Philly’s Digital First papers face harsh cuts, potential ‘lights-out scenario’

For more than a year, rain poured through a ghastly hole in the Pottstown Mercury's roof, staining walls and damaging desks on the third floor. It smelled. Mercury employees fled to the lower floors.

Then one night in late April, sports editor Austin Hertzog at the Digital First Media-owned Mercury whiffed the pungent mildew odor invading the second-floor newsroom. He wheeled around and walked out.

"Dayside people, you may want to make other accommodations for working Monday [and beyond?]," he wrote in an email later circulated to newsroom employees, calling the odor "aggressive."

Newspaper jobs have never been lucrative. Now they can be hazardous.

Years of cost cuts at Digital First Media, the nation's No. 3 newspaper chain with 48 million readers, are devastating newsrooms and fomenting employee dissent even as the hedge fund-controlled Digital First makes huge profits on beaten-down papers, where some reporters earn less than $30,000 a year.

Reporting and editing staffs at papers such as the Mercury have been decimated, newspaper buildings sold off for millions of dollars, and editing and writing functions centralized in distant hubs.

Last month, the Denver Post's editorial page editor posted a broadside on the paper's own website with the headline "As vultures circle, the Denver Post must be saved." It was aimed at the New York hedge fund that controls the newsroom through Digital First: Alden Global Capital LLC.

The Post had said it would cut 30 percent of editorial employees in a newsroom that has shriveled to fewer than 100 staffers from about 250 a few years ago. Earlier this month, union members at Digital First papers picketed outside Alden's New York office.

Despite the vicious cutbacks, Digital First earned $160 million in profits on $939 million in revenue in 2017, according to the NiemanLab at Harvard. The Philadelphia-area papers, a major hub for Digital First, contributed $61 million in revenue and $18 million in profits, and led the company in profit margin, with a surprising 30 percent. The piece was headlined: "Alden Global Capital is making so much money wrecking local journalism that it might not want to stop anytime soon."

Even some of Digital First's financial partners aren't happy. A lawsuit filed in March in Delaware's Chancery Court by two other hedge funds that are minority investors in Digital First demands more information about insider transactions and about Alden's allegedly siphoning newspaper profits into money-losing investments.

Experts now warn of "ghost papers" and a "turn-the-lights-out scenario" for many Digital First publications, even in well-off suburbs in Montgomery, Chester, and Delaware Counties. As the company extracts profits from its newspapers it also fails to transform them into viable media assets for the digital age — despite its name.

Alden officials declined to respond to calls last week and again Tuesday.

"I never thought it would get this bad," said Valerie Arkoosh, the chairwoman of the Montgomery County Board of Commissioners.

"How do citizens know who to vote for unless they take it upon themselves to do a substantial amount of their own research? There is virtually no coverage of school board meetings anymore. If you don't have the time to watch the stream [of the school board meetings], how do you know what's going on?"

Two years ago, Digital First shuttered the cream-colored Times Herald building in Norristown — the city's paper of record and located three blocks from Arkoosh's government offices at One Montgomery Plaza. The closure forced the Times Herald's remaining editorial employees to work from home or at the waterlogged Mercury, 25 minutes away.

The NewsGuild of Greater Philadelphia says staffing in editorial, circulation, and advertising at the Times Herald has plunged 73 percent over the last six years, to 12 union-covered employees, among them three reporters. The Mercury has seen an 83 percent drop to 19 union-employees.

In Delaware County, Digital First sold the Daily Times building and five acres in Upper Darby for $2 million for a CubeSmart storage unit, also in 2016. The paper relocated its newsroom and offices to a former CVS and bicycle shop at an intersection in Springfield Township. The guild says 25 union-covered employees are left at the Times, a 78 percent decline from the 112 employees six years ago.

The number of Guild-covered employees at Philadelphia Media Network, which owns the Inquirer, Daily News, and Philly.com, has declined 26 percent to 338 employees in editorial and advertising departments between late 2012 and now, the union says. The company has been hiring since last fall and said it will hire about a dozen people in editorial departments over the next few months.

