Russ Moore: Journal Bought by Notorious Cost-Cutter

Monday, July 28, 2014

 

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There’s an old saying that goes: Better the devil you know than the one you don’t.

Unfortunately for Rhode Island news consumers, that saying is about to ring truer than first light. I’ve heard talk over talk about how folks wanted to see the Providence Journal sold to someone else besides A.H. Belo. Well, they’ve gotten what they asked for, and I doubt it will make them happy.

That’s because if there was any hope that the newest owners of the Providence Journal would be more benevolent towards preserving sizable news staff, it died faster than this year's Red Sox season. The boat sank before it left the dock.

Almost two months ago, and long before any other news organization figured it out, GoLocalProv.com reported that the Providence Journal was sold to Gatehouse Media. Gatehouse Media, which owns literally hundreds of newspapers and organizations, is owned, operated, and controlled by Fortress Investment Group.

The Fortress Investment Group makes Gordon Gekko, the character from the 80s blockbuster Wall Street who infamously remarks "greed is good," seem like Mr. Rogers. Their priority is earnings- not community news or sentimental musings or anything else but the bottom line. The fact that the Providence Journal has been a stalwart and important piece of the community for 150 years isn't going to tug at Fortress's heart strings.

For Fortress Investment Group, profits aren't the main thing: they're the only thing. Here's an anecdote that should shed some light onto the level of bare bones cost cutting Fortress Investment Group will embark on to increase profitability. On January 13, of 2013, the Gatehouse Media sent out a memo to the employees at the Patriot Ledger and the Brockton Enterprise that the company could no longer afford to supply coffee for its employees.

While business owners small and large can relate to the need to keep expenses down in order to survive in competitive markets, it's hard to justify cutting basic office supplies like coffee when you're paying the company's CEO an $800,000 bonus at the end of the year!

You can't make this stuff up.

Say what you want about the Projo's "old" owners, the A.H. Belo Corporation, but those were newspaper people first and foremost. They believed in the community newspaper model and wanted to see the Providence Journal thrive. The economic downturn of 2008, coupled with a shrinking American attention span and the emergence of social media led to less readers and less revenue. That left the organization with no choice but to cut jobs.

As Dean Starkman reported in GoLocalProv.com, it's true that the Providence Journal's daily circulation dropped from 163,000 in 2000, to 79,000 in 2013. That's worse than the national average. While A.H. Belo may have mismanaged the paper, I don't doubt that it was a huge priority for the organization.

I seriously doubt that that's the case with respect to Fortress Management. Fortress Management has roughly $55.6 billion in assets under management. The purchase of the Providence Journal cost the company $46 million. That means the purchase isn't even worth one-tenth of 1 percent of Fortress's total assets. 

I'm not saying that the Providence Journal won't be a priority, but it will not be anywhere near as important to the company as the paper's old owners. Whatever local ownership is, this is the very opposite.

In paying $46 million for the Providence Journal, Fortress's main motivation wasn't the news aspect of the business- it was the Providence Journal's printing plant just a few minutes down the street. Gatehouse sees the printing model of the business as the profitable aspect of the business. Further, the company sees Rhode Island as the perfect model to further its marketing business named Propel.

In buying the Journal, Fortress was paying primarily for the printing business. In other words, Fortress/Gatehouse basically got the news organization for free. The company, in all likelihood, will demand that the news aspect be as profitable as possible above all else. They're not about to stand idle and allow the news aspect of the organization to weigh down the profitability of the printing aspect.

Here's a telling aspect of the sale: the company declined to purchase the Projo's Fountain Street headquarters and instead leased the building for 1-year as part of the agreement. Given how short the lease agreement is, it would be a shocker if the Journal's employees aren't moved out of the building after a year- perhaps out of state.

Here's the good news: regardless of who owns the Projo, and how many cuts are made, as long as they have good, hardworking, enterprising reporters led by statehouse ace reporter Katherine Gregg and razor sharp political columnist Ed Fitzpatrick, news junkies will continue to keep reading the Projo, and for good reason.

But if the company is treated more like a piggy bank for a massive Wall Street hedge fund instead of a beloved community news organization, the only thing that can happen is that we increased market share of alternative, free media organizations like GoLocalProv.com.

A native Rhode Islander, Russell J. Moore is a graduate of Providence College and St. Raphael Academy. He worked as a news reporter for 7 years (2004-2010), 5 of which with The Warwick Beacon, focusing on government. He continues to keep a close eye on the inner workings of Rhode Islands state and local governments.

 
 

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