As you know by now, my favorite source of news is newspapers,
and I’ve written a couple of articles about them before:
https://tohell-andback.blogspot.com/2022/02/
I GUARANTEE that it will bring tears to your eyes.
Since the article above was published, Gannett has a new CEO, and his name is Mike Reed, who joined Gannett in 2019.
Brian McGrory, now an employee of the Boston Globe, has a few thoughts about Mr. Reed:
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To be clear, Mike Reed didn’t cause the seismic
collapse of the newspaper industry. No, larger forces had everything to do with
that. But Mike Reed has inflicted brutal and probably irreversible damage on
already struggling news organizations all across this country. Mike may well
lead the league in bad decisions, every one of them made with the confidence of
someone who never gets anything wrong.
More debt? Mike’s your guy. Distant, unresponsive
ownership? Where’s Mike? Fewer journalists? Nobody’s better at sending them to
the unemployment line than Mike.
Mike Reed used to be the CEO of GateHouse Media,
which had the proud distinction of not being the worst of the private
equity-driven raiders that were buying newspapers, gutting them for profits,
then leaving them as scant shells of what they once were. In 2019, Reed set his
sights on Gannett, another massive newspaper consolidator, albeit one with a
prouder history. GateHouse bought Gannett, took its name, and made Mike Reed
the CEO.
At the time, Reed said the combined companies
would save some $300 million in “efficiencies.” Pressed by a New York Times reporter in 2019 for some
estimate of how many newsroom cuts the chain could anticipate, Reed replied, “I
can’t give you an exact number, but almost nothing.”
Good one, Mike. Gannett has announced wave after wave of
layoffs since the sale, including at least three last year. It forced employees
to take furloughs and other assorted pay cuts, paused the company 401(k) match,
consolidated and closed papers, and froze hundreds of open jobs. Joshua Benton,
the director of the Nieman Journalism Lab, wrote a lengthy
story on the implosion of Gannett’s circulation this month in
which he said the employee count was cut in half since the 2019 sale.
There’s more. Gannett stock has plunged about 70
percent under Reed’s leadership. The company is groaning under more
than a billion dollars in debt from the sale, debt that had an initial interest
rate north of 11 percent. Did Reed buy Gannett with a Discover card?
So you, like me, might wonder what a company pays a CEO who
has inflicted this kind of generational damage on journalists, on a particularly
fraught industry, on many millions of would-be readers and the communities
where they live, and on shareholders. The answer, courtesy of the most recent
proxy: $7.7 million in 2021.
Let’s pause there. Does anyone really think Gannett
couldn’t convince Mike Reed, a former CFO, to cause this kind of mayhem for $2
million a year, or maybe $1 million, instead of eight? Does anyone think that
Reed deserves to be paid more than the CEO of The New York Times Co., which he
is?
The Patriot Ledger, which had a couple
of hundred journalists at its peak, now has four news reporters. Four. When I
worked there out of college, we had three people covering the town of Plymouth,
and it was hailed as one of the best suburban papers in America. It’s hardly
the only remnant. There’s The Cape Cod Times, the Providence Journal, the
Brockton Enterprise, the MetroWest Daily News, the Worcester Telegram &
Gazette — none better for Gannett’s stewardship. And so many reporter-less
weeklies all over Massachusetts and beyond.
Gannett is one of the largest newspaper chains in the country.
The link below lists all the papers it owns, and it is close to 300. One of
them is the Arizona Republic, which I have a subscription to:
https://en.wikipedia.org/wiki/List_of_assets_owned_by_Gannett
Mike Reed, of course, is not the first “vulture capitalist.
That title would likely be Carl Icahn.
Howard
Hughes acquired control of TWA in 1939, and after World War II
led the expansion of the airline to serve Europe, the Middle East, and Asia,
making TWA a second unofficial flag carrier of the United States
after Pan Am. Hughes
gave up control in the 1960s, and the new management of TWA acquired Hilton International and Century 21 in
an attempt to diversify the company's business.
As the Airline
Deregulation Act of 1978 led to a wave of airline failures,
start-ups, and takeovers in the United States, TWA was spun off from its
holding company in 1984. Carl Icahn acquired
control of TWA and took the company private in a leveraged buyout in 1988. TWA became
saddled with debt, sold its London routes, underwent Chapter
11 restructuring in 1992 and 1995, and was further stressed by
the explosion of TWA Flight 800 in
1996.
In January 2001, TWA filed for a third and final bankruptcy
and was acquired by American Airlines. American laid off many former TWA
employees in the wake of the September 11, 2001, attacks. TWA continued to exist as an LLC under American Airlines until July 1,
2003. American Airlines closed the St. Louis hub later that year
https://en.wikipedia.org/wiki/Trans_World_Corporation
Icahn
is an American financier. He is the founder and
controlling shareholder of Icahn Enterprises, a public company and diversified
conglomerate holding company based
in Sunny Isles Beach.
Icahn takes large stakes in companies that he believes will appreciate via
changes to corporate policy and he then pressures management to make changes
that he believes will benefit shareholders. He was one of the first activist shareholders and
is credited with making that investment strategy mainstream
for hedge funds. In the 1980s, Icahn developed a
reputation as a "corporate raider"
after profiting from the hostile takeover and asset stripping of Trans World Airlines.
Icahn is on the Forbes 400 and has a net worth of approximately $17 billion to
$24 billion.
Since 2011, Icahn
no longer manages money for outside clients, although investors can invest
in Icahn Enterprises
https://en.wikipedia.org/wiki/Carl_Icahn
What you may have noticed is that ruthless
cost cutting benefits few people other than the CEO making the cuts.
Icahn is worth as much as $24
billion, but he destroyed a company (TWA) that had been in business for more
than 60 years. Elon Musk’s severe cost cutting at Twitter has caused the share value
of both Twitter and Tesla to plunge.
As mentioned above, the value of Gannett stock has plunged 70%
since Mike Reed took over.
In contrast, consider the investment strategies of Warren
Buffett, who includes GEICO as one of his investments. He is a believer in
buying well managed companies, and holding on to them. Long ago, he realized
that treating employees as assets, rather than liabilities, is a sound business
decision, which is why Costco’s profit margin is higher than Walmart’s:
https://tohell-andback.blogspot.com/2022/11/that-why-they-pay-you-big-bucks.html
At least some of the papers under Gannett’s ownership will
survive, but not all of them will,
This will leave a number of markets without a local news
source, further contributing to the “dumbing down of America”, one in which 9
of the top 10 cable shows are on FOX, In case you are wondering, FOX is actually not a news outlet, but an “entertainment”
outlet, which is how Roger Aisles registered the company at its 1996 launch.
Gannett itself has a long history, and it goes all the way
back to 1936. It is the largest newspaper publisher in the country, and it also
owns about 50 TV stations. It will likely stay in business long into the future,
but I predict that Mike Reed’s tenure will be short-lived if the stock price
stays in the cellar.
To quote Rush Limbaugh, “that’s the way things ought to be”
https://en.wikipedia.org/wiki/Gannett
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