Private Equity Firms are Massacring the Free Press

This post was guest authored by Olivia Snow Smith.

Though lacking the size and prestige of The New York Times or The Washington Post, The Storm Lake Times is arguably just as important. When politicians see no need to address the problems of small rural towns, it is up to the journalists to step up. Two years ago, the tiny bi-weekly Storm Lake Times in Iowa (circulation: 3,000), won the coveted Pulitzer Prize for taking on corporate agriculture interests in Iowa. If it weren’t for the existence of vibrant local papers, stories like that might never come to light.

When Wall Street investors (here you can also sub-in hedge funds or private equity moguls – they often play the same role) scoop up papers similar to the Storm Lake Times – and they have done a lot of that – we all suffer because the equation is essentially the same as buying a retail giant like Toys ‘R’ Us, which private equity looted into bankruptcy.

First private equity mavens put down a fraction of the purchase price and borrow the rest; once they complete the takeover, the company is saddled with the debt. First there is a round of job cuts, and key functions are centralized at a corporate office, ostensibly to save money, but creating a shabbier product. Circulation and revenue declines. Over the years (or faster) more and more employees are terminated.

It inevitably comes to a point where the paper is at best a mere shadow of what it once was, or has turned to ashes completely. Wall Street may win in the process, but the losers in this deal are journalists, the public, and American democracy itself. This cycle has been documented extensively and the process and the results are ugly. The view from the inside is even uglier than from the outside, with journalists only half-joking that the new owners will surely make them buy their own toilet paper.

Perhaps the most infamous recent example of this was the breakdown of the 127-year-old Denver Post by the vulture capitalist group, Alden Global. Since being acquired by Alden, two out of every three staff positions have been cut. It is not uncommon these days for newspapers to downsize, but Alden has become known for laying off staff at twice the industry rate. To add insult to injury,  Alden has been using staff pension funds as their own personal piggy bank to fund other projects. In total, they have moved nearly $250 million into their own accounts in the Cayman Islands, which has triggered federal scrutiny from the Department of Labor.

Dave Krieger was the editorial-page editor of the Alden-owned Boulder Daily Camera. Last April, Krieger self-published his own piece critical of Alden, after the publisher overruled the editorial board and killed it. The headline, “Private Equity Owners Endanger Daily Camera’s Future,” was seen by higher-ups as too incendiary to publish. Krieger was promptly fired for his whistle blowing. In solidarity and in protest, The Denver Post’s editorial-page editor, Chuck Plunkett, resigned. He had also experienced the Post’s publishers picking and choosing which stories would go to print based on what would go down smoothly with Alden. In other words, corporate greed, not the public interest, determined what information got relayed to the people.

The other papers Alden Global Capital runs through their subsidiary, Digital First Media, include The Boston Herald; The Pioneer Press of St. Paul; The Mercury News of San Jose, Calif.; The East Bay Times; and The Orange County Register. That makes hundreds more newsroom staff susceptible to censorship, and layoffs. Millions of readers, in turn, may gain only the information that Alden has deemed palatable for the public, and unembarrassing for themselves.

Another prominent example of newspapers being tanked by corporate greed, is the case of Sam Zell. Media conglomerate Tribune Co. (publisher of the Chicago Tribune, Los Angeles Times and many other venerable publications) it filed for Chapter 11 bankruptcy protection in January 2008. Across all its assets, the company was $13 billion in debt.

The beginning of the end for Tribune Co. was when it was bought by real-estate mogul and #MeToo movement opponent Zell in April 2007. Tribune Co. agreed to go private in a leveraged buyout of $8.2 billion, led by Zell. Even though the deal technically handed ownership to an employee stock ownership plan, Zell is given control. In what has been called “The Deal From Hell”, Zell (or rather, Tribune Co.) is saddled with the $13 billion debt when he closes the second step of the two-step deal.

The march of these buyout barons through the media industry continues. In early August, New Media Investment Group (owner of GateHouse Media) announced plans to buy Gannett. The $1.38 billion deal would unite one-sixth of all daily newspapers across the country, affecting 9 million print readers. New Media Co. anticipates cutting $300 million in costs in year, and its track record suggests layoffs comparable to those at the Denver Post are in the offing. The lucrative financing is coming from hedge fund giant Apollo Global Management. Fortress Investment Group, which manages New Media, will continue to harvest a management fee and a share of profits – even if that means less journalism.

The Zell buyout affected editorial integrity. Tribune Co. suddenly became particularly aggressive in its advertising techniques. They planned publicity stunts to blur the line between article and ad. For the first time, advertisements were put on the front pages of the papers, and were intentionally laid out to look like real articles. Loyalty to the public was pushed aside for profit.

The role private equity plays in stifling an independent media has become a prominent talking point among the 2020 Democratic candidates and lawmakers in Congress. Sens. Elizabeth Warren (D-Mass.), Tammy Baldwin (D-Wisc.), and Sherrod Brown (D-Ohio) recently introduced legislation to curb abuses in private equity (S. 2155, the Stop Wall Street Looting Act). In a Medium post, Senator Warren specifically calls out private equity firms for decimating local and regional newspapers. In the Columbia Journalism Review, Bernie Sanders introduces a new plan calling for a moratorium on major media mergers. He also encourages newsrooms to unionize nationwide. Even lesser-polling candidates like Andrew Yang and Amy Kloubachar have advocated for more protection for newspapers from corporate sharks.

Newspapers have been critical to American democracy since its founding. By allowing huge corporations to gut newspapers in the name of making a buck, we are putting a price tag on the same democracy that hundreds of thousands of men and women have died for. Thomas Jefferson said it best in a 1783 letter. He wrote, “Considering the great importance to the public liberty of the press, and the difficulty of submitting it to very precise rules, the laws have thought it less mischievous to give greater scope to its freedom than to the restraint of it.”


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