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 stern 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 likelier than other papers to cut the amount of local coverage, and the number of reporters at those papers fell from roughly 7 to 5, compared to a more modest decline at other papers. Relative to non–private equity acquired papers, the number of articles about local government in newspapers fell 22 percent after acquisition. The authors even found that these changes in coverage led to lower voter turnout, closer elections, and more residents having no opinion about their member of Congress. “The composition of news shifts away from local governance, the number of reporters and editors falls, and participation in local elections declines,” they concluded.
By contrast, the study showed that family-owned newspapers had higher levels of local news coverage. An increasing number of local news organizations, both nonprofit and commercial, have achieved financial sustainability when they don’t have the burden of debt payments or high EBITDA goals required by publicly traded companies. (EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.) Another study, by Benjamin LeBrun, Kaitlyn Todd, and Andrew Piper, examined 130,000 articles produced at 31 corporate-owned local newspapers. It concluded that “corporate acquisition leads to a significant reduction in the amount of local news disseminated by affected publications.”
Mergers financed with significant debt put even more pressure on local news when newspaper revenues declined. For instance, GateHouse’s purchase of Gannett, a much larger company, was financed through $1.8 billion in debt financing. The combined entity, called Gannett, now owns 560 newspapers, and since 2019, it has shed almost half of its staff. During much of that period, GateHouse was managed by the private equity giant Fortress, and much of its debt is held by Apollo Capital Management, another private equity behemoth. Even if managers are well intentioned, their options are limited by the crushing burden of servicing bonds and loans. In its 2021 annual filing with the Securities and Exchange Commission, Gannett declared that one of its risk factors was that “we are required to dedicate a substantial portion of cash flow from operations to fund interest payments.” In Hedged, a former executive of Lee Enterprises said the debt service pressure made it impossible for his company to invest in the digital makeover that would have given its papers a better shot at long-term stability. “We should have taken 15 percent profit margins instead of 25 percent profit margins, so we could do the work,” he told Susca.
You might wonder: If newspapers in the digital age are a lousy business, why would private equity firms want to own them? Because there is still short-term cash to be squeezed from them. A newspaper chain that slashes the number of reporters by, say, 50 percent will not see an immediate decline in revenues. Cost savings, however, happen right away. Extra revenue declines resulting from making the paper lousy will take more time to materialize. So hedge funds actually make quite a lot of money by buying newspapers, even now.
There are, of course, exceptions and nuances. For instance, acquisition by a private equity firm is, in the short term, sometimes the only way to keep the newsroom open. The study by Ewens, Gupta, and Howell found that while newspapers snapped up by private equity firms were more likely to cut the number of local stories, they were less likely to shut down the newspaper. The McClatchy newspaper chain, now owned by the private equity firm Chatham Asset Management, has said that it is maintaining or growing staffing levels. It could well be that the problem is not bigness per se but mergers involving particular types of entities (with particular return-on-investment demands) or particular types of financing, especially in an economically declining sector.
There’s one final, less obvious way consolidation has undermined local news: by reducing the number of advertisers. We have seen many grocery, health care, and banking mergers. If there once were five local bank branches and now there are two, that probably resulted in fewer local advertising dollars being spent. And then there’s the effect of Amazon on local retailers. I was at a gathering recently of local newspaper publishers in Wyoming, and they were complaining about the impact of the tech companies. To my surprise, they were mostly referring to Amazon rather than Google or Facebook. It is undoubtedly true that Amazon provides cost and convenience benefits to consumers. Still, we should at least acknowledge that one of the side effects is undermining the retail business whose advertising powered local news and strengthened democracy.
Local news shortages profoundly harm communities. Voters with lousy local news systems know less about candidates and public officials. One study showed that a decline in local coverage led to voters being less likely to have an opinion about their member of Congress. At the same time, another demonstrated that such residents were less likely to be able to name things they like or dislike about their representative. They are less likely to be able to place their representative on an ideological spectrum. The collapse of local news appears to have contributed to a significant drop in Americans’ knowledge of local civic affairs. In 1966, 70 percent of voters could name their mayor; in 2016, only 40 percent could.
Ask the constituents of Representative George Santos, the fabulist New York congressman. A small community weekly in Nassau County exposed a tiny portion of his fraud before the 2022 midterm election, but the paper did not even have a Twitter account and didn’t post its story on Facebook. And remarkably, there was no follow-up (or original reporting) from Newsday, The New York Times, local TV stations in the nation’s biggest media market, WNYC (the local public radio station), the Daily News, or any other print outlet. When we think about threats to democracy, we tend to focus, appropriately, on election integrity and voter suppression. But neither was a problem in New York’s Third Congressional District. Yet, in part because of a dysfunctional local news system, almost no voters had the basic information they needed when they entered the voting booth.
Communities with less local news also have lower voting rates and fewer contested races. In Cincinnati, after the closure of one of the city’s newspapers, The Cincinnati Post, fewer candidates ran for office, “incumbents became more likely to win reelection, and voter turnout and campaign spending fell.” In their study, Lawless and Davis concluded that most explanations for Americans’ waning interest in local politics “don’t account for the most dramatic change in the civic life US communities have experienced in the last 20 years: the decimation of the local news media.”