In East Bradford, Digital First now has a deal to sell the West Chester Daily Local News building to Toll Bros. for about 275 tony condos, a municipal official said. A reporter says the remaining staffers work from home or Digital First's regional printing plant in Exton. The paper is not unionized.

"There is not a strategy beyond milking those papers. You have a turn-the-lights-out scenario," said Ken Doctor, founder of media analysis firm Newsonomics, who has extensively followed Digital First and wrote the Nieman article on Digital First's profits. "People don't even know what they don't know," Doctor said. "It's impossible to measure, but it's a real loss."

Edward Condra, senior publisher for the Philadelphia-area Digital First papers, declined to respond to emails and phone calls. He had told Mercury employees to work from home or the Digital First Media printing plant in Exton because of the mold smell, according to an email.

Bill Ross, executive director of the NewsGuild of Greater Philadelphia, which represents unionized Mercury employees, said that Condra has indicated the building's roof will be replaced, perhaps as early as this month. "I have serious doubts," he added.

Earlier this year, the Occupational Health and Safety Administration contacted Digital First over the lack of hot water in the bathrooms for more than a month at the Trentonian office. In addition to no hot water, the water spewing from the taps was a bright yellow — like the color of urine, Ross said.

The Trentonian fixed the problem after the OSHA intervention, Ross said.

Alden acquired its vast newspaper chain after the 2008 financial crisis. The core of its portfolio is the former NewsMedia Group chain and the Journal Register Co., which owned the Pennsylvania suburban papers and the Trentonian. Other Philadelphia-area newspapers owned by Digital First include the Ambler Gazette, Glenside News, Main Line Suburban Life, Main Line Times, North Penn Life, Jenkintown Times Chronicle, and Willow Grove Guide, according to the group that audits newspaper circulations.

Alden is co-owned by Randall Smith and Heath Freeman, according to published reports and court documents. They did not return phone calls. Private information on Alden, including its portfolio of holding companies, recently came public through the lawsuit filed in Delaware's Court of Chancery by minority investors in Alden: the Sola Ltd. and Ultra Master Ltd. funds.

Woes in the newspaper industry are well-documented as corporate-owned chains failed to realize the big threat to their advertising revenue and subscriber base from the internet and loaded on debt.

Over the last decade, the number of newspaper jobs has fallen 54 percent — to 157,300 jobs from 345,416, according to Bureau of Labor Statistics.

In Pennsylvania, New Jersey, and Delaware, the percentages are comparable or worse. The number of newspaper jobs fell 51 percent to less than 10,000 in Pennsylvania. They dropped 63 percent in New Jersey to 5,355, and 56 percent in Delaware to 490.

"If you're a newspaper editor who has lost half of your reporters, you simply don't have the bandwidth to produce the stories you used to produce," said Penelope Muse Abernathy, the Knight journalism chair at the University of North Carolina, Chapel Hill.

According to UNC research, almost 2,000 papers have been closed or merged with other papers since 2004, mostly in rural areas of the country. But increasingly, Abernathy warned, the trend is "hitting affluent and well-educated suburbs."

Abernathy uses the term "ghost papers" to describe newspapers that fade over time as they merge into larger papers as advertising supplements or are cut to the bone with assets sold off and functions consolidated into central hubs.

"Facebook can do a lot of things that newspapers did, such as connect people to one another and publicize events," Abernathy said. "But the role of the journalist has been to give context to events and help shape the debate around important public policy issues, and that's very different from the role that Facebook plays."

Digital First journalists in the Philadelphia area — who asked that their names not be used because they had not been authorized to speak publicly and feared being disciplined or fired — said the morale is one of doom and the expectation of more layoffs.

At first, supervisors and staffers balked at the Digital First cutbacks, according to former and current staffers. But now they are resigned to them. Young reporters have abandoned the profession because of the uncertainty or the low pay. Senior reporters earn about $28,000 a year at the Times Herald. At the Mercury, a top-scale reporter makes $46,325 in base pay.

“No matter how hard you work, you won’t get any more money. No matter how much you care, it won’t make a difference except for the community. And then, like clockwork, when the next quarter comes there will be layoffs,” said a local Digital First reporter. “Nothing else matters.”