McClatchy bankruptcy and what's next?
I used to work at McClatchy. I have tremendous respect for McClatchy and the leaders there. So I was especially bummed to see the news last week about the media company declaring bankruptcy after 163 years of family control. The one-time second largest media company in the U.S. owns The Charlotte Observer, The Raleigh News & Observer and The Durham Herald-Sun, among a group of 30 across the U.S. that includes The Miami Herald and the Kansas City Star.
The basics:
You can read so many of the details here, from the company’s own mouth, but here’s the TLDR: McClatchy filed for chapter 11 bankruptcy and submitted a plan to the bankruptcy court that allows its properties to continue operating as proceedings continue. Ultimately, despite reporting positive earnings in Q3 of 2019 and making tremendous strides to grow its digital subscriptions, the company could never get past the $6.5 billion debt load it assumed in acquiring the former Knight-Ridder properties in 2006--not to mention the print advertising dollars, in particular, that it has hemorrhaged with the rest of the industry. And the final straw: it no longer could meet its pension obligations, to pay the more than 24,000 people who depend on it.
After trading at more than $700 in 2004, its stock was down to 75 cents a share last week.
Who's in charge now?
Though not fully approved, the plan submitted to the bankruptcy court would pass control of the company to Chatham Asset Management, a hedge fund that holds nearly all McClatchy’s debt. Chatham also controls magazine titles like Men’s Journal and Us Weekly, as well as the National Enquirer (which it is reportedly trying to sell). It also has a controlling stake in Postmedia, the largest newspaper chain in Canada. And perhaps most importantly to most people in the know, even though it is … a hedge fund, it has different philosophies and operates differently from the biggest “boogeyman” of the hedge funds that now control so much of the media landscape: Alden Global Capital.
Read more here from perhaps my favorite business of media reporter, Ken Doctor, about these funds that now control so much of the media companies in this country. Here in NC, new Gannett/Gatehouse and Lee Enterprises (formerly Berkshire Hathaway) now operate the super-supermajority of the non-digital native daily news organizations. And a fund, Fortress Investment Group, owns and controls new Gannett. And Alden is eyeing ways to gain a bigger stake in Lee.
Under the deal, the McClatchy family and other holders of the company’s stock lose the entire value of their holdings — and board control. Chatham is expected to operate the chain as a private company. But in its bankruptcy filing, McClatchy said it still has to resolve “final details surrounding governance and senior management.”
What’s next:
McClatchy and its creditors didn’t achieve a pre-arranged bankruptcy, leaving open the possibility of a legal battle that could drag out. The biggest point of dispute, which the court will have to resolve: who will manage the qualified pension plan, which has 24,500 beneficiaries!, that McClatchy could no longer afford to pay. McClatchy has been in negotiations with the Pension Benefit Guaranty Corporation, a federal guarantor of pensions, to assume control of their pensions so that “substantially all" of the plan's participants and beneficiaries should get their entitled benefits. But in the meantime, left in limbo are those 24,500 humans (for whom the pension was part of their compensation and something on which they rely). They have started receiving letters notifying them of the company's intent to terminate the retirement plan.
And none of this may be straightforward: the PBGC said in a Feb. 14 filing that McClatchy may have conducted "fraudulent transfers" to Chatham by converting unsecured debt to secured debt in 2018. So this may take some time to play out.
McClatchy had worked furiously to avoid this move, revealing in its bankruptcy announcement that in addition to several proposed mergers that had failed (including with the now Alden-addled Tribune Publishing Co.), Congress had declined to let them defer their $1.4 billion pension obligations that it had repeatedly forewarned it could no longer pay. (Others like The Seattle Times, Tampa Bay Times, (Minneapolis) Star Tribune and several smaller locally owned titles got that relief late last year.)
What really happens now:
I’m no futurist, but to even the best reporters out there, it’s unclear. Here’s what Robyn Tomlin, The News & Observer's executive editor and McClatchy's Southeast regional editor (overseeing all three NC properties), told me:
"While it's never fun to be in this position, it is effectively business as usual for us in Raleigh, Durham and Charlotte. More than 20 U.S. newspaper businesses have been through similar reorganizations since 2008, so we're in good company. I can't speak to the specifics of the reorganization plan, but here in NC we're still filling open jobs, and we remain fully focused on producing independent local journalism that serves our communities and state -- just as we have been since the 1800s. Nothing about the news this week changes our focus or our mission."
