Discussion of �“Local Journalism under Private Equity Ownership”�by Ewens, Gupta, and Howell�

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Ayako Yasuda

UC Davis

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2021 FOM Conference

October 28, 2021

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• The internet, mobile, and social media have challenged the newspaper business model
• People’s behavior modified by tech:
• Print to digital (and mobile)
• Publisher to social media platform

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• OLD: local newspapers heavy on local content, incl. local politics

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• NEW: consolidated news groups with shared resources across multiple papers, lean on local content

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1. Does PE ownership impact newspaper business?
2. Does PE ownership of local papers impact political participation?

Paper Summary

Under PE ownership, newpapers have:

1. Less local government coverage
2. More digital / less print circulation
3. Fewer affiliated reporters/editors

Also:

4. Lower voter turnout in county-level elections

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Interpretations:

• PE increases operational efficiency via centralized generic news production, reducing civic public good provision locally
• PE modernizes operation via IT investment in digital news production

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Contribution

• Growing literature documenting non-financial impact of PE ownership on broader society /environment
• Education
• Health
• Pollution
• Workers (skill, satisfaction, mobility)

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• This paper: Newspaper, with constitutional protection and mission to inform
• Thought-provoking, timely, fun data
• Results are nuanced

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Comments

1. Theory: how should newspapers be owned?

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• Empirics
• Employment Inference on LinkedIn
• Article Count for Shared Stories
• Local vs. National

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How should newspapers be owned for social good?

• News/journalism has a strong public good component.
• Curiously nonprofit ownership is rare in newspapers business – why?
• Does prevalence of for-profit ownership imply optimality or private benefits?
• Non-pecuniary preference of private owners hinted but not articulated
• Could go either way
• Tech billionaires vs. ultra HNW families vs. exchange-listed vs. PE/HF - why/when would one be better than the others?
• A cost-benefit + nonpecuniary incentive framework might help

• Chain ownership was already common before PE entry
• Economies of scale: shared resources for centralized functions with fixed cost
• Why would PE be different?
1. High-powered incentive: Usual explanation
2. Alternative: absence of nonpecuniary incentive for PE?
• Wealthy owner with partisan beliefs and/or personal agenda wants to tilt public sentiments towards their own, and willing to fund newspaper as a megaphone
• Rupert Murdoch, Berlusconi – Right-wing /libertarian end of politics
• Katherine Graham, Sulzberger family, Laurene Powell Jobs – progressive end
• PE lacks this objective and make purely financial decisions (or do they?)

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Empirics

• San Jose Mercury News and East Bay Times: sold to MediaNews (private chains) in 2006.
• MediaNews bought in bankruptcy by Alden Global in 2010.
• Alden Global becomes second largest newspaper owner in U.S. after purchasing Tribune Publishing in 2021.
• Though this is a HF deal, useful as examples, as mechanisms are analogous (and my local papers)

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Both papers are owned by Bay Area News Group, owned by MediaNews Group (Denver), owned by Alden Global Capital (NY).

MediaNews pioneered “clustering” before PE arrival – “cutting jobs at individual papers and consolidating functions at a hub near a cluster of newspapers” (Wikipedia)

Employment Inference on LinkedIn

• When PE buys and owns multiple papers through a chain operator, how do journalists list their employment on LinkedIn?
• Could over- or under-count after ownership change

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Does Mike get assigned to both papers?

Shomik’s articles ran in both papers – but does he get counted?

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Article Count for Shared Stories

• Shomik Mukherjee (smukherjee@bayareanewsgroup.com) wrote this article and it ran in both papers.
• Does it count as 1 article each at 2 papers?
• Does Shomik count as 1 employee, 0.5 employee, or 0 employee at East Bay Times and Mercury News?
• Could discrepancy in count method account for the large diff in “employee per 10 articles” at private chains (25%) vs. PE-owned (2%)?

Local vs. National, or non-partisan vs. partisan?

1. Local: “city council, city hall, mayor, state senate, state legislature, zoning, and planning board”
2. National: “Bush, Congress, Obama, Trump, White House, democrat, or republican”

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• Why are “democrat” and “republican” considered national?
• State politics are arguably the most hyper-partisan!
• More apt to label #1 category “non-partisan”, and #2 “partisan”
• Alternative interpretation: decline of non-partisan policy coverage and increase in partisan politics coverage after PE investment
• Why? Because it gets more eyeballs on digital platform (as per Facebook Newsfeed algorithm). Facebook is an elephant in the room perhaps?

Conclusion

• Thought-provoking paper

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• Suggestion: Push alternatives to the usual “high-powered incentive” efficiency argument
• Framework for newspaper ownership
• Private benefits (or lack thereof)
• Cost-benefit
• Chain ownership complicates employee and article count
• More partisan coverage, not national coverage?

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Social entrepreneurial response:

Nonprofit digital-only news

Heavily focused on local policy