The precarious state of local news giants

Even compared to this year’s other brutal weeks for American journalism, the past seven days have been particularly turbulent. Last Wednesday, the publishing giant McClatchy reported severe liquidity problems along with its third-quarter results; its share price has since collapsed from $2.28 to $0.40. Last Thursday, shareholders voted to approve the merger of two more media giants—GateHouse and Gannett—despite stock in GateHouse’s parent, New Media Investment Group, also having cratered since the merger was announced. The deal closed yesterday; the new company is just called Gannett. Also yesterday, Alden Global Capital—a hedge fund, notorious for cost-slashing at its media properties, that itself tried to buy Gannett earlier this yearacquired a 25 percent stake in Tribune Publishing Company, becoming its biggest shareholder.

To simplify, the Wall Street types who increasingly control local news are playing with all their biggest chips at once. As Nieman Lab’s Ken Doctor told CNN last night, this week marks a “major turning point” for the industry. “At a time when local news is needed more than ever, it is the bankers who are deciding what will be defined as news, and who will be employed to report it.”

From archives: Politico embarrasses WSJ by publishing transcript

The closure of the Gannett-GateHouse deal was the least surprising of these new developments, and is probably the most significant. Prior to their merger, the companies were, respectively, America’s first and second biggest publishers by circulation; post-merger, the company owns about one of every six American newspapers. That’s serious scale—but, as Doctor wrote in July, it’s unlikely to facilitate vaulting editorial ambition; rather, it’s about buying time until industry leaders “figure out” a profitable transition to digital. Cost-cutting to that end will surely lead to layoffs; management already told staff to expect “a reduction in our workforce after thoughtful review.” In interviews yesterday, executives insisted that they’ll prioritize the protection of editorial jobs, and that the “duplication costs” saved by the merger will prevent mass layoffs next year. (Speaking to CNN, Gannett CEO Mike Reed suggested the company might “redeploy” some journalists whose assignments overlap, rather than axing them.) Still, it’s a sad truth about our industry that damage control—rather than, say, the mass hiring of reporters—is the outcome we’re hoping for from this merger, despite its massive scale.

With the Gannett deal done, McClatchy becomes the second-biggest newspaper publisher in America by circulation. The timing could be better: Bloomberg reported on Monday that McClatchy may have to file for bankruptcy in 2020 should it fail to honor mandatory pension payments worth $124 million. The Internal Revenue Service declined to waive that obligation, so McClatchy is now in talks with the Pension Benefit Guaranty Corporation, a federal body that could yet assume McClatchy’s pension plan in exchange for future payments. However that pans out, Doctor writes, McClatchy will be burdened with a tricky financial mess of some description; Chatham Asset Management—a hedge fund that is currently McClatchy’s biggest lender and shareholder (and also owns the parent company of the National Enquirer)—will take a central role in resolving it, one way or another.

Per Doctor, McClatchy recently (re)entered talks with Tribune, now the fourth-biggest publisher by circulation, about a merger. Yesterday, another hedge fund, Alden, made its move on Tribune, buying up the 25 percent of its shares held by Michael Ferro, Tribune’s controversial former chairman. In ordinary circumstances, Ferro’s exit might have been celebrated in some quarters. His tenure included turmoil at the flagship LA Times and the ignominious “tronc” rebrand, amid other tumult; it ended, last year, with Ferro’s retirement, which came shortly before Fortune published sexual harassment allegations against him. But an Alden buy-in is not “ordinary circumstances.” The fund and its media subsidiary—known variously as Digital First Media and MNG Enterprises—have become industry bywords for severe cuts and low pay. Last year, staffers rebelled vocally against them. Yesterday, journalists at Alden papers in the Bay Area protested again, even before the news of the Tribune deal broke.

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It’s unusual for the biggest players in American local journalism to all have such big news at once. In general terms, however, there is a cyclical aspect to all this. Industry big shots come and go: as the Chicago Sun-Times noted yesterday, Ferro, for one, once harbored much loftier ambitions than a “quiet exit,” stage left. Not all money men are equal—some are better for journalism than others. Nonetheless, as Doctor writes, executives who come to journalism from the world of finance almost always sees their jobs differently than old-school newspaper executives once did. “I haven’t found any,” Doctor writes of media’s new paymasters, “who believe there’s a growth story for local news.”

Below, more on local news:

  • Spanish-language struggles: The decline of the news business has exacted a particularly harsh toll on Spanish-language media, which is heavily composed of legacy outlets. Three have shuttered this year, and a fourth—Hoy, a Tribune paper in Chicago—will close in December. NPR’s Michel Martin discussed the problem with Graciela Mochkofsky, a journalism professor at the City University of New York.
  • Not all bad news, I: A new report from the Knight Foundation and Gallup found that a majority of Americans value local news organizations, but are ignorant of their financial problems. The report also has a more hopeful finding: “When people are told about the financial situation facing local newspapers or the ways in which local journalism supports a healthy democracy, they were significantly more likely to donate to a nonprofit organization that supports local journalism (54%) than were those who did not get such information (40%).”
  • Not all bad news, II: Two weeks ago, I looked at various initiatives and experiments that aim to improve the local-news business model, including the Salt Lake Tribune’s pioneering switch to nonprofit status. ICYMI last week, Nieman Lab shared the Tribune’s successful application to the IRS, which could serve as a road map for other papers looking to make the transition.
  • Three more dispatches from the world of local news: Poynter’s Al Tompkins checked in with WFAA, a Dallas TV station that took local climate change skeptics on a fact-finding trip to Alaska. Emily Ramshaw, editor in chief of the Texas Tribune, and her colleague Amanda Zamora are leaving the publication to launch a national nonprofit outlet “aimed at giving women the facts, tools and information they need to be equal participants in democracy and civic life.” And in Arkansas, a court sentenced Nkiruka Azuka Omeronye, a local TV reporter, to three days in jail for recording a hearing.


Other notable stories:

ICYMI: What if the right-wing media wins?

This post has been updated to clarify Isgur’s name and journalism experience.

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Jon Allsop is a freelance journalist. He writes CJR’s newsletter The Media Today. Find him on Twitter @Jon_Allsop.