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Bradley Saacks and Casey Sullivan
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- Local newspapers have been rocked by consolidation and closures, as digital advertising revenue has not been able to replace print advertisements.
- Hedge funds and private equity firms have scooped up hundreds of local news sources over the years, with three firms — Alden Global, Fortress, and Chatham Asset Management — now pulling the strings behind the biggest media moves.
- Local papers have been reduced to joining large conglomerates to stay afloat. The result has been slashed payrolls, lost jobs, and the sales of many iconic newspaper offices, like The Chicago Tribune's Tribune Tower.
- Business Insider took a look at who the people determining the future of media are, and why the people that work for them are bracing for the worst.
- Click here for more BI Prime stories.
Heath Freeman owns a condo in New York's posh West Village in a building that also houses Ben Stiller and Jon Bon Jovi, runs the hedge fund Alden Global, and paid a record-setting sum for Christian Laettner's game-worn jersey from the famous buzzer-beater against Kentucky.
He's also feared by media conglomerates across the country.
Freeman's hedge fund owns a majority stake in Media News Group, formerly known as Digital First Media, a collection of local news sources like The Denver Post and The Mercury News. He is hungry for more.
His fund recently came to an agreement with Tribune Publishing — which includes the Chicago Tribune, The New York Daily News, and The Baltimore Sun, among others — to not increase its stake for six months in exchange for several board seats.
Ken Doctor, a media analyst who wrote the book "Newsonomics: Twelve New Trends That Will Shape the News You Get", told Business Insider that he thinks Freeman's interest in USA Today publisher Gannett is what prompted executives there to seek out a deal with Fortress's New Media Investment Group.
"Alden has become a cartoon villain of the newspaper business," Doctor said. "We saw in the stunned panic of Gannett that they didn't want any part of his takeover because of his reputation."
There don't appear to be many superheroes coming to save the newspaper business, either. While some non-profit newsrooms have had successes — and national newspapers like The New York Times and The Washington Post have thrived recently — local papers have been reduced to joining large conglomerates to stay afloat. The result has been slashed payrolls, lost jobs, and the sales of many iconic newspaper offices, like The Chicago Tribune's Tribune Tower.
Digital media, once seen as the industry's relatively healthy alternative to failing papers, has been hit hard in recent years as well. Publications like Buzzfeed, Vice, and Huffington Post all underwent layoffs and buyouts this year. The Columbia Journalism Review estimates 3,385 journalists lost their jobs this year.
That's all to say that the future of local news, which is already in crisis according to researchers at the University of North Carolina, may come down to the whims of a few powerful financiers.
Heath Freeman, Alden Global
Freeman has become well-known in media circles because of the cost-cutting the newspapers owned by Alden Global undergo.
Alden is a hedge fund focused on distressed investments, pumping money into things like Greek bonds and the bankrupt regional pharmacy chain Fred's as well as several media properties. The focus, analysts and others say, has been cutting costs quickly to improve profits for Alden.
"With Alden, it just feels like a liquidation strategy because there's no re-investment," said Darren Carroll, a staffer at the union that reps reporters and editors at 14 papers in Alden's empire. Since Alden took over, Carroll said jobs at 12 of the 14 papers, including the Denver Post, have dropped from a combined 1,552 employees to 450.
"A thinning out of the organization at every level," he said.
More than any other organization, staffers at The Denver Post have spoken out about the changes, publishing an editorial critiquing Alden's cuts and protesting the firm's New York headquarters.
Freeman himself does not engage much with people at the papers, several sources say, and he hardly ever speaks with media about his strategy. The only interviews Freeman has given recently are to ESPN about his purchase of the Laettner jersey and to a student affairs website for Duke, where Freeman and his two sisters went to college.
His firm did not respond to multiple requests for comment for this article.
The Duke football team, of which Freeman was a part of when he attended the school, partners with the fund every summer, inviting two players up for a short internship called the Heath Freeman Football Internship.
The school itself has been criticized by the union for accepting donations from Freeman. The university has said it has no role in Alden's business decisions.
A column from Bloomberg in 2018 highlighted the irony of Freeman taking down papers filled with union members; his father was known in the 80s as the go-to banker for union workers, and helped airline workers rework their contracts with the companies.
"His layoffs aren't just painful. They are savage," the column stated.
