Mark Hauser Discusses How Private Equity Is Buying up Newspapers | Business | Before It’s News

As Mark Hauser often points out, since 2005, nearly 2,200 newspapers have folded. Researchers estimate that roughly 100 newspapers shut down each year . The majority of those remaining are weeklies located in small and rural communities. However, newspapers that have managed to survive are not doing it alone. Many of them rely on private equity firms to remain solvent. Unfortunately, the involvement of private equity firms in the newspaper industry has some negative consequences, says Mark Hauser, founder of and managing partner at Hauser Private Equity .

Hauser Private Equity is a hybrid private equity fund manager continuing Hauser Capital Partners’ successful strategy of directly co-investing throughout the lower-middle and middle markets via partnerships with control buyout funds and selectively with managers of growth equity and special situation funds.

The Current State of Newspapers

A recent report released by Pew Research Center explores the current state of the newspaper industry.

“In 2020, the circulation (print and digital) of weekday newspapers was 24.3 million and for Sunday newspapers it was 25.8 million, both a year-over-year decline of 6%. In contrast, in 1990, the weekday newspaper circulation was 63.2 million and for Sunday newspapers it was 62.6 million. Since then, circulation has been steadily dropping, reaching an all-time low in 2020.”

In addition to declining circulation, newspapers have experienced a drop in revenue over the past few decades. Historically, advertising has been the single most significant source of revenue for newspapers. However, as advertising dollars shifted to digital media outlets, revenue fell from $37.8 billion in 2008 to $14.3 billion in 2018, a 62% decline.

Private Equity Firms and Newspapers

In response to these trends, many newspapers have turned to private equity firms for help. Private equity firms purchase companies, often with the intent of increasing the companies’ returns. As the newspaper industry declined amidst the introduction of digitization, many private equity firms saw an opportunity to make money. Mark Hauser shares insights into a recent report that shows how private equity firms increased their share of the American newspaper industry from 5% in 2002 to 23% in 2019 and the resulting effects.

Shifts Inside the Newsroom

Private equity’s approach to operating a newspaper is dramatically different from traditional means. As a result, the structure of newsrooms has changed. Acquisitions often result in cuts to reporting staff, reduced local coverage, and downsizing of offices. Reporters who previously held prestigious positions now cover all news for a single paper.

An Increase in News Deserts

A “news desert” occurs when a community has zero access to local newspapers, and the number of news deserts in the United States has drastically increased. According to research from the University of North Carolina , “The figures are stark; of the 3,143 counties in the U.S., 200 of them now no longer have a daily or weekly newspaper, impacting 3.2 million people. Furthermore, 1,449 counties have only one newspaper, usually published weekly. Lastly, 2,000 counties now go without a daily newspaper. Residents in these news deserts tend to be older, poorer, and less educated than the overall population. The loss of newspapers means a loss of community information and opposing perspectives needed in a divided political landscape.”

An Influx of Ghost Newspapers

For newspapers that remain intact, many have transitioned to “ghost” publications — yet another byproduct of private equity firms’ involvement in the industry. Ghost newspapers refer to the loss of crucial local coverage that media sources typically provide for their audience. Due to reduced staffing, only major stories are covered. Routine government meetings are ignored, leaving citizens with little information about proposed tax hikes, local candidates for office, or important policy issues that must be decided.

Effects on Democracy

Many private equity firms that have purchased newspapers take a vulture-like approach, focusing strictly on maximizing profits. In such cases, democracy itself may be negatively impacted. Mark Hauser, who has decades of experience in the private equity industry, has identified the consequences of such an approach.

A lack of local newspapers reduces the number of media sources available in a community, especially in smaller and more rural areas. According to journalist McKay Coppins, who was featured in a recent NPR article, “When local newspapers disappear or are dramatically gutted, communities tend to see lower voter turnout, increased polarization, a general erosion of civic engagement and an environment in which misinformation and conspiracy theories can spread more easily.”

Coppins notes additional research that shows how city budgets can increase as a result of newspaper shutdowns because corruption and dysfunction take hold without a local media source to hold powerful people accountable.

