McClatchy, Tribune, Buffett, and the need to think outside the box

On Thursday, McClatchy—the publicly-traded owner of 30 local newspapers, including the Miami Herald, the Charlotte Observer, and the Kansas City Star—filed for bankruptcy. The company will continue to operate, but is seeking relief from debt and pension obligations; if that goes to plan, it’ll pass into the control of Chatham Asset Management, a hedge fund which is already McClatchy’s top creditor, and which also owns the Canadian publishing giant Postmedia and the parent company of the National Enquirer. On Friday, McClatchy’s DC bureau reported that a federal pensions agency has concerns about a 2018 transaction between McClatchy and Chatham that could put the brakes on the bankruptcy process. Still, McClatchy—which has been family-controlled since the aftermath of the California Gold Rush—looks likely to end up in the hands of the 21st-century prospectors who increasingly own the local-news business.

Local-news-watchers have traced McClatchy’s present plight to its decision, in 2006, to buy Knight Ridder, then America’s second-biggest newspaper company, in a deal worth $4.5 billion. (Yes, with a “b.”) The deal burdened McClatchy with debt, and since it was struck, ad revenue and print-circulation figures have cratered. A recent hike in digital subscriptions has offered some respite; still, between the Knight Ridder acquisition and the middle of last year, McClatchy cut nearly 60 percent of its operating expenses and more than 80 percent of its full-time staff, according to Jonathan O’Connell of the Washington Post. (A year ago, CJR’s Amanda Darrach reported that Craig Forman, McClatchy’s CEO, had signed a lucrative new contract, including a monthly stipend of $35,000—up from $5,000—for housing and other expenses. The following week, his company offered buyouts to 450 staffers. Forman told Darrach that his pay was set by his board of directors with input from public consultants, and was “comparable.”)

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What will the bankruptcy—and the prospect of hedge fund control—mean for McClatchy going forward? Ken Doctor, an industry analyst who writes regularly for Nieman Lab, reckons the company could be entering “a brief moment of relief.” McClatchy, Doctor notes, still brings in a fair whack of cash; it recently announced a quarterly earnings increase for the first time in eight years, despite its other travails. Private ownership, Doctor writes, could give its leadership more latitude to execute a digital transformation away from shareholders’ impatient gaze, and Chatham has said publicly that it is “committed to preserving independent journalism and newsroom jobs.” But actions, of course, speak much louder than words. And private ownership can be a double-edged sword; “Being shielded from the markets can let you do important but difficult things,” Doctor writes. “Or it can let you get away with stripping civic assets to the bare wiring.” In an industry that’s seen far too much of the latter, it’s hard not to be skeptical.

Last year was tumultuous for local news—a product, as Doctor has written previously, of dual processes of financialization and consolidation. McClatchy’s bankruptcy raises both specters again; Doctor reckons that Chatham might find merging McClatchy with another big publisher to be an attractive proposition. One possible partner, Tribune, has itself seen plenty of turmoil since Alden Global Capital—a hedge fund notorious for taking a slash-and-burn approach to its news assets—became its biggest shareholder in November. Since the turn of the year, Tribune has overhauled its executive ranks and bought experienced journalists out of their contracts. As has been the case at other Alden-owned papers, reporters have started speaking out against management. Gary Marx and David Jackson, investigative journalists at the Chicago Tribune, which Tribune owns, penned an op-ed for the New York Times in which they called Alden an “urgent threat,” and have literally gone door-to-door in Chicago to try and woo a wealthy savior for their paper. There’s been upheaval, too, at newspapers—including the Omaha World-Herald, the Richmond Times-Dispatch, and the Buffalo News—owned by Warren Buffett, which recently were offloaded to Lee Enterprises; as part of the deal, Buffett agreed to refinance Lee’s debts, and lend it nearly $600 million. In the past, Buffett has called the newspaper business “toast.” Last week, Charlie Munger, his longtime business partner, said the industry is “dying.”

In the wake of all this bad news, Emily Bell, director of Columbia’s Tow Center for Digital Journalism (and regular CJR contributor), went on Brian Stelter’s CNN podcast to talk it through. For all but a handful of national media giants, she said, the advertising model has “completely collapsed,” and Buffett was “our last roll of the dice” on finding a benefactor willing to save local news at scale. Increasingly, it seems, that task will require thinking outside of those traditional boxes. Some publishers have found success with a nonprofit model; late last year, the Salt Lake Tribune became the first legacy daily to transition into nonprofit status, after the Internal Revenue Service greenlit its application with a surprising minimum of fuss. Bell and others see potential, too, in a “civic ownership” model, whereby the state would support local journalism via tax dollars, regulatory perks, or other mechanisms. Over the weekend, Margaret Sullivan, media columnist at the Washington Post, agreed that it’s time to take such ideas seriously. Still, as Sullivan notes, the notion of increased government involvement in media—even if hands-off—has traditionally been “radioactive” in the US. Other countries lack such hang-ups, but in America, it’s a fair bet that they’ll prove hard to shake.

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We’ve seen no shortage of ideas and initiatives aimed at a sustainable, scalable future for local news, but as Doctor told Stelter yesterday, “all of this has not added up to replacements for what’s been lost.” Time is against us, and the bankers are only tightening their grip on major local-news chains. Stelter also spoke yesterday with Julie K. Brown, a journalist at the McClatchy-owned Miami Herald whose stellar recent reporting on Jeffrey Epstein is as clear an example as any of the vital work local outlets do. When Stelter asked Brown what might be done to preserve such work, Brown called on viewers to subscribe to their local paper. “Most people pay, I would think, $100-200 a month on their cable subscriptions. Newspapers are a fraction of that,” she said. “It really isn’t a whole lot of money considering you’re investing in your community.”

