The local news’ ‘vulture capitalist’ breaks his silence

For years, Alden Global Capital’s broad-axe budget cuts have triggered newsroom revolts and public denunciations by civic leaders worried their communities would become news deserts.

But the New York-based hedge fund never apologizes and never explains. In fact, it never comments at all, even when a reporter from the Pottstown Mercury, one of Alden’s papers, made it all the way to the foyer of Alden president Heath Freeman’s mansion on the tip of Long Island, there was no comment.

News industry analysts like Ken Doctor of Newsonomics have dug through obscure court cases and picked through leaked files and documented this pattern: Alden buys distressed local papers, cuts staff, harvests the cash flow and pours that into a maze of tax-resistant offshore companies and opaque LLC investment vehicles. All told, Alden now controls about one in every eight U.S. newspapers. They generate about $100 million per year, by one veteran analyst’s estimate.

Everything that can be consolidated at the newspapers — back-office functions from payroll to page production — is carried out at a central hub to reduce overhead. Alden newsrooms fill space by sharing non-local articles from brother papers instead of investing in a bigger staff of local reporters. Analyst Jim Brady derides this as “comb-over” journalism.

Throughout, Alden has declined to explain itself. No interviews. No returned calls. No comment.

So, it was surprising to learn last week that Alden Global Capital President Heath Freeman has finally spoken up.

Sort of.

In a letter marked “Confidential,” written to Illinois’ U.S. senators, Freeman said the folks who have called him a “Vulture Capitalist” and “corporate strip miner” have him all wrong.

Notwithstanding the decimation of the Denver Post (a 30% newsroom staff cut in a single day) and the massacre of The Mercury News in San Jose, Freeman declares he comes not to bury newspapers but to save them.

“Alden is committed to local news coverage and to enabling local papers to serve their communities well into the future,” Freeman wrote.

If that turns out to be true, Freeman will have been the most misunderstood of all the poor little rich kids currently hiding out in The Hamptons during the pandemic.

Still, Freeman makes interesting points.

Sens. Dick Durbin and Tammy Duckworth wrote to Freeman on March 12, demanding answers about what Alden plans to do with its 32% stake in the Tribune Publishing chain, which owns The Chicago Tribune.

“We are deeply concerned that Alden Global Capital, with a history of dismantling local newspapers for personal gain, is now pursuing an alarming strategy of staff cuts at Tribune Publishing,” the Democratic senators wrote.

“MNG (the newspaper part of the Alden hydra) has never closed a daily newspaper during our ownership,” replied Freeman. “Given the industry trends, including in your home state of Illinois, we think this is something to celebrate  Too often, MNG is the buyer rescuing newspapers like The Reading Eagle, The Greeley Tribune, The Boston Herald or The Orange County Register from bankruptcy or liquidation or perilously close to that fate.”

It’s true that Alden has yet to shutter a newspaper. Even before the pandemic froze the American economy, local companies and media conglomerates had shut down more than 600 papers since 2004, enough that University of North Carolina scholars began mapping the spread of “news deserts”, regions that have no local news source.

“Given the extensive inaccurate media coverage Alden and MNG have received, we appreciate the opportunity to clear up some common misconceptions,” Freeman complained, though without specifying which descriptions of Alden behavior were incorrect.

“Alden acutely understands that local newspapers in the U.S. are struggling, putting the important and vital role they play in our communities at risk,” Freeman wrote. “The documented reality is that tech behemoths such as Google and Facebook are devouring the advertising base that has traditionally supported newspapers.”

He’s not wrong about that last bit, either. The duopoly have proven unbeatable in competing for local advertising dollars, to the point that the news industry can no longer rely as much on advertising, which used to generate more than half of its gross revenues.

“This is very unusual,” news business analyst Ken Doctor said Friday afternoon after I sent him a copy of the letter. “Why did they choose to respond right now? Do they expect resistance to the merger of (Alden-controlled) Media News Group and Tribune?”

Working from leaked documents and regulatory and court filings, Doctor has calculated that some of Alden’s papers clear 20% profit, which is double the normal margin.

“The thing to watch now is, with this current (pandemic) crisis, how much will they reduce their profits, as other companies are doing? What will happen with their newsroom staffing in this crisis?” Doctor asked. “That’s the test right now. They have more capacity to absorb more short-term loss and we’ll have to watch and see if they do.”

Doctor said the letter side-steps one of the key questions Duckworth and Durbin asked. “”…is Alden operating its newspapers in the long-term interest of the communities it serves?” Doctor said. “The letter (from Freeman) manages to avoid that question.”

He said Freeman’s focus on other chains, which have indeed closed papers in Illinois and elsewhere, obscures the way Alden papers operate. “Of course you don’t want to close a paper. You cannot take profit out of a closed property. They have a few local stories, filled out with a lot of content from AP from all around the country and the world… and then content from their sister newspapers that may be 100 miles away. They’re not not serving really thoroughly the news and information needs of those communities.”

I sent a copy of Freeman’s letter to Chicago Tribune investigative reporter David Jackson, who is the public face of the Tribune staff’s efforts to pry their paper out of Alden’s hands. “I think this letter provides interesting information and raises important questions. I personally hope Alden will live up to its statement that it is the buyer rescuing America’s regional newsrooms.”