Sunday, March 24, 2019

Another Sign Local Journalism is on the Ropes

The Reading Eagle building
"The crisis in local news continues unabated," is what I wrote on my Facebook page when the news broke that The Reading Eagle has entered bankruptcy and is actively seeking a buyer.

Although I was less then pleased when the Eagle decided to try to expand their coverage into the Pottstown area a few years ago, just as company that owns The Mercury went through some contractions, in retrospect I think that in many ways it made me a better reporter.

Competition does sharpen one's skills and knowing that I was up against a better-resourced news operation hungry to "steal our lunch," as my former editor used to say, I felt more compelled to jump on stories and make sure we didn't get scooped.

Now that better-resourced competitor has run up against the same economic reality with which The Mercury has been struggling for many years. It does not make me happy.

First, the nation has already lost enough journalists and enough local newspapers and perhaps more than most, I know that Berks County relies heavily on The Eagle.

Secondly, I know a lot of people who work there and they are committed to the same mission I am, keeping their neighbors informed as clearly, accurately, fairly and quickly as they can.

The latest headline in that saga is that the CFO is trying to put together a group of local investors to buy the paper. I pray, for their sake and the sake of Eagle readers, that they are successful.

The alternative, as I know well, can be troubling.

There are not too many buyers out there for local newspapers, which have been weathering economic declines for decades thanks largely to ad revenue being scooped up by Internet giants whose real product is not news coverage but your personal data.

Years ago, as former Mercury photographer Kevin Hoffman used to say repeatedly, newspapers made a mistake by putting their content on websites for free.

Now, a generation of readers that has grown used to that model expects news to continue to be free, particularly if it is online.

And, although it is a little bit like closing the barn door after the horses have all escaped, many newspapers are once again charging for their work product, putting it behind paywalls in a scramble for any revenue they can find.

Whether or not that will work remains to be seen, but readers, ESPECIALLY those on Facebook, are not having it. Many are not only unwilling, but downright outraged that we are trying to get paid for our journalism.

Just last week, the "news deserts," created by the collapse of the local newspaper industry was discovered, a bit too late, by one of the things that helped destroy it.

Associated Press reported  that Facebook "said it has found that 40 percent of Americans live in places where there weren’t enough local news stories to support it."

So Facebook gloms up all the ad revenue that remained on the Internet while using others to provide your content and, susprise!, the content creators go out of business. Who woulda thought?

With revenues in doubt, those willing to buy local papers are often more interested in the assets than in continuing the mission of local journalism -- particularly the real estate.

That was the revelation made in an investigative article by The Washington Post last month headlined: "A hedge fund’s ‘mercenary’ strategy: Buy newspapers, slash jobs, sell the buildings," which looked at Alden Global Capital, the company that owns The Mercury.

The print edition of that story is posted here.

(Full disclosure: I was interviewed for that article and I am quoted within).

Spurring the interest of the Post which -- owned as it is by one of the world's richest men, does not suffer from the same revenue deficits as the rest of us -- was a bid to buy Gannett, one of the nation's largest newspaper chains and publisher of USA Today.

The hedge fund making that bid is Alden Global Capital, which owns The Mercury and has recently re-branded itself from Digital First Meda to MediaNews Group in the wake of a wave of negative press about its business practices.

In addition to The Mercury, Alden owns The Daily Local News in West Chester, The Times-Herald in Norristown, The Reporter in Lansdale, The Delaware County Daily Times, The Trentonian in Trenton, N.J., as well as papers in California, Ohio, Michigan, New York and Colorado, including The Denver Post.

