The author visiting Heath Freeman’s Montauk manse before a security fence was installed.
By Evan Brandt
POTTSTOWN, PENNSYLVANIA — It should come as no surprise to any regular readers of this blog that, like other local businesses, local news is struggling to make it during this pandemic.
When you consider how many businesses have had to shut their doors, take the next step and ask yourself how many of them are advertising in the local paper?
Add to this, the fact that The (Pottstown) Mercury and other papers in this chain have done the right thing and made our coverage of coronavirus free of charge.
That doesn’t mean the print edition is free.
It means you can read about the information that may help save your life, or your flagging spirits, on our website without having to subscribe.
Needless to say, the combination of decreased advertising and “free-of-charge” is not having a positive effect on our bottom line.
It has accelerated an existing and increasingly desperate trend.
Just ask Ken Doctor. He is the “Newsonomics” columnist for Harvard’s Neiman Journalism Lab and his predictions about the state of the local newspaper industry have been spot-on for the past two years. And his diagnosis is not good.
His March 31 column did not offer much hope for recovery.
Newspaper executives are “finding themselves careening right now into a future they’d thought was still several years away.”
Ask an American newspaper exec a few weeks ago what they thought 2025 would look like, and they’d tell it you it would be much more digital, far less print, and more dependent on reader revenue than advertising. Some of them would have told you they think they had a plan to get there. Others, if they were being candid, would have said they didn’t see the route yet, but they hoped to find one in time.
The COVID-19 crisis has clearly accelerated that timeline — and may have ripped it to shreds altogether, depending on how long the shutdown lasts and how deep the resulting recession gets.
Make no mistake, though: Many of the decisions being made right now and in the next few weeks will be permanent ones. No newspaper that drops print days of publication will ever add them back. Humpty Dumpty won’t put the 20th-century newspaper back together again. There can be no return to status quo ante; the ante was already vanishing.
Can you guess what comes next?
You guessed right, layoffs.
By serendipity and good negotiating, those of us who work at the papers in Alden Global Capital’s Philadelphia Cluster that are lucky enough to be in The Newspaper Guild, signed a two-year labor contract in February that limits layoffs in the contract’s first year. That includes The Mercury.
That did not stop the company from asking for “voluntary separations,” or from laying off workers at non-union papers.
The latest reports indicate 19 layoffs at The Reading Eagle, which Alden bought last spring, and ten of those are in the newsroom. That is on top of the 81 layoffs that occurred right after the purchase.
My heart goes out to those staffers. I hate to see any local journalist lose their job at a time when we need them more than ever.
That the economic situation is exacerbating the peril facing local news is an inescapable fact.
But, as I wrote about in November, an already crumbling business model is being eroded at hyper speed due to the wealth-extracting business practices of private equity, better known as hedge funds.
Alden Global Capital, the company that owns The Mercury, is one of those hedge funds. Here is a primer on the company, put together by investigative reporter Julie Reynolds, who works for The Newspaper Guild’s parent union, Communication Workers of America, and has plumbed the depths of this company like no other.
Having already strip-mined the local papers it owns of their assets, like the real estate, earning double digit profits and re-investing none of it back into the business that generated it, Alden left its papers particularly vulnerable to this latest economic shock.
Small wonder that its attempt to gain control of Tribune Company, which runs some of the nation’s most revered papers like The Chicago Tribune and, more locally, The Morning Call in Allentown, has sent waves of fear through its newsrooms. So much so that in January, two Chicago Tribune reporters wrote an Op-Ed in The New York Times, pleading for a local buyer to take control.
No newspaper that drops print days of publication will ever add them back. Humpty Dumpty won’t put the 20th-century newspaper back together again.
True to form, Alden has responded to this reduction in revenue in the same way it sought to increase its revenue, layoffs across the country, in California, Denver, and Boston, not just in Reading.
Perhaps most galling is the March 27 letter Alden president Heath Freeman — who has since put up a security fence around his $4.8 million, five-bedroom, five-bath summer house overlooking Lake Montauk at the tip of Long Island since I dropped by unannounced two years ago to chat — sent a letter March 27 to Illinois senators Tammy Duckworth and Dick Durbin.
In it, he claimed that rather than pillaging newspapers, he is saving them. This is hogwash, as Vanity Fair reported in February.
(You can read his full leaked confidential letter here.)
In part, Freeman wrote:
Too often, MNG is the buyer rescuing newspapers like The Reading Eagle, The Greeley Tribune, The Boston Herald or The Orange County Register from bankruptcy or liquidation or perilously close to that fate. Indeed, failing to equip local newspapers so they can adapt to the economic realities of the newspaper business in the 21st century would most certainly lead to more newspapers going out of business in your state and across the country.
