Perhaps Wall Street financiers are not killing American local news after all. They may however be sustaining it in a less noble form. These are the conclusions of an important new economic study of private capital firms that pounce on local newspapers.
The popular stereotype is of Gordon Gekko mugging Lou Grant. Researchers found that coverage of local politics and government does indeed decline, as does the headcount of journalists. But financial owners also invest heavily in the digital publishing that is the newspaper industry’s best hope of survival.
Typically, centralised newsrooms produce national content which is then distributed across local outlets. That may be good for private equity’s annualised returns but hurtful for grassroots democracy.
The same issues are coming to the fore in local TV broadcasting, which may be on a similar trajectory because of the rise of streaming. Standard General, a private equity group, has acquired Tegna, an owner of 64 local TV affiliates at an enterprise value of $8.6bn.
TV has been a brighter business than print journalism. Tegna is selling itself at an all-time high, buoyed by sales of ads and content to pay-TV providers. Americans still rely heavily on local TV for news.
The most controversial financial player in local news remains Alden Global Management. The fund has scooped up several titles across the US. It is currently trying to buy the last independent listed newspaper group, Lee Enterprises, for $150mn.
Lee argues it is building a sustainable business model reliant on subscription revenue rather than selling ads. Public shareholders often lack patience, though. As a result, Alden bought Tribune Publishing in 2021 with a premium bid.
News journalism is an expensive industry with limited economies of scale. Even so, financial buyers have learned that a 10 per cent reduction in costs does not lead to a commensurate drop in revenue.
Critics can only condemn them unreservedly if digital investments fail. The closure and liquidation of a local news businesses is even less helpful to local democracy than their purchase by private equity.
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