Heath Freeman, the Hedge Fund Guy: “The reporters who work for him call him a vampire.”

From a Washington Post story by Sarah Ellison headlined “The savior they didn’t ask for: Heath Freeman is the hedge fund guy who says he wants to revive local newspapers. Somehow, no one’s buying it.”

Ask Heath Freeman why he got into the newspaper business and the explanation is specific and bloodless.

It was 2009, and the Great Recession was forcing many major newspaper chains into bankruptcy. Freeman was a finance guy in New York, still in his 20s, with a sports-bro patter about his days as a place-kicker at Duke and an eagerness to make his mark. He looked at some spreadsheets, decided that media execs didn’t know what they were doing — and started making some purchases.

“We saw an opportunity,” Freeman told The Washington Post, “to help fix the broken model.”

Pretty soon, Freeman’s firm, Alden Global Capital, had gained control of MediaNews Group, owner of more than 50 papers including the Pulitzer-winning Denver Post, St. Paul Pioneer Press and the San Jose Mercury News. And he was just getting started.

If Freeman, 40, had never bought into newspapers — if he had stuck to investing in discount retailers like Payless ShoeSource and Fred’s pharmacy, both of which Alden shepherded into bankruptcy — he could have remained one of those faceless hedge-funders who, for all their influence over the global workforce, rarely get much attention outside of the photo galleries for Hamptons charity benefits.

Instead, he got into an industry whose purpose is enshrined in the Constitution and whose workers are well-versed in questioning authority and defining a narrative — and started cutting their jobs.

Now, through MediaNews, Alden is not only one of the largest newspaper operators in the country. . . . The reporters who work for him — and the swelling numbers who used to — call him a vampire, a vulture, an embarrassment; some have protested outside his Hamptons home or his Midtown Manhattan office. . . .

The current era has been rough for the entire newspaper industry, hit by collapses in both ad revenue and circulation, missteps in the move to digital publication and competition from Web platforms for the remaining readers and advertisers. In the decade-plus Alden has been in the newspaper industry, the number of employees at U.S. newspapers has been cut in half, according to Pew Research Center. But Alden’s cuts have been far deeper. . . .

A word from Freeman: “I wanted to clear up some misconceptions.” The business of local news has been broken a long time, he notes. “We have bought almost all of our newspapers out of bankruptcy. Many of these papers were left for dead, and would have been liquidated if not for [our] seasoned newspaper executive team stepping up.”

This is partly true, argues the man who gave Freeman a foothold in the industry.

“They became big players in the newspaper industry because nobody else wanted to,” said Dean Singleton, the co-founder and former CEO of MediaNews Group, who oversaw the company’s bankruptcy.

And yet: Many newspaper chains declared bankruptcy in the aftermath of the Great Recession, including the owners of a wide swath of papers such as the Chicago Tribune and the Shawnee (Okla.) News-Star. And all of those chains (Tribune, GateHouse, Lee, among others) came out of the process slimmer but not decimated. . . .

“The only way Heath could refer to a newspaper was as ‘these assets,’ ” said Singleton, who stayed on for several years as chairman of the Denver Post after Alden gained control. “It was always, ‘You aren’t getting enough out of ‘these assets.’ . . . Don’t buy the idea that Alden is trying to save newspapers. I don’t think any idiot would buy that.”. . .

A key pillar of Alden’s strategy has been to sell a newspaper’s real estate assets — in some cases to Alden-controlled side companies — and move operations to cheaper space. The Denver Post consolidated at a printing facility outside of town, in the county ranking among the lowest in air quality in the metropolitan area, where reporters complained of breathing problems. . . .

Douglas Arthur, a managing director at Huber Research, which analyzes the investment prospects of communications industries, says Alden approaches newspapers “as a vulnerable target with down-and-out stocks, down-and-out business prospects, a lot of assets, and a lot of cash flow” with a strategy of “get in inexpensively and strip the assets and liquidate buildings and liquidate the lightbulbs, and squeeze as much cash out as possible.”. . .

In 2018 — the same year that staff at the Denver Post and other Alden-controlled papers openly revolted over the latest round of cuts — an investment group that owned 24 percent of the Alden-controlled papers filed suit to open up the newspaper group’s books, alleging that Alden siphoned the newspapers’ cash to prop up Alden’s flailing Fred’s pharmacy as well as investments in risky Greek government bonds and other properties “entirely unrelated to the company’s core businesses,” and hid relevant information from other shareholders. The newspaper group denied wrongdoing. The suit was later settled. . . .

Across the river from Alden’s depleted St. Paul Pioneer Press is the Minneapolis Star Tribune. It, too, filed for bankruptcy a decade ago and was later bought by a rich guy. But this new owner, local billionaire Glen Taylor, made only modest cuts, with the goal of trying to sustain a paper worth subscribing to, according to publisher and CEO Mike Klingensmith.

The “Strib” is now by far the better, stronger newspaper with a promising new digital strategy. And yet the Pioneer Press, while gasping to get by with a fraction of the staff it boasted at its peak, is still alive. Alden even raised the subscription price, having realized that older readers will keep paying for it, whether out of loyalty or sheer inertia.

Klingensmith warns that the Pioneer Press can’t possibly stay on this course and stay in business: “People catch on to you.” The readers will drop it or die, new ones won’t subscribe, the bottom will fall out, and another city will have that many fewer journalists covering it.

But in the meantime, Alden will try to squeeze a profit from it.

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