Reporter: Guys, is this how it ends? Is this the sign of the death of music reviews?

Brooke Gladstone: With huge layoffs at the beloved music review site Pitchfork and at the LA Times, this year gets off to a bad start for journalism. From WNYC in New York, this is On the Media. I'm Brooke Gladstone.

Micah Loewinger: I'm Micah Loewinger. Meanwhile, The Baltimore Sun was sold again. After the last sale, the hedge fund owners kept the paper staff mostly intact in order to go head-to-head with a local rival.

Liz Bowie: There's ego involved here, right? I mean, I'm guessing.

Brooke Gladstone: You're saying this was a bleep measuring contest.

Liz Bowie: Yes.

Brooke Gladstone: The Sun's newest owner has Baltimore locals feeling less than optimistic about their paper's future.

Milton Kent: There was a tradition. In the summertime when you go pick up a dozen crabs and lay the newspaper on the table to crack the crabs on but I think The Sun has meant more to the people of this market of this city than just a place to lay your crabs on.

Micah Loewinger: It's all coming up after this.

Brooke Gladstone: From WNYC in New York, this is On the Media. I'm Brooke Gladstone.

Micah Loewinger: I'm Micah Loewinger. 2024 has been very hard on the news business, and it's only January.

Reporter: The Baltimore Sun has now been sold to David Smith, executive chairman of Sinclair Broadcasting.

Micah Loewinger: Also this week, the Los Angeles Times announced yet another round of layoffs. The Times Guild bargaining committee tweeting Thursday, "Folks, this is the big one." The Guild called for a Friday walkout, the first such action since the paper started in 1881, to protest a projected 20% staff cut. About 100 jobs. This on top of a cut of 74 positions in June. Meanwhile, Sports Illustrated just laid off most of its staff, and then there's this.

Reporter: Guys, is this how it ends? Is this the sign of the death of music reviews? January 17, mark the day, Pitchfork has been folded into GQ.

Micah Loewinger: More on that one later in the show.

Brooke Gladstone: In recent years, billionaire owners have snapped up outlets like The Washington Post, The Boston Globe, The Atlantic, and others, with three of the top newspaper chains in the country are currently owned not by individuals or families but by private investment firms. According to Margot Susca, Assistant Professor of Journalism, Accountability, and Democracy at American University, we're currently in the private investment era of media.

Private equity firms and hedge funds may function differently in the marketplace but Susca says they have a similarly ravenous approach to buying up news outlets and selling them off for parts. Susca, author of Hedged: How Private Investment Funds Helped Destroy American Newspapers and Undermine Democracy, debunks the notion that it was solely the dawn of the internet that failed local news.

Margot Susca: The loss of advertising revenue was devastating for the US newspaper industry, but in the early 2000s, and in the mid-2000s, newspapers could have competed with those sites. Instead, with that pressure from private equity investors, there was very little digital innovation. Rather than compete digitally, they merged and they acquired, and that put them billions of dollars in debt.

Brooke Gladstone: You've observed that the newspaper industry isn't in crisis because its business model changed. The newspaper industry is in crisis because the business models of the powerful private investment funds behind the industry have not changed.

Margot Susca: That's right. Profit has been part of the American newspaper system as long as we've had newspapers, but profit in the name of democracy looks much different than profit made in spite of it. What we've had from 2003 onward is a crop of investors and owners that care very little about how a newspaper functions in the community. Hearst and Pulitzer were very concerned about money and they made oodles of money but the ownership structure that we have now, it's profit with no consideration for quality journalism.

Brooke Gladstone: What defines the private investment era?

Margot Susca: Overharvesting which is just a focus on extreme profit, mergers and acquisitions, and then a massive amount of debt. People are the most expensive line item in any newspaper. It's no shock that to maximize profits, the number one thing to go out the door are bodies.

Brooke Gladstone: You single out three investment firms for a particular damage done to local news and you give them each a moniker. First, there's Alden Global Capital. You call Alden the vulture?

Margot Susca: Well, Alden is part of Randall D. Smith's financial universe. His hedge fund was described as "profiting from other people's misery by trading the stock and debt of troubled companies," but Alden Global Capital gets its negative reputation really through the efforts of The Denver Post staff. In 2018, the staff rebelled, and they ran a front-page story devoted to how terrible conditions were at that newspaper. They had a front-page color photo that showed the impact of the layoffs on what was one of the best regional newspapers in the country and they blamed Alden Global Capital. It was revolutionary at the time and it was a wake-up call for many in the industry to say Alden is a vulture profiting off of the destruction of newspapers.

Brooke Gladstone: How does it profit?

Margot Susca: Remember, when they buy up companies, they gain buildings, land, printing presses, assets that are worth in the tens of millions of dollars. They also profit off of what's left of ad revenue and circulation revenue.

Brooke Gladstone: For as long as it lasts, I guess.

Margot Susca: Well, the US newspaper industry gets described as this tired, dead business but publicly traded newspapers in 2020 generated $8 billion in ad revenue and another $11 billion from circulation.

Brooke Gladstone: The demands of shareholders for greater and greater profit meant that a profitable business simply wasn't good enough. It still had to be sold off for parts.

