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This obscure company is doing more to destroy a free press in America than Trump | Will Bunch

A looming business deal could cut America's newsrooms — and civic democracy along with it.

Hedge-fund owned Digital First Media has launched a hostile takeover bid to gain control of Gannett. At least two Philadelphia-area newspapers could be at risk.
Hedge-fund owned Digital First Media has launched a hostile takeover bid to gain control of Gannett. At least two Philadelphia-area newspapers could be at risk.Read moreHandout

The problem really hit home for Dave Krieger — the now-former editorial page editor of the Daily Camera in fast-growing Boulder, Colorado — when a lawyer friend sent in a letter to the editor questioning what was happening at his hometown newspaper. The attorney said he didn’t understand why the price of his subscription was just jacked up 20 percent when the actual paper kept showing up with fewer and fewer pages.

Krieger knew exactly why, but at that moment it dawned on him that most citizens in Boulder didn’t know what he knew: That the newspaper’s shrinkage was the direct result of a distant Wall Street hedge fund that — through its investment vehicle with the Orwellian-like dishonest name of Digital First Media — had since 2013 been sucking money in full vampire-squid mode out of the Daily Camera’s newsroom revenue stream. Much of the cash that formerly paid reporters, editors and photojournalists instead went into the pocket of billionaire Randall Smith as Smith added to his collection of multi-million-dollar mansions around Palm Beach and the Hamptons (said at one point to be 18 — that’s not a typo — and counting).

“The daily paper is the community’s storyteller,” Krieger, a 60-something veteran of a half-dozen newsrooms, thought to himself, “and we’ve never told this story.” So Krieger sat down to write an editorial pleading for help, and what happened next was truly astounding. Randall Smith read it, saw the error of his ways, sold his mansions, and moved into a modest ranch house as he used the real-estate proceeds to hire a small army of investigative reporters that has begun exposing corporate greed and venal politicians from Key West to Kalamazoo.

Ha ha, just kidding ... everything in that last sentence was made up.

What happened in real life is the Daily Camera refused to published the editorial about its corporate owners, and Krieger was fired a couple of days later when he published it on a blog. And for America’s news consumers, reality is probably about to get even worse. Digital First Media, a sister firm called MNG and their hedge-fund parent — the Smith-led Alden Global Capital — have launched a hostile takeover bid to gain control of America’s other biggest owner of daily newspapers, Gannett. The takeover bid, which financial experts believe has a good chance of success, would implant DFM/Alden’s money-siphoning brand of vulture capitalism at 300 newspapers from coast-to-coast.

Industry experts predict a number of these local news organizations — the primary source of civic information in most of these communities — will be drained dry and die within five years, maybe less. “Consolidation (and the cost-cutting that comes with it) remains the dominant strategy in the daily newspaper industry,” wrote long-time industry watcher Ken Doctor. “If revenue continues to drop at or even near double-digit levels, the consensus thinking is that radically reducing expenses through consolidation is about as good a card as anyone has to play.”

That’s already been a losing hand for places like Boulder — and it could be for Camden County, N.J., or Wilmington, Del., two nearby communities whose Gannett-owned newsrooms are at risk from Randall Smith’s bloody knife of “consolidation” if the hostile takeover succeeds.

Over the last two-plus years, more Americans than ever have been talking about the threats to a free press — and what that means for a functioning democracy — because of something else: The presidency of a man who calls journalism “the enemy of the people,” echoing Stalin. And to be clear, the danger posed by Donald Trump’s bluster — and the climate of hostility and distrust it creates — is a very real, very serious problem. But there’s also a case that the psychic wounds of a Trumpian war on the press aren’t the same as the tangible decline in the number of journalistic watchdogs in places like Boulder or a Wilmington. In other words — that Randall Smith is doing more right now to keep Americans uninformed than Trump is.

From Boulder, Krieger told me the job cuts imposed by DFM to keep profit margins at a sky-high 20 percent — even amid the challenging markets for both advertising and circulation — left key sectors of Boulder, a high-tech university town coping with the rising costs and environmental hazards of population growth, along with income inequality, uncovered by the city’s main news source.

For example, he noted the Daily Camera’s owners eliminated the job of business editor and one of two business reporting slots even as the city’s high-tech start-up culture boomed. The newspaper barely covers the basic beats like City Hall or the school board while complex issues like the pollution from 60,000 daily vehicles and their long commute into Boulder because middle-class workers can’t afford homes in the city lie beyond the reach of the few, overworked reporters. DFM’s subsidiary called Prairie Mountain Publishing still technically prints a separate paper in nearby Longmont, Colo., but there are no longer journalists embedded there; that town is covered remotely, and less frequently, from Boulder.

“There are a ton of issues to be investigated in Boulder, and a ton of great journalism can be done if you had a staff with a couple of dozen young reporters and you sicced them on these issues,” Krieger told me. But that’s not even a consideration with DFM, Alden and Smith calling the shots.

Instead, you get what DFM did to the Delaware County Daily Times, where the Alden crew sold the newspaper’s longtime headquarters in Upper Darby (to become a CubeSmart storage facility) and moved the operation into a former CVS pharmacy and bicycle-repair shop in Springfield Township, which was easy to do after they reduced the staff in just six years from 112 employees to only 25, a 78 percent drop. You can bet that Delco’s corrupt and contented Republican political machine, which has controlled and occasionally pilfered the government since the Civil War, jumped for joy at the lack of scrutiny.

You’ve probably heard that the economics of legacy newspapers is pretty hopeless in the internet age. But the truth is a lot more complicated. For now, thanks to the brutal cost-cutting, DFM’s newsrooms in the Philadelphia area are reaping an annual profit margin of 30 percent (!), which rivals the era when newspapers had a monopoly on news. You can still get William-Randolph-Hearst-level stinking rich in the newspaper game — ask people like Randall Smith or Chicago’s Michael Ferro, who still gets paid $5 million a year to advise Tribune Publishing after a) running it into the ground and b) leaving just ahead of sexual harassment allegations.

The dirty little secret is that DFM learned — at least for now — that it can sell longtime readers an inferior (or, to use the technical term, crappier) newspaper and only 10 percent of reach each year will cancel. Do the math, though, and it’s clear that much of America outside the biggest cities will become news deserts by the early 2020s, after Smith and his fellow hedge-funders have sucked out every last drop.

“This is the lum­ber com­pany try­ing to buy the na­tional park,” said Jim Friedlich, CEO and executive director of the Lenfest Institute for Journalism, the non-profit parent of the Inquirer, Daily News and You might think that Friedlich — or me, for that matter — would be jumping for joy at the gutting of our business rivals in the Philadelphia suburbs, but journalism isn’t really like that. We thrive on the competition, and so do the readers who benefit when reporters are fighting for scoops. There’s a growing body of research that people who live in news deserts get socked with things like higher taxes because no one’s watching.

What can you do? Not much, unfortunately. Boulder’s Krieger noted back on May — when protests over job cuts at the DFM-owned Denver Post fell on deaf ears — that hedge funds are publicly answerable to no one. “Protests designed to influence public opinion,” he wrote, “are doomed to fail if Alden does not care about public opinion.” Concerned readers should support healthy news organizations that value journalism along with, or ahead of, profits — and pray that Gannett finds the business savvy to beat back the DFM/Alden takeover. And while you’re at it, light an extra candle for civic democracy in these United States.