Hedge fund ownership of newspaper groups typically spells doom for the newsrooms. Just ask some of the former employees at the Denver Post who famously revolted against owner Alden Global Capital’s order to cut staff.
But Chatham Asset Management’s takeover of McClatchy — scheduled to be finalized on Tuesday — is actually inspiring some cautious optimism among its journalists. That’s because Chatham has agreed to allow all employees to keep their jobs while honoring existing union contracts under the hedge fund’s plan to pay $312 million for the newspaper conglomerate. It’s a stark contrast to hedge funds’ habit of job cutting when they take ownership of newspapers. Indeed, a bid for McClatchy by Alden Global Capital — owner of more than 50 papers in addition to the Denver Post — “contemplated” the elimination of about 1,000 jobs and the rejection of union contracts, according to a court filing obtained by McClatchy journalist Kevin G. Hall.
A bankruptcy judge on Tuesday is expected to approve the deal for McClatchy — owner of 30 US newspapers which have collectively won 54 Pulitzer Prizes among other accolades.
“It’s good to hear there aren’t plans to lay off journalists,” said Josh Moore, sports reporter at the Lexington Herald-Leader. “Fingers crossed that they’re true to their word.”
Moore is right to hedge his optimism. Since McClatchy filed for bankruptcy and Chatham — its largest creditor — was seen as the likely new owner, McClatchy journalists have investigated the hedge fund’s history. While Chatham owns American Media Inc., which publishes the National Enquirer, it does not have other US papers. It does, however, own Postmedia, which publishes several major newspapers in Canada.
McClatchy staffers “started talking to the Canadians papers that are unionized and owned by Chatham,” said Theresa Clift, reporter at The Sacramento Bee. “The unionized journalists there have told us that job cuts increased, benefits decreased under Chatham.”
These claims are supported by a recent report by the New York Times in which reporter Edmund Lee spoke to 10 current and former Postmedia employees who recounted newsroom cuts, shuttered papers and reduced salaries and benefits.
The local media industry has been in a state of crisis in recent years as tech platforms take a greater share of ad revenue and more people get their news from a variety of online resources rather than their local newspaper. The pandemic has only accelerated cuts due to further loss in ad revenue, leading to tens of thousands of layoffs and furloughs in media.
In February, McClatchy filed for bankruptcy protection and said it would use the process to reduce “legacy debt and pension obligations.” Then the coronavirus pandemic took hold in the United States, leaving McClatchy journalists with even more uncertainty about their future.
“A lot of journalists in the room have seen what hedge funds typically do to newspapers when it comes to stripping them for parts or making big cuts to maximize profits,” said Clift, who also serves as chair of the Sacramento Bee’s union. “We just really don’t see how we can be cut anymore honestly, and if we do it’s not just the journalists who are going to suffer. It’s going to be the community, as well.”
Jessica De Leon, law enforcement reporter of the Bradenton Herald, said she has watched her newsroom shrink from more than a dozen reporters, half a dozen editors, several copy editors and designers and three staff photographers to six full-time reporters, one part-time reporter, one editor and one photographer.
“We are so cut short that there’s just not enough time, resources or people to really effectively cover our community,” De Leon said. “It weighs on us heavily, mentally and emotionally. You take pride in what you do and you know when you’re not covering all the issues in your community.”
Kristin Roberts, McClatchy’s vice president of news, told CNN Business that her team has “prioritized news jobs” over others in the company. Roberts said that since she took on the role in May 2019 no reporters’ or content producers’ jobs have been cut. To address the revenue fallout of the pandemic, McClatchy furloughed more than 100 people in advertising, the majority of whom were later laid off
Over the years, McClatchy has cuts jobs in print production and other roles to make way for resources to be shared among the 30 newsrooms as a way to save money.
“If you look at a newsroom such as Bradenton you might feel like there are fewer editors here but that’s because they’re leaning on the editing strength of The Miami Herald,” Roberts said. “That’s part of the restructuring we aim to do, to create a sort of hub and spoke system throughout the organization so that we can lift every shared burden and find some cost savings there while not diminishing at all the local reporting talent.”
The Idaho Statesman’s newsroom has shrunk to about a third of the size it was in 2011 and about half the size it was three years ago, said reporter Michael Lycklama. That grim statistic was part of the Idaho Statesman journalists’ announcement of their intention to unionize in March. The Miami Herald and the Bradenton Herald also launched union drives over the last year. They join other McClatchy newsrooms that have already unionized such as The Sacramento Bee and the Lexington Herald-Leader.
“Our CEO made a promise last fall that we weren’t going to declare bankruptcy, which was pretty much a guarantee that we were. So OK, it was time to unionize,” Lycklama said. “We’re worried. Hedge funds rarely mean good things for local newsrooms and readers that rely on them.”
But McClatchy’s sales agreement on Friday implied the opposite would happen — at least initially under the hedge fund’s ownership.
“It’s certainly a sigh of relief our new owner doesn’t want to immediately lay off one-third of the company,” Lycklama said. “But a community pillar will still be in the hands of a hedge fund, and that rarely ends well.”
A McClatchy spokesperson denies that CEO Craig Forman made that promise, adding that the company worked hard to avoid declaring bankruptcy.
Roberts said Chatham’s decision to maintain staff and uphold union contracts quelled many of the uncertainties the papers faced. To her, the agreement showed that Chatham was committed to McClatchy’s mission of producing “essential journalism for communities.”
“I think the commitments that were secured in that sales agreement were important ones, really important commitments to our journalism and to our news organization overall,” Roberts said. “[McClatchy journalists] have an opportunity to take a big deep breath because we can see a light at the end of what has been a really long tunnel.”
Bud Kennedy, news columnist at the Fort Worth Star-Telegram, said he believes McClatchy management has given Chatham “a good start” by investing in “the digital turn.”
Indeed, Forman, who will step down as part of the sales agreement, helped focus the company on growing digital subscriptions among other digital-first initiatives.
“Chatham will have something to work on if they keep the mission,” Kennedy said.
Kennedy has had a long tenure in the media industry. He told CNN Business that his first full-time newspaper job was in 1972 and that he estimates he has gone through ownership changes at least 10 times. Some of those were his decision to change jobs, but he said six were due to new buyers.
“Every year at every newspaper we worried that it might be our last year,” Kennedy said. “It’s always a question of how much we can earn and whether that’s enough to keep us going. It’s the same way now.”
Moore of the Lexington Herald-Leader started working at the paper in 2009 as a copy editor and news assistant — a job he says doesn’t exist in his newsroom anymore — when he started his freshman year at the University of Kentucky. He doesn’t have plans to leave Lexington or the paper.
“I’d love to retire at the Herald-Leader,” Moore said. “But we’ll see, if 50 years from now the Herald-Leader still exists. You just don’t know anything anymore. I hope it will.”