Killing the Hometown Paper How hedge funds decimated local news

FEATURED | Local News

By Julie Reynolds Martínez

This article is adapted from a story that first appeared in the October 16, 2017, edition of The Nation.

Back in 2011, a reclusive Wall Street tycoon began purchasing and then destroying hometown newspapers across America. His henchmen — executives with no experience in the news business — laid off hundreds of journalists and other news workers. They closed or radically downsized such venerable papers as the Oakland Tribune, the San Jose Mercury News, the St. Paul Pioneer Press, The Denver Post — and yes, the Monterey Herald and the Santa Cruz Sentinel.

At the Mercury News, the newspaper’s printing press was literally dismantled and carted away, which one staff reporter likened to “watching a heart being ripped out.” In what some saw as an ominous moment, when the Sentinel’s presses were hauled over Highway 17 to be dismantled for scrap, the truck crashed.

The tycoon is Randall D. Smith, the founder and chief of investments at Alden Global Capital, which manages $2 billion worth of assets, including the Digital First Media newspaper chain. (DFM owns the Sentinel and the Herald.) He is what is known on Wall Street as a “vulture capitalist.” Or, as the company’s brochure puts it, Smith invests in “distress.”

“Distress” is an apt word for the current state of America’s newspapers, and Smith isn’t the only financial mogul gobbling them up. On September 4, the New York Daily News was purchased by Tronc, the media conglomerate whose majority shareholder is Michael W. Ferro, the business magnate who founded the investment firm Merrick Ventures.

The shrinking and disappearing of hometown papers has done incalculable damage to Americans’ knowledge of the world around them. Democratic self-governance presumes an informed public, but the hollowing-out of America’s newspapers, in both their online and print versions, leaves citizens increasingly ignorant of vital public matters.

The most commonly cited culprit for the decline of newspapers is the Internet and the assumption that no one needs to pay for news anymore. But simple capitalist greed is also to blame. Since 2004, speculators like Smith and Ferro have bought and sucked dry an estimated 679 hometown papers that reached a combined audience of 12.8 million people.

In less than a decade, newspaper ownership in the United States has changed at a dizzying pace; these days, it rests increasingly in the hands of a few largely anonymous investment funds.

Of the 10 largest newspaper owners in the country, six are now investment firms, reports Penelope Muse Abernathy, a former Wall Street Journal and New York Times executive and the author of The Rise of a New Media Baron and the Emerging Threat of News Deserts.

Unlike large corporate owners in the past, 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. Under this strategy, America’s newsrooms shriveled from 46,700 full-time journalists in 2009 to 32,900 in 2015—a loss of roughly one journalist out of every three.

While some may shrug off this development as irrelevant in the era of Facebook news, a December 2016 Nielsen Scarborough study found that newspapers and their websites still reach 69 percent of the US population every month. “Younger readers now account for a greater percentage of newspaper readers,” the ratings agency reported. “Notably, Millennials 21–34 make up 25% of the US population and now represent 24% of the total monthly newspaper readership” (a total that includes online readers).

Abernathy says investment firms have bought up newspapers in “the poorest and most rural” communities, where those outlets are often the only source for local news. These companies then “pursue a harvesting strategy in which they ‘manage the decline’ of the assets in their portfolio. If their newspapers fail, and viable alternatives do not arise, many communities across the country are in danger of becoming news deserts.”

“It’s not just the towns without a paper, but the places where you’ve lost coverage,” Abernathy says. “Reporters barely have time to even fact-check. They end up covering nothing but events or meetings—and then they have to cut back on the meetings.”

News industry analyst and Harvard Nieman Lab columnist Ken Doctor is making the case for reinvestment in newspapers — facing head-on the disruption that new technology brings while exploring ways to innovate and survive.

One encouraging example is blossoming in Doctor’s home state of Minnesota. In 2014, Glen Taylor, the owner of the Minnesota Timberwolves, purchased the Minneapolis Star-Tribune from the investment firm Avista Capital Partners. Taylor charted a long-term course for the paper that didn’t require it to reach large profit margins every year to be sustainable.

On a recent visit, Doctor was thrilled to see how thick the Star-Tribune was — “like an old-fashioned Sunday paper!” The management team “are very good businesspeople,” Doctor says. “They understand what keeps people reading, because they have a long-term vision. They know that at the root of it is their service to the community.”

Another success story is The Pilot in Southern Pines, North Carolina, whose circulation of 14,000 is roughly equal to the town’s entire population. The Pilot provides the staples of local news — high-school sports scores, town-council election results — but it also publishes five arts-and-culture magazines, a statewide business journal, plus a few telephone directories. And it operates a cozy storefront called the Country Bookshop. “We felt this community would be less without a local bookstore,” says Pilot editor John Nagy. “So we went out and bought it. And it’s finally making a profit.

“What all that’s done is diversify our revenues, diversify our outlook, and diversify our business skills,” Nagy adds.

Some will argue that only a nonprofit model can keep local news safe from the clutches of the vultures. It’s an experiment being played out in Philadelphia, where, in January 2016, philanthropist H. F. Lenfest donated the Inquirer, Daily News, and Philly.com to the Philadelphia Foundation.

Ultimately, it may be a mix of altruistic investors, nonprofits, involved local owners, and citizen demand that keeps local news alive. Whether that news is printed on paper or pushed to a smartphone isn’t nearly as important as society’s willingness to invest in the act of reporting itself—an act central to our founders’ vision of democracy.

Have something to say about this story? Check out Your Voices.

Julie Reynolds Martínez

About Julie Reynolds Martínez

Julie Reynolds Martínez is a freelance journalist who has reported for the Center for Investigative Reporting, The Nation, NPR, PBS and other outlets. She is a co-founder of Voices of Monterey Bay.