It's true: Bankruptcy reorganizations have become increasingly common over the last decade among local media organizations. Tribune Publishing, GateHouse (which last year bought Gannett and assumed Gannett’s name), Media News Group (now controlled by … Alden) and The Philadelphia Inquirer have used bankruptcy to keep operating while they have transitioned to a primarily digital business model.
Tomlin also wrote about the deal last week. After detailing the many substantial projects the Carolinas newsrooms, among others, have produced of late (including the Journey Across the 100), she asked for the public’s support in the form of digital subscriptions. She and Managing Editor Jane Elizabeth, in particular, are meanwhile continuing to seek alternative revenue sources like institutional grants and their recently announced Growth & Housing Lab, which will be supported by direct reader revenue and gifts.
So … what really happens now?
Doctor writes eloquently (as always) about the big takeaways from the deal and what it could mean, in this era of increasing consolidation (read it here). So is this a good or bad thing, according to Doctor? Well, it's unclear even as private-backed newspapers in Minneapolis and Boston, especially, are doing better since shedding their public form. And that's because of the opaqueness of operating privately and of hedge funds, in particular, whose first mission (and their fiduciary duty) is to ... cash, not the institution of journalism.
“Being shielded from the markets can let you do important but difficult things. Or it can let you get away with stripping civic assets to the bare wiring,” Doctor writes in a justified bit of waffling because goodness knows, I can’t and won’t play the role of futurist here, so don’t ask me to.
But I’ll say this: no one in this state, or any of McClatchy’s markets, should feel completely comfortable even with a non-Alden hedge fund in control. And I feel for those pension holders, in particular. And I get on Twitter too much to believe that “subscribe to support local journalism” is a straightforward statement to make, so I won’t end with that. Instead, I’ll go out like a good journalist and quote someone I think is really smart. Specifically, here’s a brief part of a Twitter thread from Chris Horne, the truly innovative publisher of The Devil Strip, an arts and culture-centered media organization that is becoming a public-owned, “cooperative" structure in Akron, Ohio. In reaction to the McClatchy news, he wrote wise words for how we as an industry should be viewing the path forward and the value proposition that is out there for us even in these shifting times (regardless of your revenue model):
"People seek belonging + we need help connecting across difference = our opportunity
We need new classifieds. Not to drive revenue but to increase social currency.
The future for local journalism is in helping neighbors connect to each other and to the places where we live THROUGH our orgs.
If we facilitate connection and engagement, we'll be just fine."
Want to read more about the McClatchy news and fallout?
- in addition to Doctor, the other business of media reporter I follow most closely is Poynter’s Rick Edmonds (who writes about it here);
- McClatchy’s Vice President for News Kristin Roberts writes about the bankruptcy news in a lengthy Twitter thread here;
- The Washington Post’s Margaret Sullivan writes about the recent industry downturns and advocates that now is the time to really push for direct and indirect government support for journalism, like exists in Europe and Canada (which recently expanded its indirect support by offering tax credits for those who purchase digital subscriptions, like nonprofit donations); and
- Miami Herald Publisher and Executive Editor Mindy Marques talks here about why this is an “incredibly frightening time to be a journalist” and why, especially in the wake of McClatchy’s bankruptcy declaration, it is time to “give that fear new direction.”
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Some good reads
Another week, another week of great work happening across the state. Please message me anytime if you see more you think should be included!
- True crime podcasts and television shows are perhaps more popular than ever. And local news archives, and reporters, are often the sources for all of these programs. With the F/X network preparing to launch a series about former Fort Bragg doctor Jeffrey MacDonald, who is serving three life sentences for the deaths of his wife and daughters in 1970, the Fayetteville Observer looks at the infamous case and MacDonald’s continued claims of innocence. The Observer has an engaging, takeover-type navigation for the project, including a guided tour through its voluminous archives related to the case as well as the myriad depictions of the case and its fallout.
- Publishers ask me a lot: Should I be on TikTok? Is there a way to make money there? Well, one teenage in Charlotte has proven that there is ... and the Charlotte Agenda has a great profile on his growing business.
- Why are certain buildings named what they are? Who was that person? Relevant in the NC university system (in light of all of the Silent Sam rigamarole), always a good news story, too. Informing people and giving them context they don’t have! That’s journalism eh? So I liked this story from Port City Daily about why a stadium is named what it is and why, and how, the process to change it may happen. (Note: this is one of their totally free reads this week because like many other publishers PCD is using a freemium model where some content is all-free and others are metered. More on these models inside the state in an upcoming edition!).
- It’s a mighty unpleasant thought, but nevertheless it’s true: con artists prey on people after natural disasters. The News-Times has a gripping story documenting some of the ways folks were defrauded after Hurricane Florence in Carteret County.
