In Hedged (Univ. of Illinois, Jan.), American University communications professor Susca blames private equity and hedge funds for the decline of American newspapers.
How did hedge funds take over the newspaper industry?
It is taken as fact that the loss of advertising revenue to the internet is what felled the U.S. newspaper industry. That is a myth. When you go back through the last 20 years, what you see is that newspaper companies have been influenced by private investment firms unsure of how to handle marketplace changes, so they say being bigger is going to solve their problem. The firms chose to handle digital competitors with mergers and acquisitions, not online innovation, so they were losing advertising revenue while doing nothing to innovate the delivery of news. After these mergers left newspaper companies with massive debt, hedge funds came in and bought the debt or got these companies on the cheap.
How has hedge funds’ takeover of local news impacted journalism?
Hedge funds now control three of the most important newspaper chains in the U.S. Their playbook continues to be staff cuts and selling off assets. The core issue for me is layoffs, because there’s no robust coverage in communities that need it. I used to be one of three education reporters at a newspaper in South Florida. A former student of mine is now their only education reporter, and she’s covering an area the size of Rhode Island. Good journalism costs money, and if you’re going to do the kind of reporting required by a story like the mass shooting in Lewiston, Maine, you need bodies to cover the governor’s office, the mayor’s office, the police, the FBI, and the aftermath. Private equity investors don’t care. They care about the bottom line, and good journalism costs money.
Profit has always been part of American journalism. How is what’s happening now different?
Profit in the name of democracy looks much different than profit made in spite of it. The difference now is that there is no sense that a flourishing press is the desired outcome for owners and investors, who are just trying to strip whatever they can sell from what’s left of the outlets they buy. I would argue that in previous centuries, it was meaningful to newspaper owners that they were producing news in a democratic system. The other big difference is that these institutional investors and private equity firms have ties to other industries and spend millions of dollars a year on lobbying. One firm has taken control of a Florida newspaper chain and laid off the entire staff that was investigating the public safety hazards of railroads in the state. In California, Chevron started the Richmond Standard news organization at a time when reliable climate change coverage is needed more than ever. Who is left to tell these stories of power run amok in local communities?