Mass layoffs and a drop in digital subscriptions continue to rock the news industry. Countless explanations exist for these issues, but the public often overlooks the culpability of private investment funds.
Private investment funds are the focal point of Margot Susca’s new book, “Hedged: How Private Investment Funds Helped Destroy American Newspapers and Undermine Democracy.” Published on Jan. 23 by the University of Illinois Press, “Hedged” is Susca’s first book, detailing how hedge funds and private equity firms damage American newspapers and negatively impact democracy.
Susca is the inaugural assistant professor of Journalism, Accountability, and Democracy at American University’s School of Communication, as well as the associate editor of American University’s Investigative Reporting Workshop.
The book is the culmination of Susca’s research on the actions of hedge funds and private equity firms in American media. Hedge funds are partnerships where investors combine their money and invest in assets, like newspapers, to quickly make a profit. Private equity firms, on the other hand, are investment management companies that combine investor funds to buy shares in private companies, such as news organizations, with the aim of improving operations and eventually selling them.
In the book, Susca highlights how private investment dominates and ultimately weakens the newspaper industry. She writes that private equity firms and hedge funds’ singular focus on profit leads to layoffs, excessive debt and even the closing of newspapers. Susca said that she wants to give people a better understanding of the negative impacts of these economic investors.
“[Hedge funds and private equity firms] get treated like the heroes of Wall Street, by business pages by financial magazines, because wealth is revered in the United States as the standard of what everyone should become,” Susca said in an interview with The Eagle.
Susca added, “My concern is that they’re now so heavily involved in newspapers that what does that say about the reliability and the veracity of the information or news ecosystem? So, I think it’s a function of their control. And I think it’s also a function of the way America just really looks at wealth as being something that’s really great.”
Susca’s interest in media ownership began during her doctoral program at Florida State University, where she took a class called “The Political Economy of Media.” The class required her to go through records and documents related to media ownership, something she would later do for “Hedged.”
She also described how her journalism background affected her journey to create her book.
“Political economy is a tradition of communication studies scholarship that I now identify with. So, I’m known as a political economist of media. And it was an academic scholarly area of inquiry that felt a lot like investigative journalism to me, you use a lot of records, you use a lot of documents,” Susca said. “So, my work kind of having been a journalist, it just felt like a natural fit for me and from there, that’s kind of, what I wanted to do as a scholar.”
Susca received her Ph.D. in mass communication from Florida State University in 2012. Before starting her Ph.D. program, Susca was a reporter for Scripps Treasure Coast Newspapers in southern Florida.
Susca started her research for the book in 2018, compiling records related to newspaper chains like McClatchy, which owns papers such as The Charlotte Observer, the Miami Herald, The Sacramento Bee and more. During the first several months of research, Susca noticed that hedge funds and private equity firms seemed to be controlling the financing of newspaper chains. Susca then meticulously examined U.S. Securities and Exchange Commission annual reports, bankruptcy court documents and the incomes of newspaper chain CEOs. With assistance from Aaron Schaffer, an assistant editor at The Washington Post, Susca organized her research, conducting 124 interviews and sorting through 25,000 pages of documents.
Using the Freedom of Information Act, Susca obtained crucial information related to Alden Global Capital, a hedge fund that has acquired multiple newspaper chains. Susca specifically sought U.S. Department of Labor records revealing how Alden Global Capital used employee pension funds. Susca said that she was persistent when requesting documents.
“It took several months to get access to those [records] through the Freedom of Information Act. And so, that’s FOIA,” Susca said. “That’s how you know you have to just be patient and I was initially told that no records were responsive to my requests, but I knew that there were records, so you just have to navigate the bureaucracy and that’s what being a reporter is all about, so you just have to think through it.”
In “Hedged,” Susca describes the current era of private investment in newspaper journalism and contrasts it with previous eras, discussing how newspapers historically turned profits and identifying five core features of the private investment era.
On Feb. 13, Susca spoke at an SOC Media Unmasked Book Series event dedicated to her book. The event was organized by SOC and the SOC Undergraduate Council. At the event, Susca and Washington Post investigative reporter and SOC Journalist in Residence John Sullivan discussed the history of private investment funds in news media and how newspapers were family-owned until families started selling their assets to newspaper chains like Gannett, which owns USA TODAY.
During the event, Susca emphasized that media consolidation through mergers and acquisitions and debt accumulation exacerbated challenges for newspapers, particularly during the 2008 recession. She stressed that private equity firms and hedge funds should be held accountable for their role in the decline of newspapers.
“I think the main takeaway is that there is a missing piece in the history of the destruction of journalism, the U.S. journalism newspaper industry, and it’s the role that private equity played in the run-up to the 2008 Recession and in the run-up to the advertising crisis,” Susca said. “The loss of advertising revenue I mean, it’s become conventional wisdom right now that the loss of advertising revenue to sites like Craigslist and Monster.com is what destroyed U.S. newspapers.”
Susca added, “I believe that that lets private equity firms who pressured newspaper companies into making terrible decisions off the hook. And it was very important for me to trace that history of how private equity firms were responsible for the run-up for the lack of innovation from 2003 to 2008.”
Since completing “Hedged,” Susca has focused on researching sustainable news ownership models. She traveled around the country to learn more about nonprofit models for news organizations, specifically interested in models that don’t need to return money to stakeholders or shareholders.
Susca believes that private investment has destroyed local newspapers by reducing the amount of local news published, feeling that profit is now prioritized over community coverage.
At an “SOC Professors Doing Awesome” event on Feb. 22, Susca shared her findings on sustainable news ownership models. Matt Romano, an attendee and a junior in SOC, said he was glad that Susca highlighted the topic of ownership in journalism.
“The ownership of journalism is very important because it definitely dictates some of the motives of how things are written and what is covered,” Romano said. “When you have companies that are owned by these big hedge funds or businessmen like Jeff Bezos, you definitely don’t get the same kind of coverage as when you have a more locally owned corporation.”
During the event, Susca mentioned that Amazon founder Jeff Bezos purchased the Washington Post in 2013 and appreciates that students are acknowledging the ownership-related issues in the news industry.
“I think it’s a really positive development that students who are journalism majors understand the industry and maybe that’s because of the crisis we’re in. I don’t know if things were really good, we would, we have to talk about the industry.”
This article was edited by Samantha Skolnick, Abigail Turner and Abigail Pritchard. Copy editing by Luna Jinks, Isabelle Kravis, Sarah Clayton, Romy Hermans and Ariana Kavoossi.