Wes Edens, Fortress Investment Group
One Wall Street investor that has long had its hand in the newspaper business is private equity firm Fortress Investment Group, helmed by billionaire Wes Edens, who co-owns the Milwaukee Bucks.
Its history in local news extends at least as far back as 2005 when Fortress bought Liberty Group Publishing for $527 million and then rebranded it as GateHouse, expanding its circulation and reach.
This year, though, its lifespan in that business received an expiration date, when GateHouse was merged into Gannett as part of a gigantic newspaper merger set to slash $300 million in costs in two years.
Along with those changes, Fortress's ownership of New Media, the parent company of GateHouse, will sunset. Yet its involvement in the business continues to live on after making an indelible mark.
Mike Reed, the former CEO of New Media, is now the CEO of Gannett, and continues to maintain ties to Fortress.
That's how he is able to enjoy public company CEO compensation without having to disclose the amount, according to a person familiar with the matter.
Reed is technically an employee of Fortress, and the pay is treated as a management contract with the private equity firm, this person said.
The New Media filing said that its "manager" compensates Reed based on "the overall value of the various services that he performs" and "is not able to segregate and identify any portion of the compensation awarded to him as relating solely to service performed for us."
Business Insider posed a series of questions to Reed through a spokesman, including questions about his compensation arrangement. He declined to comment for this article.
Still, Reed strikes a contrast to Edens, whose Fortress charged tens of millions in fees in managing GateHouse and whose involvement in local news has seemed to lessen lately, having exited from New Media's board of directors.
Reed is a believer in local news, and thinks it can have a bright future, people close to him say.
Colleagues refer to him as soft-spoken, sharp, and thoughtful, and he's been in the news business for much of his career, having served on the boards of directors of the Associated Press and Newspaper Association of America.
As Reed settles into his new role and Edens' involvement fades into the background, though, private equity is still bound to shape Gannet's future.
The huge investment firm, Apollo Global Management, is funding the GateHouse-Gannett merger with a $1.8 billion loan.
The newspaper company will have to pay off the loan over five years, at an 11.5 percent interest rate.
Anthony Melchiorre, Chatham Asset Management
Hedge fund founder Anthony Melchiorre, who is not pictured above, kept a low profile before he was pulled into President Donald Trump's orbit.
Melchiorre, a Chicago native who went to Northwestern before coming to the East Coast, owned the tabloid National Enquirer through American Media Inc, a conglomerate that includes magazines Star and Us.
Melchiorre found his firm dragged into a presidential scandal when details of the National Enquirer burying a story about Trump's affairs with playboy models and porn stars leaked thanks to payment from the president's one-time fixer Michael Cohen, who worked with American Media Inc CEO David Pecker.
Pecker was granted immunity by federal prosecutors in 2018 to speak about the work he did in protecting Trump.
Melchiorre is described by Bloomberg as a Trump fan who is unafraid of playing dirty. Hedge fund billionaire Leon Cooperman is an investor in Chatham and told Bloomberg last year that the firm isn't afraid of taking battles to court.
But the negative publicity stemming from the National Enquirer scandal did sting the firm — the fund's home state pension is pulling its $363 million from Chatham.
The process might take a while though; Bloomberg reported that California's Public Employees Retirement System has been trying to get its $150 million investment from Chatham for years.
Melchiorre sold off the tabloid to Hudson Media in April, but still has hands in several media ventures through American Media and, more prominently, newspaper conglomerate McClatchy.
McClatchy, a public company that analysts have said could face bankruptcy next year, owns papers like the Miami Herald, Sacramento Bee, Charlotte Observer, and more, and Melchiorre's fund is the biggest shareholder and the biggest owner of the firm's debt. McClatchy's pension liabilities are close to pushing the company into the red, and analysts view bankruptcy as a possible outcome.
Melchiorre, who was once in charge of Morgan Stanley's junk bond desk, believes more consolidation in media space is on the way, according to a statement he provided to Bloomberg this year.
Doctor, the media analyst, agrees with him, noting that a potential bankruptcy could force the McClatchy family to give up more control to Chatham, which could then explore the M&A market.
Chatham also owns a majority of the shares of Canada's biggest newspaper conglomerate, Postmedia, where an American Media Inc member is on the board. Pecker was also on the board before the scandal.
McClatchy declined to comment for the story. Chatham and American Media Inc did not respond to requests for comment.
- gatehouse media
- Fortress Investment Group
- Alden Global
- David Pecker