Dean Starkman: March of the Undead Newspapers

Friday, November 15, 2013

Dean Starkman, GoLocalProv News Editor

At this point, the New England newspaper scene is starting to resemble one long George Romero movie.

Yes, plenty of newspapers are up walking around, reporting the news, posting stories to the Web, plopping onto front porches. But the trouble is, only some of them are displaying signs of actual brain activity in their headquarters and a pulse in their newsrooms. The rest increasingly resemble a parade of zombies staggering mindlessly in circles.

And, as in a zombie movie, it’s hard to tell the living from the undead until you get up close and see the telltale vacancy in the eyes. In the case of newspapers, you don’t need to be a vampire hunter to figure it out. The giveaway: are they investing in journalism or are they cutting it?

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One Example

Take Gatehouse Media Inc., which owns 78 dailies (and 235 weeklies, 91 free “shoppers,” 350 websites, and more) around the country, including some of Southeastern New England’s most venerable titles: The Quincy Patriot Ledger, the Norwich Bulletin, the Taunton Daily Gazette, the Fall River Herald News, and more.

Just this week, the U.S. bankruptcy court in Delaware approved a plan Gatehouse had submitted to restructure $1.2 billion in debt and reorganize as part of a pre-packaged bankruptcy. One might fairly ask how a company with a far-flung collection of assets in a shrinking industry accumulated so much debt to begin with, but let’s leave that aside. The question now is whether it can prosper going forward: stabilize revenue declines, win new readers, build morale in the newsroom, and reinvest for the future. Initial evidence is not heartening.

In September, for instance, an affiliate of Gatehouse’s parent company bought the Cape Cod Times, the New Bedford Standard Times, and Portsmouth Herald, in New Hampshire, and other assets from Rupert Murdoch’s News Corp., and gave them to Gatehouse to manage. At the time, Dan Kennedy, a leading journalism academic at Northeastern, presciently wondered out loud when whether layoffs at the papers would then follow.

Sure enough, as night follows day, cuts followed. Eight staffers were laid off at the South Coast Media Group, which is dominated by the Standard Times, and 17 were laid off at the Cape Cod Media Group, with 12 jobs eliminated in the Cape Cod Times newsroom. And so forth. The Cape Cod group’s president and publisher, Peter Meyer, put the best face on it in an email to employees, saying the cuts had been spread across department “to preserve award-winning journalism.” He also absolved the new buyers of blame:

Not Their Fault

"It is important to know that new ownership is not at fault for today’s actions. Any buyer would have taken similar action based on financial realities. This was a painful but necessary step to position the Cape Cod Media Group for future success.”

In fact, it is simply not true that any buyer would have done the same thing. Other local papers around the country are going in precisely the opposite direction upon acquiring newspapers: bulking up the newsroom, betting on quality, and reemphasizing print. As I’ve written, Freedom Communications, since it was acquired by greeting-card mogul (yes, there is such a thing) Aaron Kushner, has been on what the Columbia Journalism Review in May called “one of the biggest hiring sprees in newspaper history,” boosting the editorial staff by more than two-thirds in less than a year. He started by adding 140 journalists, plus another 100 in sales.

Is it working? The company says it is hitting its targets but the truth is, we don’t know. At last sighting, its bravura purchase of the Providence Journal’s sister paper in Riverside, California, was on the rocks .

But what we do know is that it has a coherent plan in place that focuses on the product, the journalism, the thing a newspaper actually sells.

Same goes for the Boston Globe, and one hopes, its sister paper in Worcester, where John Henry may not have a plan, at least one that he’s discussing, but he is at least clearly and obviously focused on the right things: The paper itself. You don’t have to take Henry’s words at face value to realize that his move, like Kushner’s, is not an exercise in mere financial engineering.

Engineering

But financial engineering is at the center of Gatehouse’s recent moves. The company is, after all, controlled by Fortress Investment Group, a publicly traded Wall Street investment giant that owns everything from railways to insurance companies. Gatehouse was a financial play from the get-go. Fortress bought the newspaper company, originally Liberty Group Publishing, in 2005 and then took it public the next year. The move was poorly timed, given that the newspaper industry was about to go to hell in a handbasket. Tellingly, a 2008 Wall Street Journal story described the company’s strategy this way:

"When Fortress led the initial public offering in October 2006, it bet it could do with GateHouse what it had done with other portfolio companies: take a firm with reliable cash flows but limited growth prospects, add millions of dollars in debt and pay investors a rich dividend using the company's steady stream of cash flow."

Take a firm with reliable cash flows, add millions in debt, pay investors using a steady stream of cash flow that should have instead been invested in the papers themselves while its industry is undergoing massive transformation… and you are asking for trouble. How did all work out? Well, put it this way, bankruptcy is rarely a good sign.

As for the future, the company’s announced plan going forward is complicated, indeed. As noted, Gatehouse now manages papers recently bought by an affiliate of Fortress, called Newcastle Investment Corp. As the Journal reported, the plan is to combine the two companies’ assets into a new company, called New Media, and take it public in an initial public offering. It is safe to say that this particular IPO will not resemble the frenzy surrounding, say, Twitter’s.

What happens from there is anybody’s guess but an independent publicly traded newspaper company has a tough slough ahead of it, not matter how well-run.

But there is at least some consolation in all this: it is good, for instance, that Newcastle is getting out of the newspaper business. Newcastle is a real-estate investment trust that specializes in “senior housing.” For a newspaper company, the symbolism there alone is all just a morale-killer.

But then, one supposes, it could have been worse. It could have been hospice.

Related Slideshow: Rhode Island’s Changing Media Landscape

Radio, print, television and digital - the faces in Rhode Islands's media has changed drastically over the past months... Let's take a look at some of the biggest moves:

Dean Starkman: March of the Undead Newspapers

One Example

Not Their Fault

Engineering

Related Slideshow: Rhode Island’s Changing Media Landscape

Bob Kerr

Howard Sutton

Andrew Gobiel

Rick Daniels

Fred Campagna

Karen Meyers

Felice Freyer

Flo Jonic

Phil Marcelo

Julie Tremmel

Jim Taricani

John DePetro

Helen Glover

Mike Stanton

Dean Starkman

Karen Bordeleau

Bob Whitcomb

Tom Heslin

Tara Granahan

Connie Grosch

Gene Valicenti

Jennifer Jordan

Ron St. Pierre

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