Updated: May 8
The recent announcement that Chatham Asset Management, a New Jersey-based hedge fund, won the bankruptcy court auction to buy McClatchy Newspapers is momentous news for North Carolinians.
McClatchy owns three newspapers in North Carolina, including the two most important when it comes to covering public policy issues of statewide importance. McClatchy bought the Raleigh-based News & Observer in 1995 and acquired the Charlotte Observer in 2006 when it bought the Knight Ridder chain. It also owns The Herald-Sun in Durham. All three will now be owned by Chatham.
Undoubtedly, the sale of McClatchy Newspapers to a hedge fund is not what the thousands of employees and the McClatchy family envisioned for this iconic employer.
In the early 70’s it was common place to see Eleanor McClatchy, the matriarch of the family and the company, walking the halls in her unassuming way as she greeted employees by name.
In the early days McClatchy owned three newspapers all named “Bee.” The newspapers and several radio and television stations were located in Sacramento, Modesto and Fresno. These were the days when media companies were permitted to own multi-media operations in the same market.
The McClatchy company was well known for treating its people well and was a place with long tenured employees highlighted by the large membership in the 25-year club. The company was generous in the communities, with venues such as McClatchy High School, McClatchy Park bearing the name of the family and the company. Eleanor McClatchy was a generous sponsor of the Music Circus, a theatrical and musical venue and so much more. The company took a turn towards corporate in the mid 70’s with the hiring of North Carolinian Erwin Potts as the director of newspaper operations. He later became the first non-McClatchy family member to serve as CEO of the company, from 1989 to 1996. Potts is credited with leading the growth years of McClatchy into a national media company.
In 2006, McClatchy CEO Gary Pruitt and the Board of Directors made a dramatic decision under pressure from investors to purchase the Knight Ridder newspaper chain, an award-winning company with 84 Pulitzers. The purchase by the smaller McClatchy newspaper company for $4.5 billion in cash and stock was viewed as a great move by many journalists. But it was questioned by newspaper business leaders.
Many in the industry would argue this was the beginning of the end for McClatchy. The company took on massive debt and made a bet that the future was bright for the newspaper industry. In fact, newspapers have been battered by the generational change towards technology and readers’ desire for immediacy coupled with fleeing advertisers who moved from print to digital and direct contact with their customers.
The purchase of McClatchy by Chatham Asset Management signals a new and uncertain future for the proud company.
Like newsrooms across the state, those at the Charlotte Observer and the News & Observer have already been cut to the bone. Chances are, the cuts will continue under Chatham’s ownership, further diminishing North Carolinians’ access to news about state and local governments they need to be informed participants in the democratic process.
In 2016, Chatham acquired two-thirds ownership of Postmedia, the largest newspaper chain in Canada, and the publisher of the Vancouver Sun. Current and former employees told the New York Times that “the company has cut its work force, shuttered papers across Canada, reduced salaries and benefits, and centralized editorial operations in a way that has made parts of its 106 newspapers into clones of one another.”
Postmedia’s chief executive, Andrew MacLeod, told the New York Times that Chatham isn’t involved in the day-to-day operation of the business, and that the cost cuts were “natural outcomes of a legacy business that’s been in structural decline.” He said Chatham was one of the few financial players willing to take a risk on a newspaper business.
It’s hard to argue with that rationale. In less than a lifetime, the industry has changed dramatically from the days when highly profitable family-owned newspapers, like those owned by the McClatchy’s, took great pride in their watchdog role and willingly expended their resources to produce great and important stories.
In a new book titled “Ghosting the News: Local Journalism and the Crisis of American Democracy,” Margaret Sullivan quotes a PEN America study, “As local journalism declines, government officials conduct themselves with less integrity, efficiency and effectiveness and corporate malfeasance goes unchecked…” Another result, according to the PEN study, is that citizens are less likely to vote, are less politically informed and are less likely to run for office. We can only wait to see how the new owner of three of North Carolina’s most important newspapers discharges the responsibility the First Amendment guarantee of a free press carries with it. But it is a sobering time as the restructuring continues of an industry that, like public education, is critical to our ability as North Carolinians and Americans to govern ourselves.
Joy Franklin is a journalist and writer who served as editorial page editor of the Asheville Citizen-Times for 10 years. Prior to that she served as executive editor of the Times-News in Hendersonville., N.C. Franklin writes for Carolina Commentary.
Virgil L. Smith formerly served as president and publisher of the Asheville Citizen-Times and Vice President for Human Resources for the Gannett Company. Smith worked for McClatchy Newspapers for twenty years in Sacramento and Fresno, CA. He is the principal for the Smith Edwards Group and writes for Carolina Commentary.