GateHouse Media, owner of the Journal Star, is in merger talks with Gannett, owner of USA Today and dozens of other newspapers across the country. If the deal closes, the merger would result in one Wall Street corporation owning the nation’s two largest newspapers groups by circulation.
“That’s terrible for the news,” said former gubernatorial candidate and Illinois Sen. Daniel Biss at a town hall meeting in late July at the East Bluff Community Center. Biss has talked with U.S. Sen. Elizabeth Warren on her recently introduced legislation “The Stop Wall Street Looting Act of 2019.”
GateHouse has a long history of doing business in a manner Warren describes as “looting.” It buys newspapers, slashes staff and siphons out money.
Biss said private equity funds and hedge funds “suck out money, go into bankruptcy and walk away with billions of dollars.”
He said, “They buy companies not to make them more profitable but to drain money from the companies and leave them as shells.”
Newspapers are left without the staff and other resources to adequately report the critical news that keeps governments operating with transparency and keeps people engaged in community-wide well-being.
It is widely assumed the decline of newspapers is due to the internet and that retail stores are closing because of online shopping. However, Biss said in reality, these failures are due in large measure to acquisitions by Wall Street. Toys ‘R Us was a good example of a profitable company driven out of business by a Wall Street acquisition designed to siphon off as much money as possible and leave the chain eviscerated.
The Journal Star was locally owned until 1996 when it was sold to Copley Press. The paper operated much as it always had until it was sold to GateHouse Media (a Wall Street hedge fund) in 2007 and the evisceration began. Newsroom staffing went from about 60 to a half dozen. Coverage of local government was slashed. Regular coverage of city hall, county board, schools, transportation, sanitation, business and the economy was reduced or eliminated and replaced with features on prostitution, crime and medical procedures. Circulation dropped from a peak of 128,000 on Sunday to about 30,000 on Sunday. Daily circulation is lower.
According to a recent Wall Street Journal article, GateHouse has a reputation for “aggressively slashing expenses” at papers it purchases. CEO Mike Reed tried to defend a recent round of newsroom layoffs contending it numbered only “a couple of hundred” out of 11,000 employees. That was a deliberately misleading statement. There are not 11,000 journalists at GateHouse. Almost all new hiring is online marketing and advertising. By some estimates, the corporation employs fewer than 2,000 journalists and cutting that workforce by hundreds was significant.
“Stop Wall Street Looting Act of 2019” calculates $5.8 trillion has flowed into private equity funds over the past two decades and that’s money leaving local communities, eviscerating newspapers and leaving a trail of bankruptcies. The legislation would prevent hedge funds from making purchases exclusively with borrowed money and would require them to have some of their own money at stake.