Private equity's impact on the media industry is scrutinized by Megan Greenwell, as she discusses its destructive effects.

The rise of private equity (PE) firms in the US news media market over the past decade has significantly shaped the industry, bringing both positive and negative consequences.

Overview and Development

In the 2010s and 2020s, private equity firms began acquiring traditional news companies, such as newspapers, radio stations, and digital portals. The reasons for this trend included the high market volatility, declining ad revenues, and the digital transformation that left many established media companies struggling financially. Most of these companies had previously been family-owned or publicly traded.

Positive Influences

Digitalisation & Innovation: PE firms often drove digitalisation forward and invested in new online platforms, mobile apps, and data journalism. Some media companies were able to expand their reach and tap into new audiences as a result.
Consolidation & Economies of Scale: Through mergers and acquisitions, larger media conglomerates were formed, which realised cost savings through synergies (e.g., shared editorial teams, technology, distribution).
Market Efficiency: Weaker or unprofitable titles were closed or restructured, making the market more efficient.

Negative Influences

Cost-Cutting & Quality Deterioration: PE firms are often under pressure to deliver quick profits. This led to massive cost-cutting measures, editorial team reductions, layoffs, and a decrease in journalistic quality in many cases.
Focus on Profit: Local journalism and investigative journalism, which are expensive and less profitable, were often pushed back in favour of more profitable, often superficial content.
Democratic Weakening: The decline in independent, local news sources weakened the democratic reporting and watchdog function of the media.
High Debt: Many acquisitions were financed through debt. The borrowed money burdened the news companies and further limited their investment opportunities.

Concrete Examples

Alden Global Capital bought numerous US newspapers, including the Chicago Tribune and The Denver Post, and became a symbol of "strip mining" in journalism: editorial teams were drastically reduced, content was standardised, and quality was compromised. Chatham Asset Management acquired the McClatchy chain, but also focused on a digital strategy. Axel Springer (though not a US company, it made investments in US media such as POLITICO) demonstrates how international players influence the market.

Conclusion

The impact of private equity on the US news media is ambiguous. While the short-term profit orientation has led to quality losses, redundancies, and a weakening of media diversity, the investors have also driven the digital transformation forward. Many experts, however, fear that the democratic function of journalism will come under increasing pressure if profit is prioritised over public interest.

Critics call for more public interest investments and new financing models to secure a sustainable, independent news landscape.

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The sale of the Denver Post to Alden Global Capital was marketed as an opportunity to restore the paper to its former glory, but eight years later, it was in open revolt against its owners.
In 2019, Megan Greenwell was the editor in chief of Deadspin, a sports blog, when it was acquired by a private equity firm.
Local news reporter Natalia, part of a union committee at the Indianapolis Star, experienced a demoralising process trying to reach a contract with Gannett, taking three and a half years.
The CEO of the company, Jim Spanfeller, published an "epilogue" celebrating that the company "will exit having increased shareholder value."

Twenty percent of the surviving papers are ghost papers, running only syndicated content with no journalists on staff. Twenty percent of those companies enter bankruptcy within ten years of being acquired. The company that acquired Deadspin's parent company, Gizmodo Media, later sold off one of its last remaining brands, Kotaku. Greenwell's new book, Bad Company, investigates what private equity's growing footprint has done to industries across the country. Eight percent of the American workforce is employed at companies owned by private equity. In many media industries, leaders have historically prioritized high profit margins, leading to a downward trend in publications' growth. Greenwell narrated her workplace's needless implosion in a viral blog post. The Mississippi Today and the Baltimore Banner are examples of nonprofit local news outlets that have conducted deep investigations.

Private equity's impact on the media industry is scrutinized by Megan Greenwell, as she discusses its destructive effects.