As newspapers downsize, private-equity owners print money

GateHouse Media -- which is owned by several nesting investment companies -- bought rival chain Gannett for $1.4B.

Yesterday, GateHouse Media’s parent company announced plans to buy rival newspaper chain Gannett in a $1.4B deal. 

As newspapers downsize, private-equity owners print money

The merger, which unites the country’s 2 largest newspaper chains, will likely result in job cuts for local newspapers across the US — and profits for the investors who own GateHouse.

Consolidation NATION continues

When the purchase is complete, GateHouse will operate 667 newspapers — more than 4x as many as the nearest competitor, Digital First Media (which operates 158 newspapers).

For local newspapers, consolidation has often been a survival mechanism: Since 2004, 1 in 4 newspapers have shut down (and nearly 1 in 2 newspaper jobs disappeared). 

But, for newspapers that evaded digitally driven demise, something strange is happening…

Profits are actually UP for newspaper survivors…

Why? The private equity companies that own newspaper chains like GateHouse cut costs enough to outpace declining revenue — often by simply cutting newsrooms in half and pulling in the same ad dollars.

That consolidation creates a tall corporate ladder… 

The Des Moines Register is owned by Gannett, which is now owned by GateHouse Media, which is owned by private-equity firm Fortress Investment Group, which is owned by Japanese telecom giant SoftBank.

So much for a LOCAL paper

Predictably, GateHouse plans to eliminate $275m – $300m in expenses, likely from layoffs.

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