The damaging effects of the local news crisis even affect the likelihood that people will participate in other civic activities. After the closure of newspapers in Seattle and Denver, there was a significant drop in the probability that people would volunteer in civic organizations such as the PTA, the American Legion, or a neighborhood watch. Conversely, those who do follow local news closely are more likely to engage in sports leagues, church groups or charity organizations, or other civic activities. Local news makes people more connected to their communities.
One way of rethinking
the traditional antitrust model would be to look at information as a commodity akin to a physical product. We see that, in general, the production of local news stories declines rapidly when private equity firms acquire newspapers.
The decline of local news may even affect physical health. During the pandemic, local news was essential in pointing citizens to testing and vaccination sites and countering misinformation. Public health officials say the decline of local news has made it more challenging to track disease outbreaks. Before COVID-19, one study found that communities with less local news are likelier to have more toxic emissions. Companies are more likely to commit serious regulatory violations—including environmental and workplace infractions—in communities that have diminished local news coverage.
There’s growing evidence that the decline of local news affects the economic health of communities. One study found that communities with less local news had lower bond ratings, higher financing costs, and higher taxes. Investors apparently figure that if no one is watching the government, it will become more wasteful.
The decline seems to be feeding polarization. In communities with less local news, voters are more likely to vote on a party line basis, splitting their tickets less frequently. And the members of Congress who get less coverage in the local press are less likely to vote against the party line.
So why did neither the Justice Department, the Federal Trade Commission, nor the Federal Communications Commission do anything about this?
As readers of this magazine know, for more than 40 years, antitrust regulators—and the courts—believed that mergers should only be blocked if they increased inefficiency, reduced competition, or otherwise harmed consumers in the form of higher prices. Any other considerations were considered speculative and hard to measure. This “consumer welfare standard” focused on efficiency and competition.
But what has been happening in the newspaper world doesn’t fit that paradigm. These mergers have rarely reduced competition in a literal sense because, in most markets, there was one newspaper before the merger and one after. It didn’t generally lead to dramatically higher subscription prices because the cost of a newspaper hadn’t changed.
The mergers caused tremendous harm—just not of the sort that the regulators and courts deem relevant and important. Indeed, the newspaper industry is an excellent example of the limitations of the dominant antitrust vision. As the chair of the Federal Trade Commission, Lina M. Khan, has written, the consumer welfare standard “disregards the host of other ways that excessive concentration can harm us.”
Can anything be done?
First, regarding print media, Congress could modify antitrust law to resemble the FCC’s approach to overseeing the broadcast industry.
In February 2023, the FCC stalled a merger between a hedge fund and TEGNA, which owns 64 TV stations, saying that more study was needed to determine whether “the Transactions will reduce or impair localism, including whether they will result in labor reductions at local stations.”
This concept of localism has long been a goal of communications regulation. “Fostering localism is one of this Commission’s core missions and one of three policy goals, along with diversity and competition, which have driven much of our radio and television broadcast regulation during the past 70 years,” wrote the Republican chair of the FCC, Michael Powell, in 2004. Stations were required to maintain a studio in the community and track programming about the community. The FCC saw—and sees—local control and programming as necessary aspects of a community, a view that the Supreme Court affirmed. Congress expressed a similar sentiment when it came time to regulate cable television, declaring in the 1992 Cable Act, “A primary objective and benefit of our Nation’s system of regulation of television broadcasting is the local origination of programming.”
But localism need not be a consideration only in TV station mergers. The concept was once a vibrant theme in antitrust debates, too. When Congress amended the 1914 Clayton Antitrust Act in 1950, it was concerned about the effects of business mergers on local control. Senator Estes Kefauver, one of the lead authors of the 1950 amendments, explained that “local independence cannot be preserved in the face of consolidations such as we have had during the past few years … The control of American business is steadily being transferred … from local communities to a few large cities in which central managers decide the policies and the fate of the far-flung enterprises they control.” In United States v. Aluminum Co. of America,Justice Learned Hand wrote, “Throughout the history of these statutes, it has been constantly assumed that one of their purposes was to perpetuate and preserve, for its own sake and in spite of possible cost, an organization of industry in small units which can effectively compete with each other.” In United States v. Von’s Grocery Co., the Court cited one of the prime sponsors of the antitrust amendments of the 1950s, Representative Emanuel Celler: “Small, independent, decentralized business of the kind that built up our country, of the kind that made our country great, first, is fast disappearing, and second, is being made dependent upon monster concentration.”
Another theory—perhaps even one that wouldn’t require statutory changes—would be to look at the diversity of voices. The Justice Department and the FCC have also blocked mergers that would reduce “viewpoint diversity.” If you think the idea of media diversity is only of interest to progressives, listen to Donald Trump’s attorney general, William Barr, who told the National Religious Broadcasters in 2020,
In 19th-century America, the press was so fragmented that the power of any one organ was small. The multiplicity of newspapers, even in one city, cultivated a wide variety of views and localized opinion. Tocqueville contrasted this to the situation he saw in Europe, where news outlets were consolidated in major urban centers, such that a few voices were capable of influencing the opinions of the entire country … The key to restoring the press in that vital role is to cultivate a greater diversity of voices in the media.