The Impact of the Pandemic

The recent COVID-19 pandemic has exacerbated the situation, as many newspapers face additional economic difficulties. Although news sources have garnered more attention during the pandemic, most of them are digitally based. Mark Hauser shares insights from Pew Research Center that further explain how the pandemic has shifted the state of the newspaper industry.

“With the economic slowdown and most retail outlets and community events temporarily shut down, newspaper ad revenue declined sharply in 2020. For the year, ad revenue totaled a record low of $8.8 billion, down nearly 30% from $12.45 billion in 2019. By comparison, in 2005, newspapers had generated a record-high $49.4 billion in ad revenue.”

Pew reports that for the first time in history, newspapers generated more revenue from circulation than advertising in 2020. While this has benefited larger, more financially successful publications like the New York Times and the Washington Post, which rely more on digital circulation than advertising for their revenue, it has presented challenges for smaller newspapers without a national brand name.

The report notes that as newspaper revenue declines, so too does employment. “In 2020 employees in the newspaper industry numbered 30,820 workers, less than half the 74,410 in 2006. Sadly, the employment number has fallen every year since then.” According to the Pew Research Center, one-third of all newspapers laid-off employees in 2020, compared to 24% the year prior. Larger newspapers (those with a Sunday circulation of 250,000 or more) were more likely to experience layoffs than smaller publications.

The Need for Private Equity Firms in the Newspaper Industry

Although private equity firms’ involvement in the newspaper industry has had consequences, smaller operations are now relying on their capital to continue operations. One theory, supported by Mark Hauser, is that many newspapers would have been liquidated if private equity firms had not stepped in. In fact, the majority of today’s largest newspaper groups, including Tribune and MediaNews Group, are owned, controlled, or indebted to private equity firms. These firms now control nearly half of the newspapers in the United States.

Moreover, for newspapers that have proven to be beneficial to communities, some private equity firms adopt a strategy of improving efficiencies, then returning the newspapers to local owners. This is considered a win-win situation for the industry. Mark Hauser supports Penny Abernathy from Northwestern University who suggests that “local ownership is always best for the community where the newspaper is located. That’s because a local owner is going to know that market and know the residents.”

The Future of the Newspaper Industry

Private equity is fundamental to the future of the newspaper industry. As the number of newspapers continues to dwindle, and more retailers turn to digital advertising, private equity provides the capital newspapers need to continue — and even improve — operations. Although their approach often appears cutthroat, they are attuned to changing consumer demands regarding digitization and have the logistics to meet those demands.

There is no denying the decline of the newspaper industry, but with the support of private equity firms, some community papers have the opportunity to survive these seemingly insurmountable challenges. Furthermore, policymakers in Congress are taking action to explore avenues to sustain local newspapers and reduce consolidation. If consolidation continues too far, civic problems could arise.

About Mark Hauser

Mark Hauser is a private equity investor and fund manager with more than 35 years of investing and operating company experience. He is the founder and managing partner of Hauser Private Equity, a hybrid private equity fund management firm based in Cincinnati, OH. He is also chairman of HAUSER Insurance, an insurance brokerage firm founded in 1971.

Mark Hauser received his bachelor of business administration (B.B.A.) in Finance from Miami University. Prior to founding Hauser Private Equity, he served as vice president of Reynolds, DeWitt, & Co. In 1995, he purchased the predecessor to The Hauser Group. Following the purchase, he grew the agency from a local Cincinnati-based insurance company to national risk management and brokerage firm.

During his investing career, Mark Hauser has served on the board of directors for consumer goods and food and beverage brands. He has also served on boards for government-contracted security and defense businesses, as well as digital advertising and textile manufacturing companies.

Originally published at https://beforeitsnews.com on March 17, 2022.

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Mark Hauser has 25+ years of private equity investment and company operation experience. / Mark Hauser is the current Managing Partner of Hauser Private Equity.

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Mark Hauser

Mark Hauser

Mark Hauser has 25+ years of private equity investment and company operation experience. / Mark Hauser is the current Managing Partner of Hauser Private Equity.

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