Hedge Fund 'Asshole' Destroying Local News & Firing Reporters Wants Google & Facebook To Just Hand Him More Money

from the really-now? dept

Have you heard of Heath Freeman? He's a thirty-something hedge fund boss, who runs "Alden Global Capital," which owns a company misleadingly called "Digital First Media." His business has been to buy up local newspapers around the country and basically cut everything down to the bone, and just milk the assets for whatever cash they still produce, minus all the important journalism stuff. He's been called "the hedge fund asshole", "the hedge fund vampire that bleeds newspapers dry", "a small worthless footnote", the "Gordon Gecko" of newspapers and a variety of other fun things.

Reading through some of those links above, you find a standard playbook for Freeman's managing of newspapers:

These are the assholes who a few years ago bought the Denver Post, once one of the best regional newspapers in the country, and hollowed it out into a shell of its former self, then laid off some more people. Things got so bad that the Post’s own editorial board rebelled, demanding that if “Alden isn’t willing to do good journalism here, it should sell the Post to owners who will.”

And here's one of the other links from above telling a similar story:

The Denver newsroom was hardly alone in its misery. In Northern California, a combined editorial staff of 16 regional newspapers had reportedly been slashed from 1,000 to a mere 150. Farther down the coast in Orange County, there were according to industry analyst Ken Doctor, complained of rats, mildew, fallen ceilings, and filthy bathrooms. In her Washington Post column, media critic Margaret Sullivan called Alden “one of the most ruthless of the corporate strip-miners seemingly intent on destroying local journalism.”

And, yes, I think it's fair to say that many newspapers did get a bit fat and happy with their old school monopolistic hold on the news market pre-internet. And many of them failed to adapt. And so, restructuring and re-prioritizing is not a bad idea. But that's not really what's happening here. Alden appears to be taking profitable (not just struggling) newspapers, and squeezing as much money out of them directly into Freeman's pockets, rather than plowing it back into actual journalism. And Alden/DFM appears to be ridiculously profitable for Freeman, even as the journalism it produces becomes weaker and weaker. Jim Brady called it "combover journalism." Basically using skeleton staff to pretend to really be covering the news, when it's clear to everyone that it's not really doing the job.

All of that is prelude to the latest news that Freeman, who basically refuses to ever talk to the media, has sent a letter to other newspaper bosses suggesting they collude to force Google and Facebook to make him even richer.

You can see the full letter here:

Let's go through this nonsense bit by bit, because it is almost 100% nonsense.

These are immensely challenging times for all of us in the newspaper industry as we balance the two equally important goals of keeping the communities we serve fully informed, while also striving to safeguard the viability of our news organizations today and well into the future.

Let's be clear: the "viability" of your newsrooms was decimated when you fired a huge percentage of the local reporters and stuffed the profits into your pockets, rather than investing in the actual product.

Since Facebook was founded in 2004, nearly 2,000 (one in five) newspapers have closed and with them many thousands of newspaper jobs have been lost. In that same time period, Google has become the world's primary news aggregation service, Apple launched a news app with a subsription-based tier and Twitter has become a household name by serving as a distribution service for the content our staffs create.

Correlation is not causation, of course. But even if that were the case, the focus of a well-managed business would be to adapt to the changing market place to take advantage of, say, new distribution channels, new advertising and subscription products, and new ways of building a loyal community around your product. You know, the things that Google, Facebook and Twitter did... which your newspaper didn't do, perhaps because you fired a huge percentage of their staff and re-directed the money flow away from product and into your pocket.

Recent developments internationally, which will finally require online platforms to compensate the news industry are encouraging. I hope we can collaborate to move this issue forward in the United States in a fair and productive way. Just this month, April 2020, French antitrust regulators ordered Google to pay news publishers for displaying snippets of articles after years of helping itself to excerpts for its news service. As regulators in France said, "Google's practices caused a serious and immediate harm to the press sector, while the economic situation of publishers and news agencies is otherwise fragile." The Australian government also recently said that Facebook and Google would have to pay media outlets in the country for news content. The country's Treasurer, Josh Frydenberg noted "We can't deny the importance of creating a level playing field, ensuring a fair go for companies and the appropriate compensation for content."

We have, of course, written about both the plans in France as well as those in Australia (not to mention a similar push in Canada that Freeman apparently missed). Of course, what he's missing is... well, nearly everything. First, the idea that it's Google that's causing problems for the news industry is laughable on multiple fronts.

If newspapers feel that Google is causing them harm by linking to them and sending them traffic, then they can easily block Google, which respects robots.txt restrictions. I don't see Freeman's newspaper doing that. Second, in most of the world, Google does not monetize its Google News aggregation service, so the idea that it's someone making money off of "their" news, is not supported by reality. Third, the idea that "the news" is "owned" by the news organizations is not just laughable, but silly. After all, the news orgs are not making the news. If Freeman is going to claim that news orgs should be compensated for "their" news, then, uh, shouldn't his news orgs be paying the actual people who make the news that they're reporting on? Or is he saying that journalism is somehow special?

Finally, and most importantly, he says all of this as if we haven't seen how these efforts play out in practice. When Germany passed a similar law, Google ended up removing snippets only to be told they had to pay anyway. Google, correctly, said that if it had to license snippets, it would offer a price of $0, or it would stop linking to the sites -- and the news orgs agreed. In Spain, where Google was told it couldn't do this, the company shut down Google News and tons of smaller publications were harmed, not helped, but this policy.

