The Ponzi scheme of marauding news conglomerates

Jim Rich
Jim Rich
May 24 · 4 min read

When Gatehouse Media announced yesterday it would be the latest news conglomerate to slash yet more staff, the news was accompanied by the usual — and understandable — question from many across social media: Just what the hell is the end game or business model for these companies as they continue to cut their newsrooms to oblivion?

The answer is simple, if painful, and the business model is as equally straightforward: A small group of executives at each corporation finding a way to maintain the ability to draw enormous, disproportionate salaries from these conglomerates. How do they do that? By showing shareholders/Wall St. that these newspapers are eking narrow profits. Everything is about the quarterly earnings calls. Sure, they pay lip service to “producing world/class journalism,” but as their actions so clearly demonstrate, journalism is not the commodity they are peddling. Profit is their product. Plain and simple.

How do they turn a profit with so little investment in the journalism they claim is their business? That’s where the disproportionately paid execs come in: Their only job is to the solve the economic equation in each newsroom that translates intothe fewest number of bodies putting out a maximum volume of content that yields that magical profit threshold.

Now, some might say at this point, hold on, that’s just good, basic business practice, isn’t it? Keeping costs lowering than the revenue generated? Yes, except in normal business scenarios that dynamic is usually also informed and affected by another factor: quality of product. In normal biz, if the quality of your product outstrips the rate at which you are slashing costs to maintain profit, your business usually enters a death spiral that will feed off itself until you are out of business. Which is exactly what we are seeing happening with newspapers.

Despite having few skills beyond finding ways to keep themselves disproportionately compensated at the expense of dying companies, the execs running these newspaper companies are not stupid. They’ve figured out that as a business, newspapers and producing journalism, is no longer something you can succeed at. (Thanks to Google, Facebook, and an ineffectual Congress, etc, but that’s another story). But grabbing up a bunch of those dying newspapers, centralizing costs, slashing staffs and grinding every penny out of them in the short term, then trying to unload them to the next buyer, is a winnable venture. Why do you think all the current news conglomerates are constantly searching for new buyers?

And the victim once the Ponzi scheme music stops playing and there are no newspapers left other than The NY Times, WaPO and Wall St. Journal ? Local news and democracy as a whole.

There are a couple of other important points to keep in my mind, however.

1. It’s easy to look at all this and conclude that these conglomerates and their execs are responsible for the death of local news. But that’s not true. The patient was already terminal when they took over. It’s fair, however, to view them as abusive hospice nurses who get bonuses for sadistic behavior, but as I mentioned as an aside earlier, there are others who are actually responsible for killing local news.

Why should these news conglomerates/execs be responsible for saving the local news industry? Don’t get me wrong: as human endeavors go, the choices they are making with these newspapers for the sake of their own enrichment is wanting, to say the least. But at the end of the day, they are merely shallow opportunists capitalizing on a gruesome situation created by a different group of shallow opportunists (see Google, Facebook). Capitalistic society is littered with these types of people and companies. It’s what gives capitalism an ugly name. Which brings me to my second point…

2. Getting pissed at these news conglomerates and execs is useless. Anyone who cares about democracy should be angry, but direct that ire at those who are the true culprits and/or the people who can help fix this. Which means call your reps in Congress. Vote for new reps who believe regulating digital behemoths is an urgent priority. Cancel your Facebook account. Switch to a search engine other than Google.

None of these things will save local journalism overnight. But it’s where we need to start.

BTW: I don’t think we should be subscribing to local outlets owned by these conglomerates. The intent is good, but all you are truly subsidizing is the execs and their mission to keep drawing their bloated salaries. Your money won’t be put toward improving the life-support journalism that exists at these places.

As for not-profit news orgs, I was once higher on them than I am now. I believe they are viable options to offset part of the current crisis, but it’s unrealistic to believe that this model can replace the once large and thriving news ecosystems that existed in most metro areas. I know many disagree with me on this, but that’s an argument for another time.

The bottom line is, what these news conglomerates are doing is dreadful, but their motivation should not be a mystery to anyone. The quicker we come to terms with this, the sooner we might be able to clean up the carnage that attracted these vultures in the first place.

Jim Rich

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Jim Rich

Jim Rich is former Editor-in-Chief at the NY Daily News & Executive Editor at HuffPost. His writing has appeared on Esquire.com, Rolling Stone.com, among others