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Paper Cuts: When private equity firms control local newspapers

Chapter 12

Conclusion: Private equity owners accelerated a market problem, putting communities at risk

Former Herald-Times editor Bob Zaltsberg takes a crack at distilling what has happened, effects of the ownership changes, and what could come next.

This story is by WFIU/WTIU News Special Projects Editor Bob Zaltsberg. He was editor of The Herald-Times until Jan. 31, 2019 — the day before GateHouse/Gannett took over the newspaper from Schurz Communications Inc. This story includes opinions.

The decline in the local newspaper scene since family ownership switched to private equity company control is evident. How much of it was caused by market conditions, rather than specifically the ownership change, is unclear.

What is clear is the combination of the two has devastated print news in south-central Indiana.

Technology changes sent advertisers and readers online, damaging the two main revenue sources for newspapers. Many family owners wanted to get out of the business, and they found willing buyers in companies operated by private equity firms, which target distressed industries.

Private equity experts point to the single-minded goal for such companies – to make money.

“They try to basically maximize profits,” Kelley School of Business faculty member Niklas Huether said. “They can either cut costs or try to increase revenues by expanding products …”

In the newspaper industry, they slash costs. That means far fewer journalists are covering their local communities.

While family-owned newspapers wanted to make a profit, they generally wanted to be a part of the fabric of the community. Todd Schurz was CEO and President of Schurz Communications when the company sold its print properties to GateHouse. He said the company’s goals for its newspapers included “helping people get to the truth” so they “can use that to make a better community, a better society, a better nation.”

But the company’s board — a mix of family members and non-family members — voted to sell the newspapers in 2019 to a private equity company it thought would have a better chance to succeed financially in the long term.

National studies show PE-owned companies follow a model that’s evident in the former Schurz papers in communities such as Bloomington, Bedford, Martinsville, and Spencer. They cut reporting staff, reduce local news coverage, consolidate business operations, shut down printing presses, and sell local newspaper buildings. The result shifts remaining news online and chases away print readers.

News that used to be a staple in local newspapers goes away — by design.

A content analysis of The Herald-Times showed all local news dipped from about 1,100 items in September 2014 to 970 items in September of 2018 — four months before ownership changed. Four years later, in September 2022, the number nosedived to 249, including obituaries and death notices.

The decrease followed the Gannett playbook, with calendars, opinion content, routine sports coverage, “news fixtures,” columns of short stories called “briefs,” and news about organizations nearly eliminated.

The content was counted on microfilm from September 2014 and September 2018, and on the Herald Times E-Editions online for September 2023. Three areas were counted. Stories with bylines of staff writers is listed on top. Locally written opinion pieces is listed in the middle; this includes editorials, columns, guest columns and letters to the editor. Stories without bylines (listed on the bottom) include obituaries, columns such as area briefs and police beats, calendars, sports roundup stories, sports agate packages, and stories by non-staff members whether or not they had bylines. The briefs columns, calendars and similar items received a count of one for the entire collection of short items.

Gannett’s impact on smaller communities was even more dramatic. Newspapers in Spencer, Martinsville, Mooresville, and Bedford meet the definition of “ghost” newspapers where no local journalists are employed, but newspapers still are printed with news from other communities.

Why is this important?

Penny Abernathy has studied the issue of the loss of local newspapers at the University of North Carolina and Northwestern’s Medill School of Journalism.

“This is not a journalism problem, but a problem for society and more specifically, democracy,” she said.

Her research shows citizens in places where local news disappears have less knowledge about and oversight of government, which can lead to more corruption and higher costs to taxpayers. The effect can also diminish voter participation.

Jason Peifer of the Indiana University Media School said negative effects can be more general.

“If we think about the implications of this, accountability is an important part of local journalism,” he said. But also lost is “having a sense of place and connection and contributing to the social fabric of some sort of community, that is very concerning to me.”

Consolidation by private equity companies controlling news organizations “managed to precipitate a huge loss of reporters,” Abernathy said.

Tim Franklin leads Northwestern’s Medill Local News Initiative, a series of programs designed to bolster the sustainability of local news. On a Zoom call last month in which the initiative’s latest research was released, he noted that cutting journalists discourages people from following local news because local newspapers simply aren’t covering their communities.

“Local news organizations have to produce news that people will pay for,” said Franklin, who grew up in Mooresville and graduated from Indiana University.

In south-central Indiana, entrepreneurs are launching online publications to try to fill the gap. But Abernathy said they have an uphill battle.

“Most digital sites fail within the first five years,” she said.

Still, many are trying to fill the local news void accelerated by private equity owners who are maximizing profits at the expense of local news. While most investors and community foundations look to digital models, an effort in Morgan County is print based.

“This is not a journalism problem, but a problem for society and more specifically, democracy.”

And it’s important to note that public media, an established nonprofit model, has added reporting resources to try to fill gaps.

One statewide digital effort is Free Press Indiana / Mirror Indy, which has its sights set on Indianapolis — where Gannett has cut journalists — as well as Gary and rural communities that have ghost newspapers or have become news deserts. Bro Krift left his job as editor of the Indianapolis Star to be CEO of Free Press Indiana. He hopes his organization can help put more eyes on local governments.

“Ultimately, that's how you reduce corruption,” he said. “That's how you have responsible government. That's how you have engaged democracy, you know, that's how you include more people to create a better community.”

While the old days of comprehensive local newspapers appear gone for good, legacy newspapers that are left can join local newcomers in boosting the media landscape. And private equity ownership may have lengthened the runway for those publications to operate, even as they cut them to something much different than had been there before. The reporters still working are doing important stories, but not enough of them.

Meanwhile, for-profit and nonprofit alternatives have emerged to specialize in particular areas — local government, police and crime, people and features. Topics seeing much less coverage are education, the work of nonprofits, the arts community and high school sports.

Piecing together the various solutions into a comprehensive diet of local news can be complicated and exhausting. More partnerships, cooperation, and a sense of news as a service that helps build community around common experiences would help. Committing to open government, watching public funds, and supporting the electoral process would too. And finally, so would the age-old journalism goals of celebrating successes, pointing out inequities, and writing about stories that make our communities’ unique and interesting places.

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Officials at Gannett would not talk to WFIU/WTIU for these stories. They sent a statement attributed to Jill Bond, news director of The Herald-Times.

Paper Cuts The reporting is supported by a grant from the Poynter Institute, a non-profit journalism school and research organization in St. Petersburg, Fla., and the Omidyar Network.

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