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Paper Cuts: When private equity firms control local newspapers

Chapter 4

Private equity firms cutting costs in a distressed industry

Private equity control of local newspapers was raising concerns of those who study the news industry before the issue came to south-central Indiana. The arrival of private equity in this area was in January 2019 when GateHouse bought Indiana newspapers owned by a family business, Schurz Communications, Inc. Later in the year GateHouse took over the much larger Gannett, and assumed its better-known company name.

The role of private equity in newspapers was being debated well before the south-central Indiana newspapers were sold by family-owned Schurz Communications Inc.

A 2017 report by news analyst and author Ken Doctor in Harvard University’s NiemanLab publication outlines much of the complexity represented by private equity involvement in print media. Forbes has also done a lot of work in this area.

For this project, the first player to recognize is the New Media Investment Group, which owned GateHouse Media and its newspapers. Forbes notes the company was founded to operate newspaper, media directory, and other media content businesses.

The NiemanLab report introduced Fortress – a huge private equity firm. The report noted that Fortress did not own New Media, but it managed and controlled the investment company that was created when GateHouse Media went into bankruptcy in 2013. Fortress was paid millions to lead the company out of bankruptcy and make sure it could address its significant debt.

“For the story of flagging local American journalism in a time of great societal stress, it’s a triumph of capital over community. The managers and the investors are the victors, the readers and the journalists the losers.”

The GateHouse strategy was to buy more newspapers that were in financial difficulty, looking for cost-cutting efficiencies and new revenue streams. The Nieman story notes:

“In some cases, GateHouse has encircled these family operations, and then offered just enough to close a sale. At best, GateHouse puts together a cluster of newspapers — best for cost-cutting efficiency and consolidation — and takes over a newer printing operation that it can use for centralized, again more cost-efficient, publishing.”

Fortress, the private equity company that has since been taken over by Japan-based SoftBank, provided the capital for purchases.

Under Fortress’s management, the old GateHouse company began cutting journalists and selling real estate – moving newspapers out of old, distinguished buildings and selling the properties.

The NiemanLab report said the cuts were most severe and noticeable at the company’s smaller newspapers, which had been the GateHouse strength before Fortress.

Said the report: “For Fortress, newspapers — now a classic distressed industry — offered a chance for good profit, using the reliable roll-up-and-cut methodology at the root of its industry.”

While the business strategy may have been sound, Doctor’s analysis for the NiemanLab report pointed out serious consequences elsewhere.

“… for the story of flagging local American journalism in a time of great societal stress, it’s a triumph of capital over community,” Doctor wrote. “The managers and the investors are the victors, the readers and the journalists the losers.”

The report added that newspaper publishers were no longer judged on community involvement, a measure of the past, but rather strictly on financial performance of their newspapers.

“A world of community leadership — as uneven as it really was over the decades — has been quickly eroded,” he wrote.

Finally, the Nieman report noted while Fortress was earning millions in management fees, less money was going into local journalism.

It was with this track record that New Media Investment Group and GateHouse Media bought the newspapers of Schurz Communications Inc. in 2019.

Schurz had owned the newspapers in Bloomington and Bedford since 1966. The portfolio of properties in 2019 included Hoosier newspapers in South Bend, near the company headquarters in Mishawaka, and Martinsville, Mooresville, Spencer, Ellettsville, Clay City, Paoli, and Springs Valley. The company’s total print holdings of 10 daily newspapers and a handful of weeklies in Indiana, Maryland, Michigan, South Dakota, and Pennsylvania sold for $30 million, according to Associated Press.

These show Gannett owned properties in Indiana. Former Schurz properties are shown in blue; properties owned before the purchase by GateHouse/Gannett in 2019 are orange.

When the sale was completed, New Media/GateHouse owned more than 150 daily newspapers and hundreds of weeklies that touched 555 markets in the nation.

New Media President and CEO Michael E. Reed said at the time he was honored the Schurz family had “chosen us to steward these papers into the future. They have a long history of strong journalism and community impact…”

Less than a year after buying the Schurz newspapers, New Media Investment Group made a larger move that further altered the impact on south-central Indiana communities. What many characterized as a merger with the well-known newspaper company Gannett was actually a takeover. New Media Investment Group announced the purchase of Gannett and took over the company’s name for its newspaper group, which swelled to 260 dailies – including the additional Indiana newspapers in Indianapolis, Evansville and Lafayette.

The deal was financed in part by new private equity secured loan from Apollo Global Management.

Since then, Gannett has closed two of the former Schurz newspapers, sold two others, reduced publication days, sold buildings, and cut staff – at some papers to zero.

Chapter 5: Behind the sale: An interview with Todd Schurz »


Officials at Gannett would not talk to WFIU/WTIU for these stories. They sent a statement attributed to Jill Bond, news director of The Herald-Times.

Paper Cuts The reporting is supported by a grant from the Poynter Institute, a non-profit journalism school and research organization in St. Petersburg, Fla., and the Omidyar Network.

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