Hedge funds increasingly sell smaller papers to local buyers

"As chain consolidation brings new uncertainty to an already fluid news landscape, another trend is emerging in which local investors buy news outlets from large chains and seek to reverse what they see as decades of disinvestment," Mark Jacob reports for Northwestern University's Medill Local News Initiative. "In the wake of the Gannett-GateHouse merger in November 2019, Gannett is selling off some of its smaller news outlets. And industry observers are watching for what comes out of Alden Global Capital’s recent acquisition of Tribune Publishing and whether any of Tribune’s news outlets will end up in the hands of local owners."

Large chains can bring more funding, bigger names, and tech support to smaller papers, but local ownership is still a better bet, says Northwestern journalism professor Penny Abernathy, who studies news deserts and coined the term. "All things being equal, local ownership is always best for the community where the newspaper is located," Abernathy told Jacob. "That’s because a local owner is going to know that market and know the residents."

"Sara April, whose firm Dirks, Van Essen & April brokers the sale of newspaper companies, expects to see more news outlets go into local hands as some big chains focus on their larger products and spin off their smaller ones," Jacob reports. Hedge funds now own about half of the nation's dailies, but April noted that hedge funds do not historically hold onto newspaper assets in the long-term.

Hedge funds may not see small papers as big moneymakers, but many local owners say they can be profitable. Frederic Rutberg, who along with others bought New England Newspapers from the Alden-owned Digital First Media in 2016, told Jacob: "People can talk about 'Newspapers don’t make money. Newspapers do not make money.' Well, guess what: They do … You’ll have a solid income. I’m not talking about Google income, but for the local newspaper, it’s good money."

Townspeople in Pittsfield, Mass., were thrilled about the Berkshire Eagle's ownership going local, Rutberg told Jacob: "I used to walk down the street and strangers would come up and say thank you."

Tim Schmidt, who launched small Missouri newspaper group Westplex Media in 2018, bought three papers, including the struggling Mexico Ledger from Gannett in 2020. “I said I think this is a paper we can turn around, he told Jacob. “It did not have local community support. And we’ve done well since buying it. The community is now back interested in the paper.”

Part of that is personal connections. “There were no local faces of the paper” under Gannett, and the reporter “was also working for four other of their newspapers,” he told Jacob. “We have a staff that is in Mexico every day. . . . The newspaper has to care about the community. I think local ownership plays a huge part in that.”