Margot Susca: We have to remember about hedge fund ownership, is that you no longer have to worry about shareholders. Under hedge fund ownership, you've got just a few guys. Yes, you're right. Is it a smaller pie than it was in 1999 or in 2002? Absolutely, but Alden Global Capital in 2017 made $170 million in profits. When you've got a company that's only a few people, that's a lot of money to spread around.

Brooke Gladstone: They're the vulture. They snapped up the Chicago Tribune, the San Jose Mercury News, the Orlando Sentinel. There's Chatham Asset Management, which you think is the least worst investment firm in the space. It bought McClatchy and the Miami Herald. Then you've got what you call the Phantom, Fortress Investment Group. Fortress bought the GateHouse Newspaper chain that was the largest in the US. In 2005, they openly said that they had no idea what they were doing running a media company and immediately started laying people off.

They went through this whole cycle of the private investment era. They would profit from cutting news. They would merge and acquire. They got into so much debt they had to declare bankruptcy, which the debt was then wiped out through Chapter 11 actions. Now, you point to how enabling our bankruptcy laws were to the Sherman's March to the Sea they were doing in the newspaper business.

Margot Susca: The bankruptcy law enabled GateHouse to emerge from its bankruptcy even stronger and even larger owner. The thing that's so fascinating is that after the GateHouse Gannett merger, Fortress Investment Group was able to collect tens of millions of dollars through both dividends and management fees from a company that laid off hundreds of reporters and claimed that it was in dire straits. These are functions and conditions of the market and we have an existing regulatory system that's designed to put guardrails on media ownership. That's designed to put caps on the number of TV stations and newspapers that one company can own in one city, but those have essentially been decimated.

We have an antitrust system that should be working to stop a very small number of companies from operating in one sector. That could be put into place. The Federal Trade Commission has merger guidelines. We need to enforce the structures that we have.

Brooke Gladstone: Why do you think local news was made a target by these firms? Aren't there more lucrative industries that they could parachute into?

Margot Susca: Newspaper companies still beat S&P 500 averages. They outperform the stock market, but I think that there are other reasons as well. Controlling the local news marketplace means that you get to control the narrative when it relates to other businesses that you might be involved in.

Brooke Gladstone: Do you have examples where exactly that has happened, because that's important?

Margot Susca: Fortress Investment Group, a private equity firm based in New York, is also very heavily invested in rail, and in Florida, there were two counties along the Atlantic coast that had filed lawsuits against efforts to expand rail. They had claimed public safety implications. There were environmental implications. Fortress Investment Group, which, of course, was the owner of the GateHouse Newspaper chain, GateHouse buys newspapers in Florida. That all but stops reporting on the public safety implications, the environmental implications of these rail deals. Those lawsuits ended up getting dropped. That's the real threat, I think, of having this kind of ownership.

Brooke Gladstone: You drew attention in your book to the death of Daniel Prude after an encounter with police in Rochester in 2020. It was months before the killing of George Floyd and it wasn't covered in the press there. You see the Prude case as one in which a well-staffed newspaper unencumbered by a corporate owner's profit margin could have pursued that story. If there had been a reporter, they would've had sources, bureaucratic paperwork to follow. There would've been neighborhood chatter after the incident. There was a videotaped encounter, an ambulance ride, a hospital visit, and even, by April of that year, an internal police report. None of that was covered?

Margot Susca: None of it was covered, and the case only came to light after his lawyers for his family filed public records requests to get access to the case. I'm not blaming the Rochester, New York Newspaper, which is owned by Gannett because they have faced layoffs. The point that I'm trying to make is that in a well-functioning press system, those are the kinds of stories that we learn about. Imagine cases like that nationwide that go uncovered, local corruption that goes uncovered because there's no reporter watching that meeting, filing the public records requests to make sure that those actions are being watched. That's a byproduct of a newspaper system that is completely broken.

Brooke Gladstone: Your research has found that there is profitability in local news. However, polarized people may be, they crave it.

Margot Susca: Yes.

Brooke Gladstone: You concluded your book by saying, "What is clearer to me now than it was five years ago, is that whatever potential exists for newspapers to investigate and to address myriad issues on behalf of society cannot exist under private investment fund control. All eras must end." Meaning the private investment era. What kind of era do you propose?

Margot Susca: Well, there's a lot of hope in the nonprofit model, but when philanthropy goes away, it will eventually, we're going to need more audience support. We're also going to need to address, as a country, government funding to create a digital news ecosystem that supports objective civic coverage. The more I study, the more I visit communities, the more I talk to citizens, the more I believe that we're going to need an expansion of a public media system that supports civic engagement because, without it, we're really in dire straits.

Brooke Gladstone: Margot, thank you very much.

Margot Susca: Thanks, Brooke. I really appreciate your time.

Brooke Gladstone: Margot Susca is the author of Hedged: How Private Investment Funds Helped Destroy American Newspapers and Undermine Democracy.

Micah Loewinger: Coming up. As newspapers keep changing hands, the journalists who staff them are caught in the churn.

Brooke Gladstone: This is On the Media.