The Denver Post's special editorial section focusing on staff
cuts under ownership by Alden Global Capital.
It was about a year ago that the editorial page at The Denver Post surprised the world by slamming its owners as "vultures" in its own pages for its staff-cutting practices.
Here in Colorado, Alden has embarked on a cynical strategy of constantly reducing the amount and quality of its offerings, while steadily increasing its subscription rates. In doing so, the hedge fund managers — often tellingly referred to as “vulture capitalists” — have hidden behind a narrative that adequately staffed newsrooms and newspapers can no longer survive in the digital marketplace. Try to square that with a recent lawsuit filed by one of Digital First Media’s minority shareholders that claims Alden has pumped hundreds of millions of dollars of its newspaper profits into shaky investments completely unrelated to the business of gathering news.
The News Guild, the national union of which I am a member and shop steward, is currently negotiating with Alden on a new contract after nearly 10 years without raises -- this despite earning what analyst Ken Doctor reported last year are profit margins of $159 million or 17 percent above expenses.

By way of local interest, Doctor's piece, titled "Alden Global Capital is making so much money wrecking local journalism it might not want to stop anytime soon," found that the $11 million Alden made on the Philadelphia-area papers it owns had a profit margin at 30 percent, the highest percentage in the company.

Yay us.

The Mercury building is now for sale.
Doctor's report came out one month before The Mercury closed the doors on its landmark building at High and King streets and put the property up for sale, as it has at dozens of other locations including The Daily Local News and The Times-Herald.

Julie Reynolds, an excellent investigative reporter who works for the News Guild and has uncovered many of Alden's financial legerdemain, wrote about that here.

Flash forward to the New Year and Alden's surprise bid to buy Gannett. Alden, which is a privately held company is a stockholder of 7.5 percent in Gannett which is a publicly held company.

Describing itself without apparent irony as a company "that saves newspapers," Alden argued that it could better manage the chain than the current management.

“Frankly, the team leading Gannett has not demonstrated that it’s capable of effectively running this enterprise as a public company,” said the letter, signed by MNG chairman Joseph Fuchs.

Gannett said the bid was too low, but the latest is that on Wednesday, "MNG Enterprises, also known as Digital First Media, issued a statement that Oaktree Capital Management said in a letter that it 'is highly confident' that the deal could be arranged using at least $1.725 billion in debt financing," USA Today reported.

Alden declined to provide copies of the full letter.

Chuck Schumer, D-NY, said he is concerned that local newspapers in New York now owned by Gannett would suffer staff cuts if the chain is purchased by Alden Global Capital.
"An analysis of the newspapers owned by Alden reveals they cut newspapers’ staff at
U.S. Sen Chuck Schumer, D-NY
more than twice the rate of competitors, and in all likelihood when they sell the real estate, the vast majority of the money does not go to revitalizing newspapers as the newspaper itself would do when it sells real estate, but goes elsewhere," Schumer said.

"For Alden Global Capital, the hedge fund, the acquisition and streamlining of Gannett papers might increase its profits a couple of percentage points, but the loss of (local upstate New York papers) "would be incalculable," said Schumer.
"Let me ask the American people and every one of my colleagues here, what’s more important — having our newspapers, which are so important to local communities, go on, or having a hedge fund raise its market profits by five points if they are public or by a certain amount? What is more important? I would argue the newspapers. I would argue the newspapers."
On Wednesday, Schumer's colleague, Pennsylvania Democrat Bob Casey was in Pottstown and echoed similar concerns.

He told me he is "concerned about what is happening to local newspapers and how community newspapers are being undermined by corporate interests."

As he travels around the Commonwealth, Casey said he sees evidence everywhere that local papers
U.S. Sen. Bob Casey, D-PA
he has known for years "are cutting staff, making it harder to do public-service journalism."

Tellingly, public service journalism spurred Casey to join his Republican colleague Pat Toomey earlier this month in a joint letter to the Centers for Medicare and Medicaid Services seeking information about the agency’s “special focus facility” program for troubled nursing homes.

Their concerns were prompted, he confirmed, by an investigation into failing nursing homes titled "Still failing the frail."

The investigation was published by PennLive, which most of us grew up knowing as the Harrisburg Patriot-News, whose 24-year-old reporter Sara Gannim won the 2012 Pultizer Prize for Local Reporting for her coverage of the Joe Paterno scandal at Penn State.

