Hedge funds become newspaper barons
Investment firms cut costs, let presses fold
A group of journalists protesting outside the offices of a New York City hedge fund recently shined a light on a little-known fact about the state of the local American newspaper: Behind the scenes, financial firms often hold all the cards.
Investors like Alden Global Capital and Fortress Investment Group have acquired ownership stakes in newspapers that have struggled to adapt in an online world, from the Denver Post to the Providence Journal. Funds have brought their cost-cutting know-how to help restructure several newspaper chains in heavy debt after the 2008 financial crisis.
But the evolving ownership picture has sparked fresh questions over whether investment firms can really help save local newspapers by making them
profitable again — or if they’ll starve them to the point that they collapse instead. The journalists who traveled from cities like Denver and St. Paul earlier this month to join the protests outside Alden Global’s offices are convinced it’s the latter. Some analysts agree.
“They’re not reinvesting in the business,” Ken Doctor, a longtime newspaper analyst
and president of the website Newsonomics, said about Alden Global. “It’s dying and they are going to make every dollar they can on the way down.”
Several hedge funds have become newspaper barons in recent years. Alden Global now owns about 60 daily newspapers through a subsidiary, Digital First Media. New Media Investment Group, which is managed and controlled by private-equity firm Fortress, owns almost 150 newspapers in smaller cities like Columbus, Ohio, and Providence, R.I., through a unit, GateHouse Media. And hedge fund Chatham Asset Management is one of the largest shareholders and bondholders in McClatchy Co., publisher of the Charlotte Observer and Miami Herald.
Alden Global didn’t respond to a request for comment. A Fortress spokesman said the firm has no role in New Media’s day-to-day operations. In a statement, McClatchy President Craig Forman said Chatham also has no influence on its operating decisions.
The plight of local newspapers is different from bigger national ones like the New York Times that have developed successful subscription models and large metro outlets like the Boston Globe that have been acquired by billionaire backers.
New Media disputes any suggestion that efforts to slim down its newsrooms are driven by profits. The company has cut highly paid but unproductive reporters while asking the remaining reporters to write more articles, according to Michael Reed, New Media’s chief executive officer. “We’re buying newspapers because we think we have a strategy that can save local journalism,” Reed said.