Two of America’s media giants, Gannett and GateHouse Media, announced on Aug. 5, 2019 that they planned to merge.
If this goes forward, it will not end well.
Completion of the deal would mean the creation of a massive media company with 263 daily media organizations across 47 states and Guam, plus USA TODAY and hundreds of weekly and community papers.
Newspapers across the country may be struggling, but this deal isn’t the best solution. It will lead to centralized editorial control, stifle local creativity, guarantee additional pressure to impose draconian cost cuts and bring brutal widespread layoffs.
Both companies have already said the merger affords an opportunity to realize savings of $275 – $300 million annually across the combined company, with most of the savings coming in the first 24 months after the merger.
GateHouse, owned by the private equity firm New Media Investment Group (NYSE: NEWM), already has a reputation for aggressive cost-cutting and layoffs at properties it owns.
In Oregon, multiple rounds of layoffs have taken place since GateHouse took over The Register-Guard in Eugene on March 1, 2018,
“What’s happening with the Guard isn’t unique to the Guard,” Tim Gleason, former dean of the University of Oregon’s School of Journalism and Communication, told the Eugene Weekly.”It’s what’s happening all over the country as these venture capital firms buy newspapers and then largely gut them,”
In May 2019, Gatehouse laid off staff at a wide swath of papers it owns, including The Columbus Dispatch, the Lakeland (Florida) Ledger, the Daytona Beach News-Journal, the Worcester (Massachusetts) Telegram & Gazette. the Providence Journal and The Beaver County (Pennsylvania) Times. The Times newsroom had 60 staffers in the early 2000s; it is now down to 12 to put out a three-section paper six days a week.
Robert Kuttner and Hildy Zenger lay much of the blame for the evisceration of local newspapers on private equity companies like GateHouse.
“The malign genius of the private equity business model…is that it allows the absentee owner to drive a paper into the ground, but extract exorbitant profits along the way from management fees, dividends, and tax break,” they wrote in The American Prospect., a progressive political and public policy magazine.
“By the time the paper is a hollow shell, the private equity company can exit and move on, having more than made back its investment.”
It’s not a pretty picture.