Is it time to give up on your local newspaper?
The financials and ownership situations are getting worse and the newsroom cuts are getting deeper. There is hope for local news, but whether it will come from existing brands is complicated.
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Alden Global Capital announced last week it has a deal to buy the Tribune newspaper chain, a deal that will make it one of the largest newspaper chains in the U.S by virtue of consolidation. For seasoned media-watchers it wasn’t a shock. Alden has had a large minority stake in Tribune since 2019, and given how it has operated in takeovers of other media companies such as MediaNews Group, the pessimistic read on Alden’s increasing influence was that things were always headed this way.
Alden is a hedge fund that has been scooping up strategic positions in distressed media properties for more than a decade. It took over MediaNews about 10 years ago after the chain became debt distressed and had to enter bankruptcy protection. MediaNews is emblematic of the successive and brutal self-owns by the industry in the ’80s and ’90s, which consisted of massive borrowing to finance consolidation on the false faith that 30-40% profit margins would last forever. Readership dropped and the bottom fell out, and that created the kind of opening for vulture capitalist funds like Alden to swoop in and profit from the wreckage.
Alden’s track record is pretty good if you’re an investor, but it’s flat awful if you value journalism in the service of the public interest. Margaret Sullivan called Alden “one of the most ruthless of the corporate strip-miners seemingly intent on destroying local journalism.” Alden’s model is the hedge fund playbook on distressed companies: make back your investment by making drastic cuts to operating costs that don’t have immediate impact on revenue, all while bleeding other assets dry. For example, the past 10 years have seen newspapers selling their own buildings because the real estate was the paper’s most valuable asset. This is a liquidation strategy that helps pay back investments while cuts push you into profit zone. In the case of newspapers, hedge funds are trying to make their purchase price back and bleed the operation to death as it squeezes out profit.
Does this sound like a terrible business model? Well, no argument here. It might be sound business in the world of winding down failing businesses in a general economic landscape, but journalism is a mission-driven enterprise. Hedge funds are poison if the goal is public service. Yes, these have always been businesses, but what the public wants and values from its news is at odds with slash-and-burn economics.
Readers notice drops in quality over time. They might hear about newsroom cuts and think it doesn’t sound good, but they might not cancel until they see the effects over time—smaller sections, entire reporting beats axed, more wire copy at the expense of local reporting, superficial stories that are the result of writers being asked daily to churn reams of copy rather than focus on one or two stories of quality. But against this backdrop you can see Alden’s cynical gambit: bleed the company in ways subtle enough that you don’t lose lots of subscribers, focus on making money while you can and don’t worry about destroying a brand that probably was going to die anyhow. This isn’t a long-term investment strategy, and it’s not an attempt to grow the business.
It also might be wrong. It’s hard to know whether the business is dying because the market wants it to or whether the people running them decided to prioritize the short term over the long term.
But I’ll leave the guessing about Alden’s motivations to others. Yes, there are ideas about right wing agendas that can border on conspiracy theories. It’s too far-fetched for my taste. Occam’s Razor would say that Alden doesn’t care about quality journalism one way or the other, that instead it is calculating that these companies are dead men walking anyhow. The company is doing what hedge funds do, focusing on profitably winding down what it perceives as a dying asset, and they can do so because the owners who do care about quality journalism have cashed out.
From that point of view, Alden pays pennies on the dollar to owners looking for the exits and then swoops in to make a modest profit on an investment that costs several factors lower than it would have been 20 years ago. Here’s a meaningful comparison. Back in 2006, McClatchy agreed to buy about 30 newspapers with a circulation totaling about 3.5 million from Knight Ridder for $6.5 billion in cash and stock; it was the last big deal of the wine-and-cheese days of news valuation, and it was a strategic blunder that turned a well run company like McClatchy into a money pit. In comparison, last week’s Tribune deal is for about $600 million and a fraction of that readership the Knight Ridder papers had (estimates are hard to make because companies add and subtract from their portfolio over time, but a few years ago Tribune circulation was about 2.5 million according to one estimate).
Which brings us to Alden, and to the Tribune purchase.