Media diversity is usually measured by the number of news outlets. But the current environment prompts us to consider a different type of diversity—the need for residents to have access to both national and local information. A dearth of local journalism is as consequential a constraint as a paucity of outlets. Residents have fewer tools for important life choices, whether it is where to send their child to school or for whom to vote in local elections.
One way of rethinking the traditional antitrust model would be to look at information as a commodity akin to a physical product. We see that, in general, the production of local news stories declines rapidly when private equity firms acquire newspapers. In Boise, Idaho, coverage of the mayor in the Idaho Statesman dropped from 7.7 percent of the available space in the print newspaper to 3.5 percent after a private equity takeover (between 2001 and 2011)—and turnout declined by almost the same amount (from 24.8 percent to 11.4 percent), according to the study by Hayes and Lawless.
These people may not be deprived of product choices, but they are deprived of candidate choices. They may not have fewer newspapers, but they have less local information. They are less likely to have good city services and more likely to pay higher taxes because such communities are more likely to have more corruption and waste.
These impacts may be harder to quantify than price changes. But the losses to these “consumers” are often far more severe than those assessed by traditional antitrust analysis.
The remedies need not be limited to a binary rejection or acceptance of mergers. In the case of acquisition by a financial firm, the best step may be for the government to force a pause to allow for local bid offers. Mergers may be assessed not only in isolation but compared to other alternative acquisitions, such as a buyer’s group organized by a place-based foundation. The parties in a merger could be required to make a good-faith effort to find a buyer that would do more for localism, the community, or the employees.
It is true that many of the horses have already left the barn. But that shouldn’t paralyze us. One big horse is still left in the barn, and its name is Gannett. The largest newspaper chain by far came from the 2019 merger (not scrutinized) between GateHouse newspapers and Gannett. The merged chain controls more than 500 papers. Gannett is hanging by a thread financially. They have laid off a fifth of their reporting staff in the past year. Recent SEC filings note that they have limited ability to invest in better local journalism or digital transformation because of the massive debt payments they must make because of the merger.
If Gannett declares bankruptcy, the most likely buyer will be private equity or a hedge fund. Soon, most local newspapers in America would be owned by a financial firm. Right about now, it might be worth remembering that the press is the only industry mentioned in the First Amendment because the Founders understood its centrality in maintaining a republic.
The failure of antitrust regulators to exert some influence—to use the stick—has made it harder for those in communities to try to save local news. In 2021, Alden Global Capital, a hedge fund with a reputation for slashing local newspaper staff, bid to acquire the Tribune Newspapers company, which owned The Baltimore Sun, the Chicago Tribune, the Orlando Sentinel,and other major papers. The businessman Stewart Bainum organized a counteroffer that would have involved local buyers. The newsrooms would have had local ownership, led mainly by nonprofits committed to greater investment in local journalism. But Alden outbid the philanthropic group and refused to sell the papers to them. Without antitrust scrutiny from the Justice Department, Alden had no pressure to keep the papers in local hands, and it could set unreasonable sale prices for the local papers.
But blocking future mergers isn’t enough. We need a strategy beyond antitrust policy that can prevent more consolidation and trigger de-consolidation—“replanting” newspapers back into communities. With papers already part of a chain, we could offer financial incentives to local nonprofit organizations or mission-oriented businesses that buy newspapers. Chicago Public Media, the parent organization of radio station WBEZ, with help from philanthropy, recently acquired the Chicago Sun-Times and turned it into a nonprofit. The government could incentivize more deals like that.
Maybe we should even provide incentives to the sellers. That might mean we’d be giving tax breaks to hedge funds. But to be crass, it might be best to pay the ransom to get the child back home. We should also amend the plant-closing laws to require that any chain planning to close a newspaper must give the community 90 days’ notice so they might organize a bid to buy the paper.
In addition, we need a strategy to prevent newspapers that are currently independent from getting scooped up because the family owners have no other choice. Owners of important Black and Hispanic newspapers, as well as weeklies in rural America, are in this position. Incentives for local ownership would help those communities too.
These steps must be combined with improvements in business models, better engagement with communities, a greater role for philanthropy, and public policies that facilitate sustainability. For instance, the Local Journalism Sustainability Act would provide payroll tax credits to encourage the hiring and retaining of local reporters, tax credits for small businesses to buy advertising in local news organizations, and a tax credit for consumers to subscribe or donate to local news publications. Perhaps the Justice Department’s lawsuit against Google for “monopolizing digital advertising technologies” can push more ad dollars back toward local news. A victorious judgment would not eliminate the advertising technology that has hurt local media. But it would likely force Google to disgorge DoubleClick and some of the companies it acquired to form what the Justice Department considers an anticompetitive “stack” of ad services.
We must vanquish the resignation that says a healthy local news environment is something we cannot have. We must create a reasonable, First Amendment–friendly public policy strategy for blocking or restricting mergers that are self-evidently bad for communities.
