Hedge fund journalism

It’s bad news for Montanans who get their news from Montana newspapers.

Lee Enterprises, owner of five papers in Montana, is purchasing another 30 daily papers from Warren Buffett’s Berkshire Hathaway for $140 million, adding to the 49 dailies Lee already owns around the country.*

What might be more troubling is that Alden Global Capital, a hedge fund based in New York City, has acquired a 5.9 percent stake in Lee. Alden has a history of “buying up chunks of newspaper companies and cutting their newsrooms to the bone. They’re the folks who led Chicago Tribune reporters to publicly plead for some civic-minded billionaire to buy their paper,” according to a story in NeimanLab, a publication of the Neiman Foundation for Journalism at Harvard University. But more on that later.

First, the fact that Buffett is selling newspapers to Lee does not bode well for the newspaper industry as he isn’t known for dumping money-making properties. As a matter of fact, according to Forbes:

Earlier this year, Buffett offered a gloomy take to Yahoo News. Newspapers “went from monopoly to franchise to competitive to toast,” he said. With the exception of a few national papers, he added, “They’re going to disappear.”

As is Buffett’s wont, though, he will be making money off the deal:

Berkshire Hathaway is providing about $576 million in long-term, 9% financing to Lee, which Lee will use to pay for the Berkshire properties and refinance Lee’s approximately $400 million in existing debt. Berkshire will be Lee’s sole lender after the deal closes.

Forbes had additional comments on the purchase:

Still, the company (Lee), which had been reducing debt and interest expenses, will likely need to continue slashing its overhead—including through layoffs—to make good on its new payments. Lee declined to comment; Berkshire representatives did not immediately respond to a request for comment.

“It’s like a noose around their neck a little bit,” (media analyst Doug) Arthur said of high-interest debt in the newspaper industry.

Forbes also reflected on the stock purchase, mentioned earlier in this post, by Alden (which will now be the third largest owner of stock in Lee):

Within a few hours, the noose tightened, when news came that Digital First Media, a subsidiary of the hedge fund Alden Capital, had acquired a 5.9% stake in Lee. Alden has generated widespread disfavor in the news business for its investing practices. In some cases, it has aggressively laid off employees, then routed those cost savings back to investors. Its tenure at the Denver Post prompted a rebellion inside the newsroom. More recently, journalists at the Chicago Tribune have risen up to challenge Alden’s ownership stake in the paper.

“It becomes a vicious cycle,” says Arthur. “You can’t attract paying digital subscribers unless the content is good. And you can’t have good content if you’re laying off the professionals who produce it.”

An earlier line in this post, “cutting the newsrooms to the bone,” is particularly worrisome. There really isn’t that much more to cut. And adding to this increasingly scary scenario–loss of in-depth reporting and journalistic integrity–are the attacks on the press by a deranged president and his minions. If ever this country needed a strong, free press, it is now.

“Every time a newspaper dies, even a bad one, the country moves a little closer to authoritarianism.”-Richard Kluger, The Paper: The Life and Death of the New York Herald Tribune.


*Lee owns two of the three highest-circulation newspapers in Montana: the Billings Gazette has the highest numbers with the Missoulian coming in third (the Great Falls Tribune ranks second). Lee also owns dailies in Butte (the Montana Standard) and Helena (the Independent Record). The fifth Lee paper is the Ravalli Republic in Hamilton which is published Monday through Friday. The numbers given in the Missoulian-Berkshire Hathaway article don’t make sense, though. It says Lee will be acquiring 30 dailies to add to its existing 49 dailies (for a total if 79). The last paragraph in the story reads, “Lee’s portfolio will grow to 81 daily papers… ” That’s what happens when you lay off copy editors.

If you appreciate an independent voice holding Montana politicians accountable and informing voters, and you can throw a few dollars a month our way, we would certainly appreciate it.

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About the author

Pete Talbot

'Papa’ Pete Talbot is first and foremost a grandfather to five wonderful grandchildren. Like many Montanans, he has held numerous jobs over the years: film and video producer, a partner in a marketing and advertising firm, a builder and a property manager. He’s served on local and statewide Democratic Party boards. Pete has also been blogging at various sites for over a decade. Ping-pong and skiing are his favorite diversions. He enjoys bourbon.

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