I want to start by asking a provocative question that admittedly doesn’t have an easy answer: are we wasting our money by subscribing to newspapers owned by hedge funds that are just grinding these publications to dust? Put aside the hard work these journalists are doing for a second, because they aren’t the ones degrading the quality. This is a question geared toward whose pockets we are lining, what innovation we are stifling, and what trends we are encouraging.
Before exploring that, I want to leave you in suspense. So first let’s talk about three realities about the Alden purchase in context that can shape how we think about this question.
First, after adding Tribune properties to Alden’s MediaNews holdings, the company is vast and diverse in terms of reach. These are papers in markets big and small, most notably the flagship Chicago Tribune, and includes my home here in the Lehigh Valley. My local paper, The Morning Call, has seen its circulation drop precipitously since 2010 and no longer has a newsroom after Tribune sold the building last year. If you know someone who’s worked at a Tribune paper, you know the chain has been through a tumultuous run the past 10 years (remember tronc?) and has faced several rounds of devastating newsroom cuts. That Alden, whose M.O. is devastating cuts, is taking over properties that have already been cut to the bone? It’s not hard to see the huge threat to local news sustainability that this acquisition represents. How do lean newsrooms get more lean?
Second, the sale had an interesting wrinkle. As part of the purchase, Alden made a nonbonding agreement to sell The Baltimore Sun to the Sunlight For All Institute, a local charity that wants to preserve the paper’s community legacy. The notion is that a paper that doesn’t chase profit is more likely to serve the community better, to put the community’s needs above the demands of the bottom line. This is another version of a recent trend of taking papers to nonprofit status, including the Salt Lake Tribune transitioning in 2019. I know other Tribune newsrooms have looked at this model as a possibility, though some of that requires creating financial incentives such as tax benefits to make selling a more attractive option to Alden compared to killing the paper.
Finally, the sale is happening amidst a big unionization push that already was happening in Tribune newsrooms. This is a broader trend in the U.S., detailed well by Josh Sternberg earlier this week, that started with emerging digital media shops and has spread to legacy newsrooms. For the digital media newsrooms, I have more hope about the ability to create real change in working conditions and job security. I have more questions about the impact on local newspaper guilds. The difference between these two is leverage. Digital companies are working in spaces and with business models that at least represent, by and large, where ad revenue and subscription dollars increasingly are flowing. Not all of these companies are doing well, but at least they are somewhat in the right direction of the trend. Local newspapers represent where the money is flowing from. Unions fighting for working conditions in a newsroom whose entire industry is dying due to dwindling ad revenue are fighting a difficult battle by asking for more when the story each day is that companies whose industry—not the individual paper, but the entire business of newspapers—is bringing in less relative to fully digital peers.
Unions do represent some ability to keep newsroom quality that could stave off cuts, but from this corner their larger benefit is creating a collective mindset that gives them the power to walk and launch something new (read this about how Defector Media was built exactly that way, and it’s workingggggg). But I could be wrong. Maybe unions create sympathy with the public and educate readers about the need to support local news. It’s a difficult puzzle that isn’t easily parsed by union rhetoric, well-meaning as that rhetoric might be. Tribune guilds have not made a lot of splashy traction in this regard, and I don’t know how they’ll get anywhere with Alden in the long run either.
With that said, back to the question. Are you—am I—a chump for paying for local news?
Hopefully you can see why I just spent some time on that context. The question of where to send your subscription dollars is wrapped up in several different and possibly self-contradictory realities:
You care about local news and want to support it.
You’re giving money to a news chain that is making cuts to quality and has no long-term plan to get that quality back. Its goal is mere survival rooted in slow death, not sustainability.
Cuts mean less breadth in beats, topics and focus. Local news that lacks breadth lacks value.
Newsrooms are gathering to fight this trend in savage cuts. They need our support, even if unions came to the game a bit late.
Subscribing busy newsrooms time to explore sustainability opinions, including a nonprofit transition, whereas a dead newsroom is dead.
Money thrown to dying companies is money not thrown to innovators trying to make something new. And in fact it represents a barrier for anyone thinking of launching a startup to address deficiencies in a local community’s news ecosystem.
