Last month brought bad news for the Milwaukee Journal Sentinel, once a journalistic powerhouse in this state and year by year shrinking ever smaller. About a quarter century ago the paper had six reporters covering the state Capitol, but that has gradually shrunk to two. Expect more downsizing in overall state coverage.
The shareholders of two companies, Gannett, which owns the Journal Sentinel, and GateHouse, voted to merge, though it is more like a buyout as the parent company of GateHouse — New Media — will own 50.5 percent of the newly formed entity. How will the new leadership affect the Journal Sentinel and this state? Probably in countless ways, but here are the nine biggest likely changes:
More remote ownership: The newly formed company will become the nation’s largest newspaper publisher, numbering more than 250 daily newspapers including USA Today, plus hundreds of weekly and community papers. GateHouse Media is part of the New Media Investment Group, which is managed by Fortress Investment Group, a New York financial firm that is owned by the Japanese conglomerate SoftBank. Local and state stories that might be crucial to Wisconsinites will be far less important to this multinational conglomerate, whose decisions will be all about driving revenue.
Less input from journalists: The new company’s nine-member board has no journalist on it. Not one.
Journalistic ethics could be sacrificed: GateHouse’s push to make money has led to “tactics that have raised eyebrows,” as one news account noted. “In 2016, GateHouse reporters at its Las Vegas paper were ordered to begin investigating judges who had been a thorn in the side of billionaire casino owner Sheldon Adelson…Weeks later, GateHouse sold the Las Vegas paper to Adelson for $140 million, more than double its book value.”
Meanwhile, Fortress Investment was milking the publishing company for all the money it could, extracting $250 million from New Media/GateHouse between 2014 and 2021, an analysis by NewsGuild-CWA, a union representing journalists, estimated. “A back-of-the-envelope calculation suggests those fees could have paid the salaries and benefits for 336 workers…Leon Cooperman, the largest investor in New Media, called the Fortress compensation package ‘morally wrong.’”
Financial pressures will squeeze operations: To finance the buyout, New Media had to borrow $1.792 billion from Apollo Global Management LP at an annual interest rate of 11.5 percent, a rate the NewsGuild analysis called “usurious.” The loan almost triples the combined long-term debt of the two companies.
Meanwhile, the “immoral” level of fees collected by Fortress will continue, though lowered by about 25 percent, the News Guild analysis estimated.
All of which means the company will be forced to impose severe efficiencies, experts have suggested. While the company has five years to pay off the $1.8 billion debt, “at an interest rate of 11.5 percent, the Apollo loan could become onerous if not paid off quickly,” Tim Hynes, head of North American research for debt analysis service Debtwire, predicted in a story by USA Today.
More staff cuts: “No one knows for sure just how many employees will be laid off in the wake of the merger, but estimates put the number between 3,500 and 4,000,” an analysis by Brookings notes. That could mean a 10 percent reduction of the nation’s total newspaper workforce.
And long term, more cuts are likely given the GateHouse style. The NewsGuild-CWA analysis noted that between April 2014 and April 2019, 12 of its bargaining units within GateHouse experienced a drop in employment of 40.1 percent versus 28.8 percent for bargaining units within the Gannett chain.
Fewer newspapers: GateHouse has also been aggressive about merging newspapers. In Wisconsin, Gannett owns daily newspapers in Appleton, Fond du Lac, Green Bay, Manitowoc, Marshfield, Oshkosh, Sheboygan, Stevens Point, Wausau and Wisconsin Rapids, and those are likely candidates for a merger, resulting in less coverage of this state.
More emphasis on digital journalism: Gannett was already de-emphasizing print newspapers, but that trend will accelerate. The new company must “engineer a full transformation to digital news at its 266 daily outlets and create a widened digital revenue base,” as the Poynter Institute noted.
Less emphasis on local journalism: The financial pressures of this deal will likely cause an even greater de-emphasis on local journalism because it doesn’t drive big traffic numbers, which the company will desperately need to drive revenue.
Fewer working journalists: “In the next year, it is likely the country will see thousands of reporters and editors previously employed at the local newspapers owned by Gannett and GateHouse leave the industry altogether,” Brookings predicts.
“The deal is bad for journalists, it’s bad for readers, and it’s bad for the future of local journalism,” Bernie Lunzar, president of the News Guild-CWA, has said.
And it’s bad for American democracy: Less journalism means less transparency and more corruption in government and less understanding of the issues by average citizens.
Bruce Murphy is the editor of UrbanMilwaukee.