This surely sounds familiar to all of us. It's been more than a decade since Rupert Murdoch instinctively observerd: "There are those who think they have a right to take our news content and use it for their own purposes without contributing a penny to its production... Their almost wholesale misappropriation of our stories is not fair use. To be impolite, it's theft."

First off, it's not theft. As we pointed out at the time, Rupert Murdoch, himself, at the very time he was making these claims, owned a whole bunch of news aggregators himself. The problem was never news aggregators. The problem has always been that other companies are successful on the internet and Rupert Murdoch was not. And, again, the whole "misappropriation" thing is nonsense: any news site is free to block Google's scrapers and if it's "misappropriation" to send you traffic, why do all of these news organizations employ "search engine optimizers" who work to get their sites higher in the rankings? And, yet again, are they paying the people who make the actual news? If not, then it seems like they're full of shit.

With Facebook and Google recently showing some contrition by launching token programs that provide a modest amount of funding, it's heartening to see that the tech giants are beginning to understand their moral and social responsibility to support and safeguard local journalism.

Spare me the "moral and social responsibility to support and safeguard local journalism," Heath. You're the one who cut 1,000 journalism jobs down to 150. Not Google. You're the one who took profitable newspapers that were investing in local journalism, fired a huge number of their reporters and staff, and redirected the even larger profits into your pockets instead of local journalism.

Even if someone wants to argue this fallacy, it should not be you, Heath.

Facebook created the Facebook Journalism Project in 2017 "to forge stronger ties with the news industry and work with journalists and publishers." If Facebook and the other tech behemoths are serious about wanting to "forge stronger ties with the news industry," that will start with properly remunerating the original producers of content.

Remunerating the "original producers"? So that means that Heath is now agreeing to compensate the people who create the news that his remaining reporters write up? Oh, no? He just means himself -- the middleman -- being remunerated directly into his pocket while he continues to cut jobs from his newsroom while raking in record profits? That seems... less compelling.

Facebook, Google, Twitter, Apple News and other online aggregators make billions of dollars annually from original, compelling content that our reporters, photographers and editors create day after day, hour after hour. We all know the numbers, and this one underscores the value of our intellectual property: The New York Times reported that in 2018, Google alone conservatively made $4.7 billion from the work of news publishers. Clearly, content-usage fees are an appropriate and reasonable way to help ensure newspapers exist to provide communities across the country with robust high-quality local journalism.

First of all, the $4.7 billion is likely nonsense, but even if it were accurate, Google is making that money by sending all those news sites a shit ton of traffic. Why aren't they doing anything reasonable to monetize it? And, of course, Digital First Media has bragged about its profitability, and leaked documents suggest its news business brought in close to a billion dollars in 2017 with a 17% operating margin, significantly higher than all other large newspaper chains.

This is nothing more than "Google has money, we want more money, Google needs to give us the money." There is no "clearly" here and "usage fees" are nonsense. If you don't want Google's traffic, put up robots.txt. Google will survive, but your papers might not.

One model to consider is how broadcast television stations, which provide valuable local news, successfully secured sizable retransmission fees for their programming from cable companies, satellite providers and telcos.

There are certain problems with retransmission fees in the first place (given that broadcast television was, by law, freely transmitted over the air in exchange for control over large swaths of spectrum), and the value they got was in having a large audience to advertise too. But, more importantly, retransmission involved taking an entire broadcast channel and piping it through cable and satellite to make things easier for TV watchers who didn't want to switch between an antenna and a cable (or satellite receiver). An aggregator is not -- contrary to what one might think reading Freeman's nonsense -- retransmitting anything. It's linking to your content and sending you traffic on your own site. The only things it shows are a headline and (sometimes) a snippet to attract more traffic.

There are certainly other potential options worth of our consideration -- among them whether to ask Congress about revisiting thoughtful limitations on "Fair Use" of copyrighted material, or seeking judicial review of how our trusted content is misused by others for their profit. By beginning a collective dialogue on these topics we can bring clarity around the best ways to proceed as an industry.

Ah, yes, let's throw fair use -- the very thing that news orgs regularly rely on to not get sued into the ground -- out the window in an effort to get Google to funnel extra money into Heath Freeman's pockets. That sounds smart. Or the other thing. Not smart.

And "a collective dialogue" in this sense appears to be collusion. As in an antitrust violation. Someone should have maybe mentioned that to Freeman.

Our newspaper brands and operations are the engines that power trust local news in communities across the United States.

Note that it's the brands and operations -- not journalists -- that he mentions here. That's a tell.

Fees from those who use and profit from our content can help continually optimize our product as well as ensure our newsrooms have the resources they need.

Again, Digital First Media, is perhaps the most profitable newspaper chain around. And it just keeps laying off reporters.

My hope is that we are able to work together towards the shared goal of protecting and enhancing local journalism.

You first, Heath, you first.

So, basically, Heath Freeman, who has spent decade or so buying up profitable newspapers, laying off a huge percentage of their newsrooms, leaving a shell of a husk in their place, then redirecting the continued profits (often that exist solely because of the legacy brand) into his own pockets rather than in journalism... wants the other newspapers to collude with him to force successful internet companies who send their newspapers a ton of free traffic to pay him money for the privilege of sending them traffic.

Sounds credible.

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Filed Under: aggregation, google tax, heath freeman, hedge fund, journalism, local news, profits, reporting
Companies: alden capital, alden global capital, digital first media