Just before Robert Kuttner and I filed our American Prospect article on the rape of the newspaper industry by private equity predators in December (“Saving the Free Press from Private Equity”), the prime nemesis of our story, GateHouse Media, bid $4.5 million to buy the 171-year-old Boston Herald, which declared bankruptcy the same day. The deal was conditioned on voiding union contracts and deep-sixing legacy pension, health, and other obligations. “Major layoffs in the newspaper’s 120-person newsroom are a certainty,” we wrote, in the context of GateHouse’s dismal record of gutting editorial staffs at its 770 daily and weekly newspapers.
But GateHouse was then elbowed aside by Digital First Media, whose $11.9 million bid won the February 13 bankruptcy auction in Boston, indicating that the DFM bean-counters have calculated a more profitable but probably even bloodier endgame for the venerable Herald, whose days are now surely numbered, according to industry observers.
Its publisher, Patrick Purcell, said he was pleased with the outcome. “I started this process with a promise that I would do everything humanly possible to avoid shuttering the unique and fearless voice of the Boston Herald,” his own paper quoted him saying.
“I’ve read that statement in a couple of hundred forms over the years,” newspaper analyst Ken Doctor told me. He predicted that DFM would get its money out of the deal within three years at most, then declare bankruptcy and sell off the emaciated remains of the business for whatever they can get for it. “They know what they need to cut to make the profit they want to make,” he said. “They are fat and happy. They will milk it.”
Though GateHouse and Digital First have essentially the same modus operandi for buying up papers in small and medium-sized markets and wringing profits from them by decimating newsrooms, raising subscription prices, and selling off assets, Doctor said that DFM “has been manifestly worse than GateHouse. While GateHouse has cut, it is mindful of trying to improve the editorial product. There’s more of a strategy there. But Digital First papers tend to spiral down more quickly than others.”
The newsroom numbers from other cities bear out Doctor’s prediction. At the St. Paul Pioneer Press, DFM cut the editorial staff from a peak of 225 to just 25 today. The San Jose Mercury News, a formidable paper in the 1990s, had a newsroom staff of 440 back then. Under DFM ownership, the number is now 41.
Julie Reynolds, a freelance journalist who follows the newspaper business closely, reported recently that Digital First has laid off workers at twice the rate of other national newspaper chains in the last two years. She worked at the Monterey Herald for ten years, including a period in which “we went through four owners in about two days, ending up with DFM,” she told me. The newspaper was previously part of the Knight Ridder chain, once the second-largest newspaper publisher in the United States.
“We all complained about Knight Ridder,” Reynolds said. “Now we look back at those as the glory days.”
Digital First is owned by Alden Global Capital, a private equity firm that was founded by Randall D. Smith, a reclusive Wall Street investor who is said not to have granted a single press interview in 30 years—“an unlikely press baron,” noted Nieman Lab Director Joshua Benton, writing in The Boston Globe. Benton pointed out that fewer and fewer U.S. cities enjoy the benefit of having two significant daily newspapers.
“Two newspapers means more reporters, more editors, more people on watch for things the public should know—and more options for readers,” he wrote. The sale of the Herald to DFM, he suggested, does not bode well for Boston, agreeing with other observers that “Digital First’s cuts stand out as deeper than just about any other owner in the industry.”
Indeed, at the Fitchburg (Massachusetts) Sentinel & Enterprise, another DFM property, the company announced earlier this month that it will be shutting down its physical offices completely and replacing them with a “virtual newsroom.” At the same time, Digital First maximizes its profits—as high as 25 percent of revenue at some papers—by ratcheting up subscription prices for loyal subscribers who, the company has discovered, often take a long time to give up on their formerly beloved local papers even as quality plummets.
Julie Reynolds sees one bright spot on the industry horizon: a growing awareness of what’s really killing newspapers and how dire the situation is. “There is a huge change in the reporting of this issue,” she said. “The narrative has changed. The story is no longer that the internet is causing the death of newspapers. That’s the first step in finding a solution.”