Media industry turmoil continues as the sharks start to circle

When an industry is under severe financial pressure, it tends to bring out the sharks, so it’s probably not surprising there has been an increase in shark-like activity in the media business of late—now, even the sharks are being attacked by other sharks. Take the Gannett newspaper chain: one of the largest players in a shrunken industry, it owns dozens of leading papers across the country, including flagships such as USA Today and the Detroit Free Press. Some see it as a perfect candidate to snap up some of the other players in the market, such as McClatchy or Tribune Inc. (formerly Tronc), the latter of which it tried to buy in 2016. According to a report in The Wall Street Journal on Wednesday, Gannett was recently said to be looking at the assets of Gizmodo Media, which current owner Univision is trying to unload.

Unfortunately for Gannett, competitor Digital First Media has thrown a large wrench into the works, by quietly acquiring 7.5 percent of the chain’s stock as a prelude to launching a takeover bid. DFM sent the chain a letter earlier this week advising the board that it seeks to buy the company for $12 a share or about $1.4 billion, and would reserve the right to replace some or all of Gannett’s board of directors. The would-be acquirer also accused its target of making a number of poor financial decisions, including a number of what it said were ill-fated digital deals (a somewhat ironic criticism coming from a company that goes by the name Digital First). “The team leading Gannett has not demonstrated that it’s capable of effectively running this enterprise as a public company,” the letter said.

The proposed acquisition has sent shivers through the industry. DFM has developed a reputation for squeezing its properties financially and shedding reporters and editors as quickly as possible in order to protect its bottom line. According to industry analyst Ken Doctor, the company—whose largest shareholder is the New York–based hedge fund Alden Global Capital—reported a 17 percent operating profit margin last year, much higher than most media entities, profit that many believe came from hacking away at the staff of its papers. “Alden Global Capital is making so much money wrecking local journalism it might not want to stop anytime soon,” he wrote, while Jim Friedlich, executive director of the Lenfest Institute, told the Journal DFM buying Gannett was like “the lumber company trying to buy the national park.”

If Digital First goes ahead with its bid, Gannett will have to put its interest in Gizmodo on hold, which could open the door for other bidders. Among those who have expressed interest is Bryan Goldberg, the man behind Bustle and a growing group of distressed digital properties. In July, Goldberg swooped in to buy the domain name and archives of Gawker for $1.35 million (those assets weren’t part of the deal with Univision), then late last year he acquired the assets of Mic.com for about $5 million, after that site shut down due to a lack of funding. And now, it seems both Gawker and Mic have returned to active duty in a sense: articles have begun to appear on the latter, despite the fact that the company laid off all 100 or so of its writers and editors when it shut down. And Gawker just announced its first new hires, including veteran digital writer Maya Kosoff, formerly of Vanity Fair. The new site is being run by Amanda Hale, former managing editor of The Outline, a relatively new digital-media startup that has also been under financial pressure recently.

Although writers and journalists like to think what they do is special, at least in cultural or social terms, the reality is the media business has a bottom line just like any other industry, and that bottom line has been chipped away by the advertising dominance of Google and Facebook. Digital enterprises were once seen as a better risk than stodgy old newspaper chains like Gannett, but if we’ve learned one thing from the recent travails of BuzzFeed, Vice, Mic and others, it is that new and old media entities alike are under very similar kinds of pressure—and until that changes, the sharks and bottom-feeders will rule the day.

Here’s more on some of the major players in the industry’s ongoing turmoil:

  • Let the games begin: Ken Doctor says the bid by Alden Global and DFM to acquire Gannett is likely just the opening round in what could be a consolidation spree within the newspaper industry. “This may be the first newspaper mergers-and-acquisitions story of 2019, but it definitely won’t be the last,” he writes at Nieman Lab.
  • A British front: The fact that Gannett is now in play doesn’t just affect the fate of US newspapers or the American media industry. The Drum notes that since Gannett owns Newsquest, a major UK newspaper publisher, any move to acquire Gannett could set off a consolidation spree in Great Britain as well.
  • Gawker, the sequel: In September, Bryan Goldberg told The Wall Street Journal that he planned to invest at least $5 million in relaunching Gawker, just after his company closed a $40-million financing round that valued it at more than $200 million. “We’re building a company that Condé Nast ought to have built for digital,” he said.
  • The great unwinding: Univision announced that it was looking to sell Gizmodo Media last July, including sites like Jezebel, Deadspin, and Splinter, as well as humor site The Onion. The Spanish-language broadcaster acquired the assets from Gawker for $135 million in 2016 as part of an ambitious digital expansion.
Sign up for CJR's daily email

 

Other notable stories:

  • A report from Digiday says The New York Times stopped using ad exchanges and behavioral targeting in Europe, in the wake of the European General Data Protection Regulation or GDPR. But the newspaper’s ad revenue didn’t decline as a result, a Times executive said—instead, it has actually increased significantly.
  • Report for America, which is trying to build a national non-profit journalism operation and just received some funding from Facebook, announced that it will create 50 new reporting positions this year in newsrooms across the country, including a watchdog group in Puerto Rico, as well as the Cincinnati Enquirer and the Associated Press. Reporters will also be placed in non-profit organizations and public radio stations.
  • After it faced widespread criticism for adding alt-right conspiracy theorist and nutritional supplement purveyor Alex Jones and his Infowars site to its lineup, streaming-media company Roku said that it would remove the site and Jones from its platform. Jones and Infowars have been blocked or banned by a number of services including YouTube, Facebook, Twitter, Spotify, and PayPal.
  • Grindr, the dating app for gay men, has laid off the entire staff of its LGBTQ publication, Into, as part of what it said is a refocusing of its efforts on video. The publication caused some controversy in November when one of its reporters called out the company’s president, Scott Chen, for making remarks some said were homophobic.
  • As the prospect of Brexit draws ever closer, British publishers and media companies are stockpiling newsprint and ink, according to a report by Bloomberg, concerned that if Britain leaves the European Union their supplies could be cut off, or the price of those commodities could rise suddenly if the value of the British pound tanks.
  • Dan Sanchez, the editorial lead for The New York Times‘s new venture into audio programming for digital assistants, spoke with the newspaper’s Insider staff about how the new features for Amazon’s Echo units will work. Among other things, Echo owners will be able to ask their assistant to play them a “flash briefing” read by Mike Barbaro, host of the paper’s popular podcast The Daily.
  • Storyful, the digital verification company owned by News Corp., did an analysis of how posts by certain influential accounts on Twitter helped spread the story of Rahaf Mohammed al-Qunun, a Saudi Arabian woman who pleaded for asylum and was eventually accepted into Canada.
  • A court in Montenegro has sentenced an investigative journalist, Jovo Martinović, to 18 months in prison, on charges of drug trafficking and criminal association. Press freedom advocates say the accusations are bogus and are further evidence that the government is engaged in a crackdown on independent media.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Mathew Ingram is CJR’s chief digital writer. Previously, he was a senior writer with Fortune magazine. He has written about the intersection between media and technology since the earliest days of the commercial internet. His writing has been published in the Washington Post and the Financial Times as well as by Reuters and Bloomberg.