Newspapers increasingly on life support, and hedge funds are paying the bills

by WorldTribune Staff, May 22, 2018

Hedge funds have acquired ownership stakes in numerous American daily newspapers – but are the investment firms saving, or starving, the struggling papers?

“Newspapers have struggled to adapt in an online world, from the Denver Post to the Providence Journal,” Bloomberg noted in a May 22 report. “Funds have brought their cost-cutting know-how to help restructure several newspaper chains in heavy debt after the 2008 financial crisis.”

But, the report noted, “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.”

New Media Investment Group, which is managed and controlled by private-equity firm Fortress, owns almost 150 newspapers in smaller towns like Columbus, Ohio, and Providence, Rhode Island, through a unit, GateHouse Media.

In January, GateHouse’s Florida Times-Union in Jacksonville announced plans to cut about two dozen jobs, or 10 percent of its workforce, just one month after saying it would eliminate 50 production positions, the Bloomberg report said.

“We’re buying newspapers because we think we have a strategy that can save local journalism,” New Media CEO Michael Reed said.

New Media’s shares are up 36 percent in the past year, and Reed says its profit margins are about 10 percent.

Another investment firm, Alden Global, owns about 60 daily newspapers through a subsidiary, Digital First Media.

Alden Global “has made some of the most severe cuts among owners,” the Bloomberg report said.

Last month, employees at its Denver Post, whose staff has shrunk from about 200 to less than 100 in the past eight years, “publicly rebuked its owner after being ordered to cut 30 more jobs.”

“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.”

Alden’s Digital First Media generated a 17 percent profit margin in 2017, which is more than The New York Times, Doctor said.

Patricia Doxsey, a 60-year-old reporter at the Daily Freeman in Kingston, New York, told Bloomberg she had to wear fingerless gloves and a warm hat when the newsroom had no heat on a recent winter day. In the early 2000s, the newspaper had about 200 employees, she said – now it has about two dozen. And the outsourcing of the paper’s printing press to Albany means late-breaking stories aren’t published in print for two days.

“We just want Alden Global Capital to get the hell out of the news business,” Doxsey said. “It has no business owning newspapers. We’re not widgets. If they close us down, the news goes away.”

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