How this ‘vulture’ hedge fund’s gutting of local newsrooms could hurt Americans

The hedge fund Alden Global Capital has been acquiring scores of U.S. newspapers across the country — then gutting newsrooms and selling off assets. It’s part of a larger trend in the erosion of local news and related jobs in the last decade. A look at Alden Global Capital is the cover story of the latest issue of The Atlantic. Staff writer McKay Coppins joins John Yang with more.

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  • Judy Woodruff:

    A hedge fund has been acquiring scores of U.S. newspapers across the country and then gutting the newsrooms and selling off assets.

    It's part of a larger trend in the erosion of local news, where thousands of reporter and editor jobs have been cut in the past decade.

    John Yang has our conversation.

  • John Yang:

    Judy, in may, the fund, Alden Global Capital, bought Tribune Publishing, the media group whose roots stretch back to the 1840s and whose properties include The Chicago Tribune, The Baltimore Sun, and The New York Daily News.

    The $633 million sale made Alden the nation's second largest newspaper owner in terms of circulation, with more than 200 newspapers. A look at Alden Global Capital is the cover story of the latest issue of "The Atlantic," which is currently available online.

    Staff writer McKay Coppins reported and wrote story and joins us now.

    Thanks so much for being with us.

    McKay, first of all, let's start with the basics. Who or what is Alden Global Capital? And what have they been doing with all these newspapers that they own?

    McKay Coppins, "The Atlantic": Yes, Alden is a hedge fund that many people in the financial world would consider a vulture hedge fund, which is to say that their model focuses on distressed assets, businesses that are struggling in some way.

    In the case of the newspaper business, Alden, around the tail end of the Great Recession, began buying up local newspapers and newspaper chains with a very specific model they ended up pursuing, which is, when they would buy a newspaper, they would cut the staff dramatically, sell any real estate holdings the paper had, in many cases, increase subscription prices, in some cases, outsource certain parts of the paper, like layout design, to the Philippines, all with the goal of maximizing short-term profits.

    And they have been very successful at this. But it has come at a serious cost to the newspapers and the communities they serve.

  • John Yang:

    Talk about that cost, both in the newsrooms and in the communities.

  • McKay Coppins:

    Yes. Well, I mean, look, there's a huge body of research that shows when a local newspaper either disappears or is significantly diminished, there are downstream effects on the communities they serve.

    So, voter turnout drops. Misinformation spreads more easily. Civic engagement is lower. There is even evidence to suggest that city budgets get larger because there's more dysfunction and corruption without a bustling newsroom of reporters holding city hall to account.

    And what's — what we have seen play out with the newspapers that Alden has bought is fairly similar, right? You have seen newspapers dramatically shrink their coverage of local government, of education, schools. In the case of The Chicago Tribune, which Alden bought earlier this year, they very quickly lost a quarter of their newsroom, which made it more difficult to cover, for example, the resignation of a powerful state lawmaker amid bribery charges.

    They didn't have a reporter at the statehouse to cover that story. And so, when you put all these things together, you basically end up with a situation where cities across the country have one less check on the people in power, and one less binding agent for the community, which is the role that these newspapers often serve.

  • John Yang:

    And this also has a personal effect on some of the newspaper employees. You wrote about that in the case of The Vallejo Times Herald in Vallejo, California.

  • McKay Coppins:

    Yes, I spoke to a reporter there who, when he started, he was joining a newspaper of about a dozen journalists. And over the course of his five years there, he went from being a general assignment reporter on this fairly sized staff to being the last hard news reporter in town.

    He was basically tasked with covering not only city hall and schools, but also crime and police and hospitals and business. He was basically trying almost by himself to cover a city of 120,000 people, because he felt this kind of moral responsibility to stay on top of all the news. But he knew that it was an impossible task.

  • John Yang:

    You were able to talk to one of the two people who run this hedge fund. What did he tell you?

  • McKay Coppins:

    Yes, I spoke with Heath Freeman, who is the president of Alden Capital and one of the co-founders.

    And I think I was struck by how little he seemed to care about his reputation and his firm's reputation for sort of ruthless cost-cutting. In fact, at one point, he almost seemed to regard it as a badge of honor.

    He said: Look, if you look at all these newspapers that we purchased, a lot of them were either in bankruptcy or on the brink of bankruptcy.

    That was more true early on in their tenure in the industry. More recently, they have actually been buying newspapers, like The Chicago Tribune, The Baltimore Sun, that are profitable. They're still turning a profit. And Alden still follows its playbook of severe cuts and maximizing short-term profits.

    And so I don't think they can really plausibly make the case that they're trying to save these newspapers or put them on solid footing for the future. All signs point to them trying to take as much cash out of them in possible in the short term, so that they will show up on their ledger as a winning investment, whether or not the papers can survive another five, 10, 15 years.

  • John Yang:

    You also write sort of the reaction of what Alden Global Capital is doing actually provides a little bit of optimism of newspapers' futures?

  • McKay Coppins:

    Right.

    I spoke to a man in Baltimore named Stewart Bainum, who is a local hotel magnate, wealthy philanthropist, who actually tried to save The Baltimore Sun from Alden Capital and was ultimately unsuccessful in that.

    But since its acquisition of The Sun, he has become convinced the paper under Alden's ownership will not be able to provide the city with what it needs. So, he's started to build his own nonprofit digital newsroom from the ground up. And he is investing a significant amount of money into it.

    He told me that it will launch next year, The Baltimore Banner, which is about the same size, or at least close to it, of The Sun, and an operating budget annually of $15 million.

    So, his hope is that they can figure out a nonprofit model for local journalism in Baltimore that can be replicated in cities and markets across the country.

  • John Yang:

    McKay Coppins of "The Atlantic," thank you very much.

  • McKay Coppins:

    Thank you.

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