It’s a difficult puzzle. I struggle with it somewhat but have kept subscribing because in my case I lack real alternatives. People sometimes ask me if it’s worth it, even people whom I know value supporting the news. I always tell them local news is worth supporting, but it really depends on where you live and what is available. But it’s important for us to think about our own local context and make informed choices that help grow local news, whatever it looks like.
I want to spend some time on those last two bullet points, because they represent the ends of spectrum that really define the choice for us.
What happened with the Sun is the culmination of work to transition the model into something that is community-owned, more mission-oriented and (most important) sustainable. This doesn’t happen if the Sun shuts its doors last year or two years ago; you could argue that people subscribing amid the turmoil bought the paper time for its next act.
It’s also worth noting that it involves saving a legacy brand; the brand is probably the most valuable asset the paper has at this point, and creating something sustainable with an existing property allows the paper to sidestep a lot of the marketing, promotion, and visibility costs that make life difficult for startups. It could be the smoothest path forward if the goal is to not disrupt the community news ecosystem. At the same time, it comes with some costs, namely that the new model looks like the old, just with less baggage from debt and profit needs. While it is journalism-centered, it’s not necessarily going to be something that is built to have a flexible business model, making it susceptible to another tech change similar to how the internet ruined the local news monopoly.
The other more obvious problem with the legacy brand transition is it is going to look different depending on the community. Not every community has a wealthy philanthropist determined to save news in the public interest. Not every locale has a favorable tax structure that makes selling attractive for an Alden, and state legislatures hostile to independent news might not lift a finger to make necessary changes without a rich lobbyist to back the effort. The Sun is a hopeful story, but not necessarily a generalizable one. With time, perhaps communities can find a way to do it. But papers are running out of runway and Alden is the Grim Reaper, so it’s a question of whether time is up.
So then there’s the other side. In throwing good money after bad businesses, are we stifling innovators and delaying a necessary rebirth? That is, if my local paper dies tomorrow, what will spring up in its place? Probably nothing right away, and if what happened in the Week Facebook Killed Australian News (man, I really love saying I told you so) is any indication, the void will be filled by a lot of extremist and conspiracy-theory content. My own area hasn’t had an innovative startup launch similar to ones we’ve been seeing spring up all over the U.S. Is this a question of lack of entrepreneurial spirit, lack of ripe conditions, or lack of sense the public would jump on board?
It’s easy to get tunnel vision, but innovation in news is happening everywhere and it’s not a one-size-fits all model. The accidental genius of legacy newspapers is the model scaled up and down because they all operated in monopolies made possible by no internet. What worked in New York City largely could be a model in Whynot, MS, or Brazil or Singapore because the competition was limited but the information needs were human and thus somewhat more universal. I wrote this in Wired a couple years ago, and unlike my college airband’s power ballads, it holds up well:
The accidental brilliance of the newspaper business model is it commoditized all those information needs to an audience that, pre-internet, had no other choice. You want a weather report? The newspaper had it. Looking for a job? The newspaper had it. Newspapers owned their readership, which had many needs but few choices. Advertisers showed up in droves to capitalize on this holy grail—a captive audience that could be reliably delivered in a defined space. The internet changed everything. The weather became a website, then an app. TV guides went online and became interactive and customizable. Classifieds became searchable and interconnected across regions, then states, and eventually the nation.
I’ve spent the past few years using my conference travel (hey, remember traveling? I hate you, COVID) to crash sessions run by people doing local news at small scale but finding success. Online News Association, Newsgeist, South By Southwest sessions, etc. The model really varies by market and mission, but if you start to put the pieces together, it has a similar story.
If we accept that the Internet broke the information-needs monopoly, new players have the advantage of seeing gaps that legacy products don’t. Papers spent a decade from 2000-2010 trying to compete with the Internet—with everybody!— and failed. One of the problems that come with having a successful business and brand is you feel pressured to try and transfer that model online. Legacy business is advertising and subscription around a defined product, and “innovation” was defined for too long by local newspapers as figuring out how to sell that what worked in print in online spaces. It has been a dismal failure.
Startups have the ability to see coverage gaps, uncovered beats, underserved communities and crazy-ass business models that Just. Might. Work. They lack the baggage of serving what has always been done. It is a terrifying kind of freedom, but as my main man Kylo Ren once said, sometimes you have to let the past die.
