paton era proved to be shockingly brief. That’s because Alden Global Capital, the hedge fund that was headed by Randall Smith, began bleeding Digital First dry before Paton’s vision could be fully implemented. Project Thunderdome was shut down. Costs were cut. The company’s newspapers didn’t even have decent websites. (So much for “digital first.”) DeRienzo quit in 2014, and Paton left the following year.

Jim Brady, a former washingtonpost.com editor who had run Project Thunderdome as Digital First’s top editor, spoke favorably of Paton when we talked in early 2016. “He was maybe a little more aggressive and beat his chest a little bit more than I would,” said Brady, who subsequently launched a company that operates the mobile-first local news sites Billy Penn in Philadelphia and The Incline in Pittsburgh. “On the other hand, it got him a lot of attention and probably allowed us to hire some people, get some people interested in us that wouldn’t have been interested otherwise.”

As Julie Reynolds notes in her article in The Nation, Digital First is now one of the country’s largest newspaper chains. The company bought the Orange County Register out of bankruptcy in 2016 following Boston businessman Aaron Kushner’s failed attempt to restore the Register’s fortunes. In Massachusetts, Digital First owns the Sentinel & Enterprise of Fitchburg and The Sun of Lowell. With luck, perhaps Digital First will someday sell them to local buyers, as it did with the Berkshire Eagle of Pittsfield, a transaction that has revived the Eagle and its affiliated papers in southern Vermont.

“Unlike large corporate owners in the past,” Reynolds writes, “the stated goal of the investment firms is not to keep struggling newspapers alive; it is to siphon off the assets and profits, then dispose of what little remains.”

The Digital First story might have had a different ending if Paton had been able to implement his ideas. To this day many smaller papers without debt and with little competition are making money and serving their communities, even if they’re not exactly thriving. Long-term, their demise may be inevitable. Short-term, they’re being hustled along to the boneyard by the likes of Digital First.

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