Hedge fund ownership of newspapers stokes fears
Journalists lament loss of local news amid cuts
“If you lose a pint of blood you don’t notice it, but if you lose 6 of your 8 pints you’re going to feel it.”
Dana Coffield, former Denver Post journalist, on staff cuts
DENVER – In a cost-cutting move last year, The Denver Post moved from the city’s downtown, where the newspaper had been based for more than a century, to quarters in its printing plant in a neighboring county. Reporters and editors found that their new workplace had the feng shui of a run-down casino, with no windows to let in sunlight and a constant ambient hissing from the presses.
But they hoped the move represented an end to the bloodletting that had occurred at the newspaper since hedge fund Alden Global Capital took over in
2010, said Larry Ryckman, then a senior news editor. Layoffs and turnover had left only about
100 journalists in the newsroom, a third of its staff during the paper’s heyday.
That hope was dashed a couple of months after moving offices, when it was announced 30 more positions would be cut. It was then that Ryckman came to believe that the firings would only end when the newspaper closed for good: “We were under attack by our own owners.”
What would follow was a newspaper mutiny, including editorials slamming its own ownership, allegations of censorship and mass resignations.
Most any journalist who has worked at a newspaper in the last couple of decades has come to expect layoffs and other cuts as the new reality of the industry, including at Gannett Co., USA TODAY’s owner. As audience has shifted to digital products, including online news, the unrelenting trend has ravaged profits from print circulation and advertising. Increasing digital subscriptions have not easily offset print’s legacy profit sources.
But journalists and industry insiders familiar with Alden regard its methods of acquisition and management of distressed newspaper properties as a particularly ominous force in the industry in which staffs are decimated and properties sold off for investment elsewhere at the expense of a newspaper’s prospects for long-term survival.
If Alden’s latest plans come to fruition, it will be bringing its ownership style to a newspaper near virtually every American. MNG Enterprises, which also operates as Digital First Media and is owned by the hedge fund Alden, has launched a hostile takeover bid for Gannett, the nation’s largest newspaper publisher by paid circulation. With a national newspaper in USA TODAY and 109 local brands in cities around the country, Gannett would make for a unique – and landscape-shifting – acquisition for MNG.
In a note to clients on Monday, analysts Douglas Arthur and Craig Huber described Alden’s reputation for “strip-mining” newspapers it purchases “until the very last iota of cash flow has been squeezed from it.”
Ken Doctor, an analyst who writes about the media business on his website, Newsonomics.com, said the hedge fund is alone among owners of struggling media properties in that it doesn’t reinvest in its journalism or harbor any long-term survival strategy for the newspapers it owns. Doctor said that MNG purchasing Gannett “would signal a local newspaper capitulation to the inevitability of further decline toward closure at some point.”
But in a letter sent Monday, MNG derided Gannett, of which it says it already owns a 7.5 percent stake, for a “series of value-destroying decisions made by an unfocused leadership team” and cast it-
self as a guardian angel for the industry. “We save newspapers and position them for a strong and profitable future,” MNG declared.
Gannett has said it is reviewing the proposal. Some analysts have said they believe MNG’s offer, of $1.4 billion, is too low. Gannett declined to comment on what impact the potential sale might have on the company’s journalism.
In interviews with roughly a dozen journalists who experienced Alden’s takeover in Denver, a dire picture emerges of what happens when the hedge fund comes for the newspaper in your town. They described crippling personnel cuts and corporate meddling. A spokesperson for MNG, Paul Caminiti, did not respond to specific questions for this article but issued a statement crediting the company’s “successful track record” enabling it “to run newspapers profitably and sustainably so that they can continue to serve their local communities.”
Alden’s Digital First owns about 200 publications, including The Mercury News in San Jose, California, the Los Angeles Daily News and the Boston Herald. Perhaps nowhere has its ownership been as contentious as in Denver.
The Denver Post, first published in 1892, had waged a decades-long war with the Rocky Mountain News. In 2007, each newspaper employed more than 200 journalists, according to Kevin Vaughan, a former reporter at both papers. But shrinking profits gave close quarters to the feud when the rival newspapers were forced to move into the same office building, and ended it altogether in 2009, when the Rocky shut down.
In 2010, when Alden acquired the Post’s bankrupt parent company, the newspaper’s journalists were expecting the kind of cuts that have become commonplace in the industry – but not the carnage that ensued, Ryckman said.
Chuck Plunkett, then The Post’s editorial page editor, described a “yearly grind” in which layoffs followed even the best journalistic results, such as when he said roughly 20 staffers were cut after The Post won its ninth Pulitzer Prize in 2013 for coverage of the Aurora movie theater massacre.
That’s a familiar pattern for the company, according to Kat Anderson, an administrative officer at the Pacific Media Workers Guild, a union representing journalists at several San Francisco area newspapers. She said that MNG laid off about 20 staffers at the East Bay Times after the Oakland-area newspaper’s Pulitzer win for its “Ghost Ship” warehouse fire coverage.
Dana Coffield, whose decade-long tenure at The Post until 2018 included a stint as its second-in-command editor, said the ongoing cuts crippled the newspaper. “If you lose a pint of blood you don’t notice it, but if you lose 6 of your 8 pints you’re going to feel it,” Coffield said.
Making the layoffs more troubling to those weathering them are revelations that the company apparently was earning ample profits yet reinvesting them in non-journalistic enterprises.
Doctor, the analyst, has obtained financials showing that Digital First earned a $160 million profit in
2017. The privately held company has disputed the figure while not releasing detailed financial information. On Monday, the company boasted of a profitability margin exceeding 16 percent in 2018.
In a contentious meeting with staffers at The Post’s office last June, MNG Chairman Joe Fuchs described a strategy of “survivability and consistency,” which included making “Warren Buffett-style investments in some other things.”
In the recorded meeting, Fuchs allowed that at least one of those investments, into the struggling Fred’s pharmacy chain, was “not very successful.” The $158 million investment is now worth roughly
$20 million.
Alden has made investments in other publiclytraded companies unrelated to media and communications, federal regulatory filings show. The hedge fund made a profit by selling most of its stake in furniture store Pier 1 Imports in January 2017, before the company’s stock plummeted. Alden’s other investments have included Mechel PAO, a Russian mining giant that has been criticized for pollution, and a Brazilian state-run energy company, the filings show.
The trouble in Denver reached a boil over last spring, when journalists in The Post’s opinion section responded to the continuing layoffs with a bold statement: a full page of columns blasting Alden as “vulture capitalists” and calling for new ownership to save the newspaper. Editorial page editor Plunkett said he was forced to resign soon thereafter.
When then-senior news editor Ryckman insisted on writing an article about Plunkett’s resignation, Ryckman said, editor-in-chief Lee Ann Colacioppo only allowed the story to be published only after removing explicit references to Alden Global Capital. Colacioppo did not respond to a phone message seeking an interview for this story.
Ryckman said it was “the first time in my career I was told to take facts out of a story for no reason having to do with journalism.” He resigned the next day.
Ryckman said: “It makes me sad to contemplate what’s going to happen to Gannett papers coast-tocoast if this sale goes through. ... They’ve put these newspapers into a death spiral.”