Casey told me the kind of investigative reporting that spurred a bi-partisan effort to learn more about nursing home oversight is crucial to keeping government agencies and elected officials accountable.

"But I know that with the staff cuts and corporate mindset these owners have, it's virtually impossible for smaller papers to do this kind of investigative reporting and that is a real concern for all of us," Casey said.

And it's not just the Senate that's worried.

Friday, U.S. Rep. Chrissy Houlahan, D-6th Dist., issued a statement in the wake of the Reading Eagle's bankruptcy announcement.

U.S. Rep. Chrissy Houlahan, D-6th Dist.
“The free press is the bedrock of our democracy, entrusted with holding elected representatives accountable and shedding light on the news and stories concerning the public,” said Houlahan. “The Reading Eagle has served our community for over 150 years," she said. 

"We are facing a crisis in local journalism around the country. Transparency in government and public affairs is something I take seriously, and I understand just how important a local and free press is to that mission," Houlahan said. "Without experienced journalists investigating and searching for truth, our country’s ability to engage in productive debate and successfully progress into the future is hindered.”

Indeed it is.

And it should be a concern for you a well dear reader, because studies have shown that a lack of a local news source not only has an impact on democracy, but also on your wallet.

Without local news around to keep a watchful eye on things, public financing companies have found local governments become more wasteful. As a result, public financing agencies charge higher interest rates for government borrowings for schools, roads and other projects in communities without a local news outlet.

You know who pays for that increased cost. You do.

But the public interest aspect of this business is lost on many owners who fail to realize it is more than a business. It is a public trust.

There are two kinds of newspaper owners, a newspaper company and a company that owns newspapers.

We have too much of the latter and not enough of the former.

A newspaper company -- traditionally a locally owned, often by a family as was the case with the Eagle -- understands the business it is in and understands its responsibility to the community it serves.

Being sustainable, making a profit if possible, serves the purpose.

For a company that owns newspapers, like Alden Global Capital, it is just another product, like the PayLess Shoes chain it ran into bankruptcy, or the Fred's Pharmacy chain it bought and plundered.

Friday, LNP, Lancaster County's locally owned newspaper, made note of what the Eagle's troubles mean for dwindling local ownership.

"Under national media companies, regional newsrooms have been cut and services consolidated as the industry tries to adjust as readers and advertisers migrate online," wrote reporter Chad Umble.

Friday's story about local newspaper ownership in LNP.
Noting that few of the papers surrounding Lancaster enjoy local ownership, Umble wrote "MNG Enterprises, which does business as Digital First Media, offered to buy Gannett Co. for $1.36 billion in January.

Both companies have a record of buying media companies and slashing costs, but Colorado-based Digital First has a reputation for being especially ruthless, according to the Associated Press."

Bankruptcy, which has occurred twice during my time at The Mercury, can often put a paper in a better position, often to be sold, which the Eagle's owners have evidently been trying to do since January.
That is better than the alternative, but not a guarantee of continued publication.

I suppose I'm guilty here of doing what former Pottstown Schools Superintendent Reed Lindley used to call "worshiping the problem."

Newspeople are much better at discovering and outlining a problem than providing possible solutions. that's a characteristic now being turned on its head by a practice called literally "solutions journalism."

I don't know if that is the answer to saving local journalism, or if its more transparency, better use of social media, or crowd-source funding.

Lots of people smarter than me have been trying for years to figure out how to save the function of local journalism, whether it's printed on paper, shows up on your phone or gets beamed into your brain.

Either way, until we figure it out, it's dangerous to lose what we now know works, even if it works imperfectly.

Best of luck to The Eagle.

And to The Eagle's sometimes unappreciative readers, I'll leave you with the wisdom of Joni Mitchell: "Don't it always seem to go that you don't know what you've got till its gone."

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