The Media Today

Could McClatchy become a nonprofit newspaper chain?

June 30, 2020

In February, McClatchy, the newspaper chain that owns titles including the Miami Herald and the Charlotte Observer, filed for bankruptcy in the Southern District of New York. As bankruptcy proceedings have unspooled since then, a lot has changed—both in the world at large and for the already-beleaguered news business, which has been hammered by collapsing ad revenue amid the economic crisis brought on by the pandemic. In April, McClatchy furloughed more than a hundred non-editorial staffers and cut executive positions and pay; around the same time, the company asked the judge overseeing the bankruptcy to allow McClatchy to scale back its payments to its lawyers and creditors. McClatchy’s Kevin G. Hall reported at the time that “the case now has one of the largest investigation budgets in the history of the Southern District’s bankruptcy court.”

Proceedings have been complicated by longer-term wrangling, too. Last week, for instance, a group of unsecured creditors asked the judge for permission to go after current and former leaders of McClatchy in relation to a 2018 debt-refinancing deal with Chatham Asset Management, a hedge fund that is McClatchy’s biggest lender and investor. The creditors claim the deal was fraudulent and unfairly benefited Chatham. (A federal pensions agency has also raised concerns about the deal.) Both Chatham and McClatchy strongly deny this; the latter called such claims “chicanery.”

ICYMI: Kayleigh McEnany, media critic

Tomorrow, the case will reach an important milestone—the deadline for final bids for McClatchy’s newspaper assets. McClatchy’s board will disclose the winning bid next week, pending judicial approval at the end of July. Yesterday, Ken Doctor, an industry analyst who writes for Nieman Lab, assessed who might be in the running to take over. Chatham has long been seen as the frontrunner, and in May, it filed a formal bid in the area of $300 million. According to Doctor, however, Chatham’s lawyers have said they’re open to being outbid. “As a hedge fund, it’s in McClatchy for a financial return, not long-term investment or community service,” Doctor writes. “If someone else thinks McClatchy is worth more than they do, they’ll happily take their money.”

The someone else could be Gannett—America’s biggest newspaper chain by circulation, which already merged with GateHouse last year—or Alden Global Capital, the hedge fund that’s notorious for devastating cuts at its media properties, or an unnamed “newish player” from the financial sphere. Or, intriguingly, it could be a leader or leaders from the world of nonprofit journalism. Doctor reports that unnamed people in those circles are actively discussing whether to acquire McClatchy, or part thereof, with the idea of turning into a nonprofit newspaper chain.

It’s not certain whether all or any of the above suitors will bid by tomorrow’s deadline. Online, however, the prospect of the latter idea—nonprofit conversion—was welcomed by many journalists and journalism-watchers. There were eyeball emojis. “I imagine this will generate a very mixed reaction,” Emily Bell, the director of the Tow Center for Digital Journalism and CJR contributor who is jointly leading our Journalism Crisis Project, tweeted. “However, taking an established for-profit group and *genuinely* reforming it as a non- profit would open some exciting possibilities, I think.” Aron Pilhofer, a professor of journalism innovation at Temple University, said in reply to Bell, “Speaking for myself, reaction very much not mixed. If there is a world in which McClatchy can end up in the hands of a civic-minded owner (regardless of that owner’s tax status), then I’m not sure who would think that’s a bad thing.”

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Amid the industry hellscape, the idea of nonprofit conversion has often been touted as a promising avenue for news organizations, especially on the local level, for whom the prevailing for-profit news model is scarcely—or not—viable. Late last year, the Salt Lake Tribune became the first legacy daily to transition to nonprofit status in and of itself; surprisingly, the Internal Revenue Service processed the switch quickly and painlessly, offering an encouraging template for papers in a similar situation. More recently, Save Our Sun, a coalition of nonprofit, union, and civic leaders in Baltimore, launched a campaign to acquire the Baltimore Sun—which is owned by Tribune, which is increasingly entangled with Alden—and take it nonprofit, too. Another group, the American Journalism Project, aims to establish a network of new nonprofit outlets across the US. In March, as the coronavirus crisis started to bite, Ben Smith, media columnist at the New York Times, endorsed that idea, and suggested that while we’re at it, we should “let newspaper chains die”—saving their journalists while jettisoning their hedge fund owners.

Any move to take McClatchy nonprofit would in some ways represent a middle ground here: it’s a less radical idea than starting from scratch (and could retain some of what would be lost under Smith’s proposal, such as the name recognition that established journalistic brands enjoy), but a much more ambitious project than converting a single title. Nonprofit status is not a silver bullet for any news organization, and certainly not for the whole of McClatchy, which has deep-rooted problems. The economic climate for news was already dire, and the pandemic has made it much more so. Yesterday, Doctor sounded a note of skepticism about the possible McClatchy nonprofit. “How would a civic-minded nonprofit approach the tough transformations still ahead for local news, which is still highly dependent on print revenues smack in the middle of the COVID age?” he asked. “In this growing civic-good journalism world, there are many good people with the right motives—but very uneven skills to transform beleaguered companies.”

Still, McClatchy’s many outstanding journalists deserve owners who at least try to prioritize investment over cuts, and news over profits. As Nieman Lab’s Joshua Benton put it on Twitter yesterday, after sharing Doctor’s article, “there is a big difference between ‘owner who demands an 18% profit margin’ and ‘owner who’s cool ~breaking even.’”