So what are some new avenues?
New ownership models: The aforementioned Defector initiative is interesting. The company is owned by the journalists. They have an interest in its success, and in the best interests of the company. Unlike sending money to a Tribune paper, you know your money is going straight to people making what you consume. There’s a brand relationship with your audience that matters here. This can take other forms, such as a community-owned co-op model such as The Devil Strip in Akron, OH. Everyone is a stakeholder, not just a reader. The point is, ownership structures that are centered on employees and readers can scale down to 1- or 2-person newsrooms in a small town too if the other moving parts such as coverage choices are calibrated correctly. Another option, as mentioned above, is a nonprofit or foundation model where news is driven by philanthropy. It’s an interesting path, but it’s also somewhat fraught if not structured well. Journalism is supposed to hold the powerful accountable, and there ain’t no power like the billionaire holding your news operation by the thread.
New revenue models: Memberships, such as what you can do with Nevada Independent or Texas Tribune, are on the rise. “Membership” can be a fancy word for “subscriber,” but it also can be a tier past mere subscription that gives you access to other things like events and backroom chats with staff and newsmakers. In that sense, it follows a model not unlike NPR in some cases.
New coverage models: The ugly historical truth about legacy local news is it too often has been created with white, affluent audiences in mind. That creates coverage gaps, but it also creates room for someone to come in and make something better. Some of our best innovation is coming in underserved communities, in Black or Spanish-language communities. Bookmark Outlier Media in Detroit, MI, as a great example. They’ve revolutionized how to rethink community information needs by thinking about gaps in the news based on what the community is saying (and it’s run by Candice Fortman, a brilliant news executive and journalist who gives me hope for the future of news). Other models are built around being extremely niche. If the legacy product is mass and general audience, the new model looks like communities with several small startup products that all serve a slice of interest area.
Note these are all things that legacy papers could be doing, and some certainly are trying. All things equal, I’d like to support a known brand working to do something new and innovative. But some are stuck in old thinking, others are constrained by having no resources to make these changes. There’s the hedge fund problem again. I told you the answer is complicated.
I’d posit that it should be a given that we find a way to financially support the local news we use. Product use means we value it, and we should help make it sustainable. The void left behind is so much worse. So let’s call that a starting point.
But is it time to break up with your local newspaper? That’s more difficult. What are your other options? What is the paper doing to reinvent itself? What are its medium-term prospects for accomplishing that relative to its financial distress? If it’s owned by a hedge fund, how confident are you that good journalism is front-and-center of the long-term strategy?
One transition path is to encourage local journalists working at dying media properties to consider going independent. This is basically what happened with Jon Ralston, Mr. Nevada Politics, when he launched the NV Indy. But there is so much missing knowledge for these folks, so much leveling up to do. Journalists of my generation were told not to think about the business model, that thinking about profits was a threat to our independence. So it took me going to grad school to see the full picture of the economic calamity that was about to hit the industry starting in 2006.
Were I starting out now, a class in entrepreneurial journalism, how to set up a business LLC or nonprofit, etc., would be a must in my toolkit. But there are seasoned journalists out there without that knowledge, but they have the chops to give you a legit product. They’re going to need that prodding to add to their knowledge base, and they need to know they have your support.
But the reality is that unless you’re in a big metro, you might not have a startup to support. But stay on the lookout, and let individuals know you support them in case they are thinking of going it alone.
There is an inflection point coming as the news desert expands. Local news is going to look and operate differently than the days of old, and it might have different names and ownership structures than it used to, but community-minded innovators are going breathe life into these deserts. I’m heartened by projects like the Tiny News Collective, which is aiming to start more than 500 startups all over the U.S. Many might fail, but some won’t. We need 100 ideas in place to find the 50-60 that might work. News history has always been driven by a pioneering spirit with a side of creative destruction, with printers closing existing businesses to strike out in new markets and defining new products as they went. These new ventures and old re-inventures just need us to choose them, and to know when to make the leap.
Jeremy Littau is an associate professor of journalism and communication at Lehigh University? Did you like this? Please share and smash that subscribe button. Find him on Twitter at @jeremylittau.