- Look, there’s no sugar coating it: it’s a battle to reach new readers these days. They say we are all exposed to more information in a day than someone in the 12th century would have encountered in their whole lifetime. Even in this hyper-connected and online world, it can be tough to stand out from the literal masses and to get people interested in anything resembling the “vegetables” (or things you should know) that journalism traditionally has served (and to some extent must serve). So I liked what NC Health News’s Anne Blythe did with the headline and lede of her recent story on the ongoing battle between legislators and the governor over Medicaid transformation. She related it to something a little more accessible but not in a patronizing way (and certainly in a timely way): she related it to the UNC-Duke rivalry game in men’s basketball. Great lede too: "Whether you believe that politics has become a blood sport or sports have become too political, it’s hard to dispute the long-standing comparisons between the two."
- Finally, a shout-out to Corey Friedman, editor of The Wilson Times and executive editor for Restoration NewsMedia, whose weekly opinion column has been picked up for syndication. Creators Syndicate has begun distributing the weekly column and making it available to newspapers, magazines and online news outlets across the country. Here is the first installment. Freidman, who I work with as part of the UNC-Knight-Lenfest Table Stakes program, told me: "It’s an exciting opportunity. I hope some papers will pick it up. I try to cut across political paradigms to challenge folks and make them think.”
Founded in 1987, Hermosa Beach, California-based Creators is a publishing and syndication house offering comic strips, puzzles, editorial cartoons and columns. It’s the third-largest syndicate in the United States.
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To-do list
- A reminder that tomorrow, Feb. 20, QCityMetro in Charlotte will host a free community discussion with Pulitzer Prize-winning journalist David Zucchino, the author of the new book on the 1898 Wilmington massacre: "Wilmington's Lie: The Murderous Coup of 1898 and the Rise of White Supremacy." Register here. (And see a Q&A here.)
QCity Publisher Glenn Burkins said in addition to that community conversation, moderated by WFAE's Gwendolyn Glenn, the event also will feature a panel of journalists to talk about "Media Literacy in the Age of the Internet." The League of Women Voters also will be on site with a voter-registration table. Plus there will be some special musical guests.
Burkins and his team are doing tremendous things with QCity, and one particularly cool thing he's done with this event, and this book, is that with help from Foundation For The Carolinas, he bought 500 copies of Zucchino's book and gave them to local libraries.
Anyway, please get your tickets to this event. Burkins told me the church where it's being held can hold up to 1,500, so hope to see lots in attendance.
- RALtoday is a great newsletter from the folks at 6AM City, which have launched a successful newsletter-centered business model with operations now in seven cities including Asheville and Raleigh. Since launching RALtoday six months ago, they have grown to more than 15,000 subscribers. And understandably: they’re ready to celebrate! So they’re having a “launch party” on Feb. 20 at Whiskey Kitchen in downtown Raleigh. More details here. First drink is on them!
- When you talk to newsletter folks like 6AM City about the “must-attend” events this year, they almost all say: the UNSPAM conference in Greenville, SC on March 12th and 13th. 6AM City is hosting a newsletter-focused hackathon during the conference, among other panels and workshops over the two days (this is one of those “un-conferences” that I find much more worthwhile and help to program myself; no sitting in rooms passively listening for eight hours!).
- Ex-N&O reporter David Menconi and and NC Policy Watch reporter Lisa Sorg will discuss the “State of Newspaper Journalism” at the North Carolina Book Festival this Saturday, Feb. 22, from 12-1. The event is free to the public and will be at HQ Raleigh at 310 S. Harrington Street. More info here.
- I talked in a previous edition about the Mountain Xpress in Asheville and how they had soft launched a membership model. Well, now it’s officially live and online. Check it out and consider joining here.
- Another reminder that Sunshine Day 2020 will be held Monday, March 9 at North Carolina A&T State University in the NC A&T Student Center. Guests are invited to attend a slate of events on openness and transparency issues facing North Carolina citizens. Events will begin at 9:30 a.m. Go here for more information.
- Finally, tickets are now on sale for the NC Media & Journalism Hall of Fame induction ceremony on April 3. This year’s class with ties to North Carolina are:
-Garden & Gun mastermind Rebecca Darwin;
-baseball’s beloved Pete Gammons ’67;
-Project 1619 powerhouse Nikole Hannah-Jones ’03 (M.A.);
-Lenovo C-suite communications guru Torod Neptune; and
-PBS NewsHour’s Judy Woodruff.
More info here.
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