By Dan Kennedy

Newspapers are still our most reliable source of local journalism. Private equity, though, is squeezing the life out of newsrooms as greedy owners cash in.

Hedged: How Private Investment Funds Helped Destroy American Newspapers and Undermine Democracy, by Margot Susca. University of Illinois Press, 232 pages, $24.95.

The media business analyst Alan Mutter once memorably asserted that newspapers’ “Original Sin” dates back to the mid 1990s, when they started giving away their journalism for free on the internet. Margot Susca, though, argues that the real fall from grace came roughly a decade later, when Fortress Investment Group paid $530 million to acquire Liberty Group Publishing, renaming it GateHouse Media. That transaction marked the beginning of the private equity era in journalism, an era defined by hollowed-out newsrooms and ghost newspapers that lack the resources to provide the communities they purportedly serve with the news and information they need.

Susca, an assistant professor of journalism at American University, tells the sad story of how private equity wiped out vast swaths of the newspaper business in Hedged: How Private Investment Funds Helped Destroy American Newspapers and Undermine Democracy.

GateHouse, as she observes, slashed and burned its way through the next decade-plus, and in 2019 merged with the Gannett chain, putting its own executives in charge of the combined company. Gannett, which now controls about 200 daily papers, including its flagship, USA Today, cut its workforce by nearly half after the merger. The hedge fund Alden Global Capital is right behind, controlling some 100 papers through the two newspaper chains it owns, MediaNews Group and Tribune Publishing, and gutting formerly great papers like the Denver Post, the Chicago Tribune, and the Baltimore Sun. (In an unexpected move, on January 15 the Sun was sold to David Smith, head of the right-wing broadcasting network Sinclair.) A third private equity firm, Chatham Asset Management, which bought the McClatchy chain and which Susca calls the “least worst,” is nevertheless so cheap that its executives refused to buy a copy of Microsoft Excel for an investigative reporter at the Idaho Statesman who needed it for her work.

“Researchers have shown that investments in sustainability, diversity, and community suffer when profit is the only goal; companies involved in those efforts to improve the world around them may actually inspire hedge funds to target them; hedge funds see line items in those businesses that, if eliminated, could lead to more profits,” Susca writes.

I’ve been following the depredations of private equity and hedge fund newspaper ownership for many years, especially at Alden and GateHouse/Gannett. In my own reporting I’ve taken an optimistic view, finding that the destruction of legacy newspapers has often led to the rise of startup news organizations that fill at least some of the gap, such as the New Haven Independent, launched in the shadow of the New Haven Register, and the Colorado Sun, begun by journalists who quit the Denver Post following round after round of cuts by Alden.

Yet Susca makes a strong case that even the best of these startups can’t fully replace what has been lost, in large measure because people often don’t know that alternatives exist. “With financial support from citizens,” Susca writes, “more nonprofit and independent newsrooms can thrive, but it’s true that the hundreds of nonprofit newsrooms that exist now cannot act as a one-to-one replacement for newspapers.” For instance, to return to Denver for a moment: the Colorado Sun has grown into one of the larger news organizations in the state, but rather than replacing the Post it has instead established itself as a cog in a larger media ecosystem that also includes Colorado Public Radio, the alternative weekly Westword, the upstart daily Denver Gazette, and the Post itself, still fairly robust even in its current shrunken condition. No longer can the public rely on one comprehensive newspaper for most of their news, a situation that contributes to civic fragmentation.

Author Margot Susca. Photo: Timothy Devine

Susca has done a daunting amount of research, poring over financial records and filings with the Securities and Exchange Commission. That research enabled her to delve deeply into the chain owners she writes about in order to describe what’s taking place beneath the surface. For instance, even after GateHouse morphed into Gannett, Fortress Investment continued to extract millions of dollars in management fees. And though Gannett is a publicly traded corporation, its largest institutional investors include private equity players such as BlackRock Fund Advisors. Indeed, Gannett’s top 10 owners are all financial firms of one sort or another, comprising a little more than 40 percent of the total ownership.

