It's time for news consumers to flex
Alden Global Capital's purchase of Tribune Co. was approved this week, and that is very bad news for local communities. Now is the moment for communities to stop worrying and take action.
You might have seen the news that Tribune Co. shareholders approved the sale to Alden Global Capital, meaning one of the biggest and most important newspaper chains in the U.S. has gone private and is now operated by a hedge fund.
I’ve written about the hedge fund scourge before (here and here) to the point where I sound like a broken record, but it’s a really important story the public needs to be aware of, and fast. Hedge funds and newspapers are a toxic mix. The latter is a public good that exists to serve an informed public and keep power accountable (yes, this is not always how it plays out, but it has to exist to make such things possible at all). The former’s role in news at least has been to wind down businesses, not grow them. When a hedge fund buys your paper, it’s on life support. Hedge fund papers don’t recover so much as fade away.
Why is this bad? Because at the close of the sale, about 50% of the daily newspaper circulation is produced by a hedge fund. Again, these are distressed papers and being stripped for parts to extract every last bit of revenue before they die. I hope you can see that leads to a very news-less place in vast parts of the country.
Bear in mind, Tribune had no debt at the time of the sale and was marginally profitable. Alden took on debt to make the purchase by borrowing from other papers it owned (at a ludicrous interest rate, no less!), and that debt lies now with the new Tribune papers. So overnight, Tribune papers are functioning under the weight of debt it didn’t previously have, and then buyouts become the next step.
So to recap, Alden acquired a debt-free chain of papers that was profitable but not really close to its glory years, ran up a lot of debt to make the purchase, put that debt on the company, and now will have to make cuts to pay off the debt so that the revenues will go back to investors. Ad and subscription revenue will still flow and that’s why Alden made the purchase at all. They’ll pay off the borrowed money by cutting people, closing physical newsrooms, and reducing benefits. My local Tribune paper, the Morning Call here in Allentown, no longer has a physical newsroom for its reporters and editors.
The model they use is to make slow cuts in ways that help decrease expenses but don’t show up immediately in the product. Over time, if you’re paying attention, it’s not hard to see slow-developing gaps in coverage or an increase in fact or editing errors. One subtle thing you wouldn’t notice until you pick up a paper from 15-20 years ago—newspapers have gotten a lot narrower. Companies have shrunk the page width to slice costs by using less paper, but it’s been so subtle and gradual that many haven’t noticed. These are the kinds of small cuts to quality and product that are hard to notice unless you’re focused on the long view, but they absolutely matter.
I wish I could say this chain of what’s next is speculative on my part, but Alden has done this so many times with its other papers that it’s the playbook.
So at this point the board is set. The state of local news just got a lot more dire in the U.S., at least in terms of legacy properties. It’s time for communities to prepare as if their local paper is not long for this world, and to think about what is next.
We can’t have a journalism vacuum, not if democracy is to survive. Leaving democratic decisions in the hands of the loudest barkers on social media or self-interested political parties that have an incentive to selectively frame candidates and issues is a recipe for disaster. Having nobody to dig into policies, legislation, appropriations and contracts is a recipe for rife corruption. Journalism’s charge to be independent means that candidates, parties, and power needs to answer difficult questions. You take away the accountability agent, and we are just living in a world of diffuse PR campaigns for a world already locked in social media echo chambers.
So if we start from that premise, that journalism is essential to healthy self-governance, then it means that communities need to come together and figure out how they will solve this puzzle. For some it’s going to mean helping launch and support an independent news startup. For others it might still be possible to save their local paper, though if it’s owned by a hedge fund I’d say I’m very pessimistic on that front.
A third way would be to exercise what power we have over these hedge funds. If slow cuts you don’t notice is the goal, a strategy that relies on you keeping that auto charge on your credit card every month long enough for Alden to make its money back, a sudden rash of cancellations would get some attention. Your local hedge fund uses the same model AOL does in still charging old people for their email; they are just cutting and cutting and hoping it’s gradual enough that you’ll keep paying.
But what if we didn’t? If Alden were to experience a massive shock to the revenue side, that means the company just acquired a mountain of debt to write down. There is no ad revenue if there are no subscribers, and in a simplistic way you could say Alden’s entire deal has been to see how little content it can produce to keep those ad and subscription/sale dollars flowing in just the right calibration relative to cuts. But hedge funds aren’t in the business of massive losses that come with steep drops in revenue. Something would have to give.
I am not advocating for a particular action here, just pointing out that collective action by consumers might be the only way through this if they want to save their local paper. I am about the biggest booster for supporting local journalism you’ll find because I understand the news to be an essential condition of having a free democracy. If you read or hear me regularly, you know this. But we are reaching an inflection point where consumers need to figure out some way to not have their patronage taken for granted, and withhold with purpose. There is no more fat to cut from these newsrooms. They have been cut to the bone already the past 15 years, and every new hack is a devastating blow that I don’t think can be fixed easily.
And yet, one reason people still subscribe is because that they know the cuts are savage but also that our communities need news. Indeed, one reason the Alden model works is because they rely on supporters of local journalism being torn about what to do when they see their local paper being dismantled. The whole setup takes advantage of the very people who support independent journalism and journalists. So the marketing around journalism is that we should support local journalism, but when they reward our loyalty with further cuts to journalism jobs the line is we should support local journalism?
Heads, Alden wins. Tails, Alden wins.
This is a story going on four decades now, this vicious cycle of cuts and declines in readership. Ongoing greed has killed newspapers in the U.S. instead of strengthening them to transition to a sustainable online business.
In that sense, consumers have a type of leverage. Threats aren’t enough anymore; Alden has relied on our inertia or indecision (and our genuine desire to support local journalists) to play out the string. And make no mistake, they are playing it out. Maybe a boycott forces more investment, or maybe Alden realizes it needs to sell to a buyer who wants to grow a sustainable product. Either would be a win, and so the question is how to force ownership to the table.
So I did the unthinkable this week: I broke up with my local paper, and when I called to cancel I told them exactly why. With the sale this week, I decided my dollars weren't supporting local journalism anymore. It was managing OK (but not great!) before the sale. My subscription now was being funneled to a debt that didn’t need to happen, in the service of hedge fund investors that couldn’t care less about local journalism.
I want to throw my dollars somewhere. If Alden will commit to growing the newspaper, I can come back. If an independent startup launches here, they’ve got my money.
Pleading isn’t enough; Alden doesn’t care about subscribers, let alone quality. Making logical arguments isn’t enough. The only language hedge funds speak is money, and so therein lies power to make change.
Jeremy Littau is an associate professor of journalism and communication at Lehigh University. Find him on Twitter at @jeremylittau.