Below, more media business news:

  • Refusing to let this happen: The union that represents staff at the Miami Herald and El Nuevo Herald, its Spanish-language sister paper, is circulating a petition calling on the bankruptcy judge to reject Chatham’s bid. “Hedge funds don’t belong in public service fields like journalism,” the union writes. “Hedge funds have gutted local newsrooms. We refuse to let it happen to the Herald.”
  • Another decisive moment: Doctor’s article also focused on Tribune, which has faced an uncertain future since Alden became its biggest shareholder last year. Alden and Tribune’s second-biggest shareholder, Patrick Soon-Shiong, who owns former Tribune paper the LA Times, previously agreed not to buy or sell any more shares, but that agreement expires today. Per Doctor, Tribune and MNG, Alden’s media arm, are now expected to pursue a formal merger. Yesterday, CJR’s Savannah Jacobson published a timely profile of Alden and its maneuverings with Tribune. You can read it here.
  • Fallen Apple: The New York Times is withdrawing from its partnership with Apple News, meaning that the service will no longer include Times articles in its feed. “The Times, which has made adding new subscribers a key business goal, said Apple had given it little in the way of direct relationships with readers and little control over the business,” the paper’s Kellen Browning and Jack Nicas write. “It said it hoped to instead drive readers directly to its own website and mobile app so that it could ‘fund quality journalism.’”
  • Selling up: WarnerMedia, which owns CNN, has decided to sell the CNN Building in Atlanta. According to Brian Stelter, its chief media correspondent, the network will eventually relocate staffers working in the building to another CNN campus in Atlanta, but the move is expected to take several years so nothing is likely to change soon.
  • Some good news from Australia: Yesterday, a group of investors and philanthropists finalized a deal to take over the Australian Associated Press, a newswire that was slated to close at the end of this month. Australia’s ABC News has more.

Other notable stories:

  • Today is the final day of Pride Month. During it, Black trans women including Dominique “Rem’mie” Fells, Riah Milton, and Brayla Stone have been killed; according to Out magazine, Stone, who was 17 and was found dead in Arkansas, “is the eighth trans person violently killed in the last seven days.” David Johns, of the National Black Justice Coalition, told Out that media outlets must “acknowledge and protect all Black Lives, especially Black trans women and girls.” Recently, I looked at media coverage of Black trans lives and the killings of Fells and Milton in a newsletter for CJR.
  • Over the weekend, the Times reported US intelligence that Russia offered to pay militants linked to the Taliban to kill coalition soldiers in Afghanistan. The story raised many questions as to what Trump knew and when; at a briefing yesterday, Kayleigh McEnany, the White House press secretary, did not answer them. McEnany previously claimed that Trump was not briefed on the intelligence; on Sunday, the president said as much in a tweet, and accused the Times of “another fabricated Russia hoax.” (Trump tagged the Times’s Books desk in the tweet, probably by mistake.) But yesterday, both the Times and CNN reported that Trump did receive a written brief on the matter.
  • For CJR, Bill Grueskin profiles McEnany, and her habit of bringing old press clippings to White House briefings, then citing them in a bid to turn tough questions back on the media. Her goal “isn’t to respond directly to these questions, or even to engage in a dialogue about journalistic ethics,” Grueskin writes. “It is to throw up so much chaff into the media’s radar that even the most basic critique is deprived of meaning.”
  • Yesterday was a banner day for banning. Reddit banned r/The_Donald, a pro-Trump hub that has long been inactive, and r/ChapoTrapHouse, a forum dedicated to the left-wing podcast of the same name. YouTube banned David Duke, Richard Spencer, and Stefan Molyneux on hate-speech grounds. And the video platform Twitch suspended Trump, citing hateful content during two rallies that were recently streamed from his account.
  • On Sunday, the Daily Beast’s Lloyd Grove reported that Van Jones, a liberal pundit on CNN, helped Trump craft a policing policy, then praised the policy without disclosing his input. Yesterday, Jones called the story “doubly false” and demanded a correction; the Beast updated its story to include Jones’s denial, but stood by its reporting. In other policing news from the Beast, Kelly Weill reports that members of Congress are pushing the FBI to unredact and update a 2006 report on white-supremacist cops.
  • In the early days of the pandemic, hundreds of tons of medical masks were exported from the US to other countries, despite a domestic shortage. The Intercept’s Lee Fang reports that it’s hard to know much more about the shipments because the disclosure of air-cargo data is banned under federal law—a concession won by airline-industry lobbyists in the 1990s. (Cargo data for shipments sent by sea can be made public.)
  • Medical providers and major airlines have removed magazines from waiting areas and seat pockets due to fears that they could help spread the coronavirus, Bloomberg’s Gerry Smith reports. Health officials generally do not believe that touching such items poses much of a risk; still, Smith writes, “paranoia over print has lingered.”
  • For Politico, Natasha Bertrand profiles Allison Gill, who anonymously hosted Mueller, She Wrote, a popular podcast about the Mueller probe, while holding down a day job at the Department of Veterans Affairs. Gill was fired after the VA investigated the podcast. She has since filed a complaint alleging discriminatory treatment by her bosses.
  • And in the UK, Times Radio, a Murdoch-owned station set up as a rival to the BBC, launched to great fanfare yesterday; its first guest was Prime Minister Boris Johnson. Listeners who tried to tune in via Amazon’s Alexa, however, were steered to a different station named Times Radio—in Malawi. The Guardian’s Jim Waterson has more.

ICYMI: The most feared owner in American journalism looks set to take some of its greatest assets

Jon Allsop is a freelance journalist whose work has appeared in the New York Review of Books, Foreign Policy, and The Nation, among other outlets. He writes CJR’s newsletter The Media Today. Find him on Twitter @Jon_Allsop.