If there is a weakness to Hedged, it is that Susca sees the financialization of journalism as almost the sole reason for the current sad state of the newspaper business. “What we have is not a crisis of profit,” she asserts. “What we have is a crisis of greed and growing inequality.” And though she does occasionally acknowledge that changes wrought by the internet have contributed to the news business’s woes, she doesn’t place enough emphasis on the consequences of how technology destroyed the newspaper advertising market, with once-lucrative classified ads moving to Craigslist and most of the rest being scooped up by Google and Facebook. Though it’s true, as she writes, that the newspaper business was fabulously profitable at one time, those profits have long since shrunk or, in many cases, turned into losses, even at independent operations run by well-intentioned local owners.

Recently, for instance, Erik Wemple of the Washington Post reported on the Scranton Times-Tribune of Pennsylvania, which, along with several sister papers, was sold last year to Alden Global Capital over the objections of several members of the family that owned the papers. That family, the Lynetts, come off as solid members of their community who sought to serve the public as best they could. But that wasn’t enough to stop the Times-Tribune’s slide in paid print circulation from nearly 80,000 in 2000 to less than 25,000 in 2023, with a slight rise in paid digital barely a factor in offsetting that decline. “The sale was driven by 15 years of a continuing drumbeat of reduced revenue,” said family scion George V. Lynett, who nevertheless opposed the deal with Alden. “No matter what we and our people, our employees, tried, we couldn’t reverse that. And that becomes frustrating.”

Local news is the lifeblood of democracy, and newspapers, along with a new generation of digital startups with the soul of newspapers, remain by far the most efficient way to provide that news. So what is to be done? In fact, hundreds of startups have risen up in recent years to fill the gap created by the market failure of chain-owned newspapers. And one lesson I’ve taken away from my own work is that there is no substitute for the hard work of building support for such projects at the grassroots level.

Still, there are policy proposals that might help, and Susca writes about several. Among them: more aggressive enforcement of antitrust laws and tax credits for local news subscribers, advertisers, and publishers, tweaked in such a way that newspapers owned by private investors wouldn’t be able to benefit. That latter proposal has been kicking around for several years now; its current incarnation, which omits the subscriber credits, has garnered some bipartisan support.

“At a time when government accountability and truth itself are at a crucial nexus,” Susca writes, “news organizations in the private investment era have failed citizens as these organizations have boosted private investment funds’ bottom lines. The public has a right to know how police, elected boards, and governments function using citizens’ tax dollars. Newspaper journalism throughout modern history was the system set up to foster that knowledge.”

The late media critic Ben Bagdikian, in his oft-updated book The Media Monopoly, wrote that, as early as the 1970s, Gannett was running up profit margins of 30 percent to 50 percent, numbers that even then were wholly incompatible with journalism’s public service mission. But there was a difference. The original Gannett wanted to keep the goose healthy enough that it would continue laying golden eggs. Today’s private equity owners, by contrast, have convinced themselves that they are presiding over a terminally ill business and have decided that they’re going to grab as many golden eggs as they can before the goose is good and dead.

Susca has written a valuable guide to this world of greed, unbound by any sense of mission beyond lining the pockets of wealthy investors. As we move into the post-newspaper era, it would serve all of us who care about local news and its role in fostering civic life to look back at what happened, and what is happening still. The challenges facing local journalism would be daunting in any case, but they would be less daunting if a new breed of robber barons were not depriving them of the resources they need to serve their communities and chart a path to a more sustainable future.

Dan Kennedy is a professor of journalism at Northeastern University and the author of three books about the future of journalism. His latest, with Ellen Clegg, is titled What Works in Community News: Media Startups, News Deserts, and the Future of the Fourth Estate, and was published this month by Beacon Press. Kennedy and Clegg’s website and podcast are online at whatworks.news.