I wonder if the 19 Reading Eagle employees laid off this week feel “rescued.”
He goes on to note, accurately, that:
The digital transformation of the U.S. newspaper industry is in its early stages. And if local newspapers do not reset to these economic challenges they may cease to exist.
As you may be aware, a 2018 study from the University of North Carolina found that the U.S. has lost nearly 1,800 local newspapers since 2004, or approximately one in five. Clearly, if local newspapers fail to adapt to the economic realities they will continue to close.
We could not agree more. What Freeman’s letter fails to indicate, because he can’t, is what Alden has done with the profits it reaped from local papers to reinvest and adapt to those economic realities.
The answer, of course, is nothing.
My work laptop runs on Windows 7, which Microsoft stopped supporting on Jan. 14. The plan for upgrades, or new equipment? There isn’t one.
That’s because Freeman and his corporate cronies took the profits we were making and invested them in unrelated businesses like Fred’s Pharmacy and Payless Shoes, both of which are now in bankruptcy, putting more people out of work.
Perhaps most egregious of the letter’s passages is when Freeman writes: “MNG’s goal is to operate newspapers in a sustainable and responsible way (emphasis mine) so that they will continue to exist successfully for the benefit of their local communities and shareholders over the long term.”
This is more hogwash. There is no plan for sustainability. None.
There is only a plan for profitability, for as long as it lasts.
Freeman wrote to those senators at a time when many of them are not only questioning the questionable role hedge funds play in undermining local news, but also considering making the support of local papers part of the next stimulus to combat the economic devastation wrought by the coronavirus.
Pennsylvania’s senior senator, Democrat Bob Casey, is among them, joining 19 others in signing a letter to other senators urging support for the move.
“The current public health crisis has made the already vital role of local news even more critical,” the senators wrote in the letter. “Some of the most important guidance for families and businesses during this crisis has been highly localized.
“Local journalism has been providing communities answers to critical questions, including information on where to get locally tested, hospital capacity, road closures, essential business hours of operation and shelter-in-place orders,” the letter says.
The senators said any future stimulus package must contain funding to support this important industry at such a critical time. They suggested the legislation include a provision that is tailored to benefit aid recipients who make a long-term commitment to high quality local news.
There are other suggestions for the legislation as well, coming from those of us who know the business well, and know how sudden influxes of cash can sometimes find their way into the wrong wallets if further protections are not put in place.
On Thursday, NewsGuild President Jon Schleuss wrote a letter to House Speaker Nancy Pelosi, House Minority Leader Kevin McCarthy, Senate Majority Leader Mitch McConnell, and Senate Minority Leader Chuck Schumer.
He had some pretty relevant suggestions:
- A publicly financed fund to support newsrooms and media workers to prevent layoffs furloughs and pay cuts;
- Requirements that news outlets receiving aid remain independent from partisan influence, demonstrate a need for the assistance, report on how funds have been spent and be prohibited from engaging in mergers and acquisitions resulting in job losses, leveraged buyouts and anti-union activity, and from using funds for executive bonuses, stock buybacks or dividends (emphasis mine);
- A prohibition on job cuts by participating companies;
- Requirements that recipient companies provide ongoing information on staff diversity;
- Ensuring that one-quarter of seats on boards of directors be held by non-management employees at recipient publications;
- A separate mechanism to establish a Small Business Administration program of no-interest loans for the creation of news start-ups, including nonprofits and employee-owned co-ops;
- Tax deductibility for the cost of subscriptions to any news product;
- Incentives for local ownership to encourage chains to sell to local owners and community interests;
- A nationwide federal advertising program to promote public health, participation in the federal census and other topics of national interest.
“Continuing news coverage through this pandemic must be a priority in the next stimulus package. Many publications have lowered digital paywalls to provide COVID-19 coverage for free,” Schleuss wrote.
“At the same time, the news industry is seeing plummeting ad revenue created by business closures. At this moment when Americans need reliable, community-focused coverage, we risk losing it all,” he wrote. “More Americans will die if they cannot access this critical information.”
There’s also something you can do, and it doesn’t even cost any money.
Sure, you can subscribe to The Mercury or the local paper near you. I can guarantee you it’s struggling.
But you can also lend your John Hancock to a petition supporting Schleuss’s suggestions.
I guarantee it will make you feel good inside. And it might just save your life or the life of someone you love.