‘Vulture Fund’ Buys Local Newspapers

By David Bolling

It finally happened, but not the way everyone thought it would.

The months-long rumored, widely anticipated, unofficially confirmed but expected sale of Sonoma Media Investments (SMI) to the Hearst corporation – one of the largest media companies in the country – was shockingly clarified on May 1 with the front-page announcement that the Santa Rosa Press-Democrat and its sister publications had been bought by the even bigger Media News Group, instead of Hearst.

Media News Group is a sister corporation to Bay Area News Group, both of which are subsidiaries of Digital First Media, a publishing empire owned by Alden Global Capital, a New York-based hedge fund notorious for what has been commonly called “vulture capitalism” because of its practice of buying troubled publishing companies and stripping off assets – mainly staff – to improve profitability.

Bay Area News Group owns a majority of all the newspapers in the Bay Area.

Prior to the announcement of Alden’s acquisition, it was reported in mid-April that the Press Democrat Guild had agreed in writing to vacate its current union contract to clear the way for Hearst’s acquisition of the SMI newspapers. That contract had some 18 months still to run.

What behind the scenes negotiations and machinations took place between then and May are not publicly known, and by all accounts the announcement of Alden Global Capital’s acquisition caught Press Democrat staff entirely by surprise. SMI owned the Press Democrat, the Sonoma Index Tribune, the Petaluma Argus Courier, the Sonoma County Gazette, La Prensa Sonoma, the North Bay Business Journal and Sonoma Magazine. 

One immediate implication of the sale is the assumption that Alden outbid Hearst, and that, for SMI, the bottom line outweighed considerations of future consequences for the newsroom. Requests for comment from SMI management, principally including managing general partner and lead investor Darius Anderson, have received no response. But Press Democrat reporter Martin Espinoza wrote in the May 1 edition announcing the paper’s sale that staff member Christopher Chung, who is president of Guild Local 39621, has criticized Anderson, the lead investor in SMI, for selling to MediaNews. “Clearly money was more important to him than his commitment to local community journalism,” Chung is quoted as saying.

Another guild member, Press Democrat investigative reporter Phil Barber, told KQED he was relieved the collective bargaining agreement will remain but that members “have a lot of questions” about the way the sale to MediaNews came together.

“We’re a pretty optimistic group by nature, and we certainly want to make the most of this and hope for the best, but it’s going to open up a period of uncertainty for us,” he is quoted as saying.

Less than two weeks after the Alden purchase was announced, all newsroom staff received email offers for buyouts of their contracts, in what is frequently referred to as a “voluntary separation.” It’s a standard Alden strategy, usually followed by a series of staff layoffs. According to an NPR report by David Folkenflik, a former reporter at the Baltimore Sun, which is now owned by Alden, a NewsGuild union study covering a six year period found that Alden cut staff at Guild-represented newspapers by an average of 75 percent. The Baltimore Sun’s newsroom was slashed over time from about 400 staff to some 80 by 2021.

Given the uncertainties of print advertising revenue, it’s understandable that any publishing enterprise should seek to reduce costs as much as possible. A 10-percent profit margin in today’s media marketplace can be considered healthy. Hedge funds, on the other hand, by definition employ higher risk investment strategies and instruments, and therefore seek higher returns. Some, it is argued, also have a higher coefficient of greed. 

Numerous accounts of Alden’s practices suggest their profit expectations are much higher than the newspaper industry standard. According to Folkenflik’s 2021 report, after Alden bought the Tribune Company – which included the Chicago Tribune, the Baltimore Sun and the New York Daily News – Tribune staff were warned that Alden expected profits to exceed 20 percent. Folkenflik said a survey of former executives and news leaders in markets with Alden newspapers, found that “cost-cutting measures made it much harder for journalists to expend the time and resources needed to hold public officials, corporations and other major players accountable through solid reporting.”

Alden’s grip on Bay Area daily newspapers is all but total. Only the San Francisco Chronicle, the flagship of Hearst’s media empire, remains as an independent daily. The once rich San Francisco newspaper landscape has been metaphorically clearcut. The former Hearst flagship, the Examiner, is a digital memory, and the two alternative weeklies once locked in an endless internecine rivalry – the Bay Guardian and SF Weekly – are both dead and buried. 

In the East Bay, where Lesher Communications had the daily Contra Costa Times and five or more weeklies scattered around the county, and where the Oakland Tribune was once a daily, and Black-owned powerhouse, by 2016 there was only the Alden-owned East Bay Times. The Bay Area News Group, through a series of acquisitions and consolidations, has acquired and then reduced more than a dozen newspapers into one.

And the San Jose Mercury News, purchased by Digital First Media in 2007 and renamed as simply The Mercury News, was once among the largest and most respected daily papers in the country. Its editorial staff, estimated by the Media Guild to have once numbered 400, is now variously reported as 150 people or less.

The Press-Democrat, meanwhile, has about 43 editorial positions listed on its website, a staff that contributes as well to the content of the Sonoma Index-Tribune and the Petaluma Argus Courier.

It should be acknowledged that the Alden Capital management strategy is not unique. When Sonoma Media Investments purchased the Sonoma Index-Tribune in 2012, there was a brief period of reinvestment in staff and equipment, but then, when the Press-Democrat was acquired (along with the Argus-Courier) consolidation rapidly reduced onsite functions. In short order, a majority of circulation, sales, design and production functions were moved to the Press-Democrat facility in Santa Rosa. By the fall of 2014, more than 100 years of Index-Tribune staff relationships in Sonoma had been eliminated, shrinking the paper’s local footprint substantially. And the paper’s physical presence shrank from a well-staffed sidewalk office just off the Plaza, to a small second-floor office suite without continuous front-desk staffing.

Alden, which currently owns about 100 daily newspapers and some 300 weeklies, has not necessarily throttled the creative potential of its properties. The Chicago Tribune won a 2022 Pulitzer Prize in Local Reporting the year after Alden Capital bought it in a contentious takeover campaign. But the most vulnerable newspapers to the Alden ownership strategy may well be the small-to-medium properties, like the Index-Tribune and the Press Democrat.

The Index-Tribune has walls of awards from the California Newspaper Publisher’s Association, and the Press Democrat has won two Pulitzers and regional respect for its outstanding design, content and attention to local issues.

How either fares in the future under Alden ownership remains to be seen. But one local newspaper veteran with a national profile says he is concerned.

Jim Bettinger spent 20 years in the newspaper trenches as a reporter, editorial writer and editor, working for the Riverside Press-Enterprise as well as the (then) San Jose Mercury News. He also spent six years as Director of the John S. Knight Journalism Fellowships at Stanford, and now lives in Santa Rosa. The consolidation of newspaper properties in the Alden model, says Bettinger, “is not promising for local news in Sonoma County.” He adds, “I’m really sad to see it. It makes it harder for smaller newspapers to go up against larger news organizations. It’s not a particularly healthy trend.”

But it appears to be a very healthy trend for Heath Freeman, the managing director of Alden Global Capital, whose 2021 purchase of a 9,700-square-foot home in Coconut Grove, Florida was widely reported in national media, including in the New York Post which gleefully headlined the story, “Hedge fund ‘vampire’ sinks teeth into $19M Miami Home.”