How to Stop Vulture Funds From Killing Local News.

• Author: Waldman, Steven

WASHINGTON HAS THE TOOLS. IT'S TIME TO USE THEM.

When the story of the collapse of local news is told, there are usually two villains: internet companies, especially Facebook and Google, gobbling up revenue that had once gone to newspapers; and the hedge funds that bought and gutted newspapers.

But strangely, while politicians have called for stem action against social media companies--the Justice Department recently filed an important lawsuit against Google's domination of digital advertising--the role of private equity and hedge funds has prompted a collective shrug. No one likes what the financiers did, but there seems to be an air of inevitability, a sense that media consolidation just couldn't be helped.

That assumption is wrong. Antitrust enforcers could have done more--and must play a bigger role in saving local news.

First, it's essential to understand the gravity of the crisis. Since 2004, 2,100 newspapers in the United States have closed. On average, two newspapers shut down each week. Some 1,800 communities that had at least one newspaper now have none. The number of newspaper newsroom employees dropped 57 percent between 2004 and 2020, according to Bureau of Labor Statistics data analyzed by the Pew Research Center. Although hundreds of start-ups have emerged to fill the gap, they are too small and rare to compensate for the loss of traditional local news outlets.

These drops have happened, of course, as both the U.S. population and state and local government spending have increased. As a result, the number of newspaper newsroom staff per 100,000 people living in the U.S. has declined 62 percent, and the number of reporters per $100 million in local government spending has fallen 67 percent.

What's more, today there are at least another 1,000 "ghost newspapers," defined as papers that have lost at least half of their staff. Larger newspapers have cut back on coverage of counties outside the city center, and significant beats affecting residents' lives, such as education, health care, and criminal justice. Between 1999 and 2017, coverage of local politics dropped by 56 percent, according to a study of 121 newspapers by the professors Danny Hayes and Jennifer Lawless. Between 2003 and 2017, newspaper stories about school boards dropped by a third. The falloff was even worse among smaller publications. And according to a study of 16,000 stories in 100 communities conducted by Duke University's Phil Napoli, only 17 percent of the content in local newspapers was about local communities and addressed a critical information need.

Media consolidation was not the initial cause of the local news collapse--but in many cases, it has intensified the harm, promises to make the situation worse, and has limited the ability of communities to respond.

The crisis in local news stems primarily from the internet undercutting traditional business models. Advertisers reduced or eliminated their spending in local newspapers and instead placed ads on websites, search engines, or social platforms. The combination of factors led to a staggering 71 percent decline in newspaper ad revenue from 2006 to 2018.

But mergers and acquisitions played an ever more important role in diminishing local news. In 2005, an "M&A frenzy" gripped the newspaper industry, writes Margot Susca, assistant professor of journalism at American University, in her forthcoming book, Hedged. Lee Enterprises, a newspaper chain, bought the Pulitzer newspapers. Gannett purchased the HomeTown chain. GateHouse bought 124 papers--and, in the biggest deal, McClatchy bought one of the best chains, Knight Ridder, financed with $2 billion in debt. In 2004, the 25 largest chains owned less than one-third of America's daily newspapers. By 2020, they owned 70 percent. In the past 15 years, due to serial acquisitions, the number of newspaper owners has dropped from about 4,000 to 2,400. "Massive consolidation in the newspaper industry has shifted editorial and business decisions to a few large corporations without strong ties to the communities where their papers are located," concluded a major study of news deserts led by Penny Muse Abernathy when she was a professor at the University of North Carolina school of communications.

Private equity firms and hedge funds are driving much of the recent consolidation. In 2016, six of the 10 biggest newspaper chains were owned by private equity firms or other financial firms, Abernathy found. Since then, many iconic newspapers-- the Chicago Tribune, The Baltimore Sun, New York's Daily News, and dozens of others--have been acquired by private equity or hedge funds. The study also found that more than 1,000 newspapers are now controlled by "hybrid" companies that are publicly traded but controlled by financial institutions.

Thanks to the intense pressure to either provide strong returns to investors or repay debt, these mergers have hurt communities. The Tribune Company eliminated the physical newsroom of the Hartford Courant, the oldest newspaper in America--and at the Capital Gazette of Annapolis, Maryland, where the staff put out a newspaper the day after their colleagues were slain in a mass shooting. A recent study by Michael Ewens, Arpit Gupta, and Sabrina T. Howell found that newspapers acquired by private equity firms were...