While hedge funds raid and kill local newspapers, Sinclair tries to build an empire of low-grade local TV stations
It’s become an article of faith among media professionals and people concerned with the future of the free press that the internet is killing off journalism. There’s no doubt that the emergence of fake news and the sharp decline in advertising sales has negatively impacted media companies. But the truth is more complicated. The fact that local news is dying across America has more to do with who owns the media than with technological disruption.
“In just the last six to eight years, there has been a sea change in who owns newspapers,” said Julie Reynolds, a former investigative reporter who now focuses on uncovering the financial underside of the media industry. “Private equity firms, aka hedge funds, have taken control of the majority of American newspapers.”
It’s easy to see why local media companies would be attractive targets for such investment firms. While some private equity groups have favored purchasing unprofitable or distressed companies and then turning them around for sale, another type, sometimes called “vulture funds,” prefer to buy companies, loading them up with debt and then sell off the pieces.
That latter scenario is exactly what’s happened in the local radio market, where the industry’s largest player, iHeartMedia, filed for bankruptcy last week. It had become saddled with tens of billions in debt after it was taken over by Bain Capital and Thomas H. Lee Partners in 2006. The two hedge funds took out massive loans to finance the acquisition and have been making significant staffing cuts at the hundreds of stations owned by iHeart, a company formerly known as Clear Channel.