Politics, Technology, and Language

If thought corrupts language, language can also corrupt thought — George Orwell

Will private equity save the newspaper industry?

Posted by metaphorical on 17 January 2007

“Media companies in transition should be private. When you’re privately backed, you have the flexibility to be nimble.”  — Scott N. Flanders, president of Freedom Communications, the parent of the Orange County Register.

We may know soon the fate of the LA Times and its parent, the Tribune Co. Yesterday, the Washington Post reported that:

Tomorrow is the deadline Tribune has set for bids on its $7.3 billion newspaper and television empire. But enthusiasm for Tribune has been tepid, rousing little interest from publicly traded newspaper companies but plenty from private money.

That unsettles some, who fear that private equity’s focus on short-term gain will lead to more cuts and quality reductions in an already shaky industry. But Freedom president Scott N. Flanders said private-equity ownership of newspapers is actually the best idea for this turbulent era.

“Media companies in transition should be private,” Flanders said. “When you’re privately backed, you have the flexibility to be nimble.”

Though they are not growing, many newspapers continue to make healthy profits, making them appealing targets for equity firms: small groups of moneyed investors who typically hold their new companies for a few years, urge them to cut costs and create value, and then sell their interest and move on.

Some have called private money the industry’s salvation: no more quarterly earnings reports, no more forecasts to meet, no more stock-price-crazed Wall Street sharpies.

But private money is no panacea.

When private investors buy into a company, they often borrow large sums of money, layering debt upon a sometimes-shaky corporation.

And in a execrably written opinion piece, Chicago Tribune columnist Charles Madigan comes to the same conclusion. It’s so badly written that it’s painful to link to it. I’ll spare you by jumping straight to the money shot:

Having read all of these words about my own business, I’m thinking that a lot of the despair is misplaced, created by the fact that we have plopped ourselves in exactly the wrong place, the stock market, even though that seemed like the smart thing to do two decades ago.

The difficult part now is figuring out how to get out of that spot.

Unsurprisingly, I’m going to take the opportunity to once again link to my previous suggestion that we find a way to make newspapers, newspaper chains, and a all other media companies non-profit corporations.


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One Response to “Will private equity save the newspaper industry?”

  1. i like the fact you back your blog up with the quotes very well done and intressting

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