Below, more on the news business:

  • Duopoly money: Facebook and Google, of course, have played a crucial role in undercutting news organizations in the online-ad market. Last year, Facebook pledged to pay select outlets to link to their content. On Friday, Benjamin Mullin, of the Wall Street Journal, reported that Google, too, is in talks with publishers about a similar paid arrangement. The talks are at an early stage, and mostly involve news companies outside the US, Mullin writes.
  • Six sells: For Esquire, Kate Storey asks how, amid a collapsing media business, Page Six, the New York Post’s gossip column, still exists. “Page Six—a column in a newspaper that is printed on paper—has managed to grow. Yes, it has a website and a Twitter feed, and there was even a TV show. But mostly, it’s still something you flip to rather than something you click on,” Storey writes. “To the people who run the world, or certain parts of it, Page Six still matters.”
  • Public risks, part I: The Trump administration has repeatedly proposed cutting funding from NPR and PBS, public media outputs that the US does have. Cuts were proposed again in last week’s budget, as was a cut to the federal subsidy of Stars and Stripes, an editorially-independent military newspaper owned by the Pentagon; for CJR, I looked at the First Amendment issues at stake in the latter proposal. Congress, of course, is yet to have its say.
  • Public risks, part II: Boris Johnson’s war on the BBC, Britain’s public broadcaster, continues. Over the weekend, a government source told the Sunday Times that Johnson wants to scrap the license fee, the mechanism through which the public funds the BBC, and replace it with a Netflix-style subscription system. If it goes ahead, the government’s plan would significantly scale back the BBC’s current output, but senior lawmakers in Johnson’s Conservative Party are already speaking out against the idea; one said it would amount to “cultural vandalism.”


Other notable stories:

  • Last week, Benjamin Dixon, a progressive podcast host, dug up footage, from 2015, of Michael Bloomberg defending his expansion of stop-and-frisk policies as mayor of New York; “We put all the cops in the minority neighborhoods,” Bloomberg said, “because that’s where all the crime is.” Dixon wrote for The Guardian that Bloomberg “is avoiding all scrutiny.” In the days since, that, belatedly has started to change; among other stories, GQ and the Post detailed historic allegations of sexism against Bloomberg, and the Times tracked how he used his billions to build “an empire of influence.” Elsewhere, after Bloomberg flooded Instagram with bizarre memes, the platform’s owner, Facebook, announced that it will no longer ban politicians from posting “branded content,” Politico reports. Facebook will not flag sponsored posts in the same way it flags political ads, but the former, unlike the latter, will be eligible to be fact-checked. And Bloomberg scored an eyebrow-raising endorsement—from the legendary ABC journalist Sam Donaldson.
  • In other 2020 news, Amy Klobuchar and Tom Steyer failed to identify the president of Mexico when asked to do so during interviews with Telemundo. BuzzFeed’s Jane Lytvynenko and Slate’s Ashley Feinberg debunked a viral rumor that Lis Smith, a communications aide to Pete Buttigieg, was pretending to be a Nigerian Buttigieg fan on Twitter. And Michael Avenatti—the once-ubiquitous, Trump-antagonizing lawyer who was touted as a possible Democratic presidential candidate—was convicted of trying to extort Nike. On CNN, Stelter asked whether he and others had been “stupid” to take Avenatti seriously.
  • CNN’s Oliver Darcy reports on “a climate of nonstop workplace terror and bullying” at the Washington Examiner, a conservative outlet whose managing editor, Toby Harnden, was recently ousted. According to Darcy, Harnden had “made highly inappropriate comments, including sexist and homophobic remarks, about staffers.”
  • For CJR, Zainab Sultan profiles Manuel Duran Ortega, a journalist from El Salvador who was arrested by Immigration and Customs Enforcement in Memphis in 2018. Ortega remains in immigration limbo—his case won’t be heard until March 2022. “I fear returning to El Salvador,” Ortega tells Sultan. “I believe that if I return I will be killed.”
  • For Air Mail, Lee Siegel writes that the case of Tessa Majors, a Barnard College student who was murdered in Morningside Park in December, has gone cold, “at least in the media.” “Simple, discoverable facts” about the murder “remain hidden and unrevealed,” Siegel writes. It “has been exploited with far more zeal than it has been investigated.”
  • In France, Benjamin Griveaux, President Emmanuel Macron’s former top spokesperson, pulled out of the race to be mayor of Paris after featuring in an explicit video that spread online. The video was first posted by Pyotr Pavlensky—a Russian political performance artist living in France—on his site “PornoPolitique.” Figures from across the political spectrum called the ensuing scandal a regrettable “Americanization of political life.”
  • Also in France, the news network France 24 is facing scrutiny for failing to mask the identity of Sadou Yehia, a farmer in Mali who was interviewed for a report on local militants, and subsequently kidnapped and executed. France 24 has denied any ethical lapse; the notion that anonymizing the farmer might have saved him, it said, is “illusory.”
  • And in the UK, Caroline Flack, the former host of Love Island and other TV shows, killed herself on Saturday. Her death has sparked a reckoning for Britain’s tabloid press, which hounded Flack after she allegedly assaulted her boyfriend last year. On Friday, The Sun ran a mocking Valentine’s story about Flack; by Saturday evening, it had been deleted.

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