GateHouse Media was born in 2005 when Fortress Investment Group purchased Liberty Group Publishing, a newspaper chain based in Downers Grove, Ill. The company moved to upstate New York the next year with its new name and began expanding into small and midsized markets.
The initial push came in Massachusetts with acqusition of the Community Newspaper Company and some properties of the Journal Register Company.
GateHouse purchased the State Journal-Register and four other Gannett Co. newspapers in 2007 for $410 million and nine newspapers — including the Peoria Journal Star and Rockford Register Star in Illinois — from Copley Press Inc. for $380 million that year.
It also bought numerous newspapers from Morris Communications.
The company accumulated more than $1 billion in debt while building this newspaper empire. This led to extensive cost-cutting at all the properties, especially in newsrooms.
When the industry suffered serious revenue declines — due to a faltering economy and increasing competition for readers and advertising dollars — GateHouse accelerated its cost-cutting to maintain a strong profit margin in Springfield and other markets.
The company cuts its national work force from 7,200 at the end of 2007 to about 4,100 in 2013.
The NYSE delisted GateHouse stock, which had become virtually worthless. But the expansion continued, with Newcastle Investment Corp., a Fortress affiliate, purchasing 33 properties in the Dow Jones Local Media Group in 2013 and putting them under GateHouse management.
GateHouse was finally forced into a prepackaged bankruptcy and rose, phoenix-like, as part of an even bigger media company: New Media Investment Group.
The Fortress folks held much of the $1 billion in debt and swapped it for stock in New Media Investment Group. (GateHouse stock disappeared in the bankruptcy; those still holding stocks gained warrants to buy New Media stock at a discount. GateHouse Media still operates, but under the New Media corporate umbrella.)
Freed from all that debt, New Media Investment Group looked to expand. Rather than reinvesting in The State Journal-Register and other stripped-down properties, New Media began using its “free cash flow” from Springfield, Peoria, Rockford and other markets for expansion and to pay stock dividends.
It acquired the Providence Journal for $46 million. With GateHouse/New Media executives calling the shots, the Journal immediately laid off prominent journalists and scheduled the outscourcing of its entire copy desk to Texas.
Most recently, New Media announced it would issue 6.5 million shares of its stock to raise $100 million for further expansion.
This led to the acquisition of the Halifax chain, many Stephens Media properties and the Columbus Dispatch. New Media is well on its way to making $1 billion in new purchases.
New Media’s generous dividends and soaring stock price has made it darling on Wall Street, drawing interest from some of the sharpest vulture capitalists.
It recently flipped one of its properties, the Las Vegas Review-Journal, to the family of casino magnate Sheldon Adelson for a handsome profit — 69 percent by its own reporting. The sale was initially shrouded in secrecy. But GateHouse continued managing the property and attempted to orchestrate an investigation of Las Vegas judges, including one presiding over litigation against Adelson.
But even after that move, journalists were essentially told to go easy on the newspaper’s new owner.
Industry analyst Ken Doctor noted that top company executives created a credibility crisis:
Kirk Davis, COO of New Media and CEO of Gatehouse Media LLC, has been publicly quiet, though associates say he now understands the depth of the controversy. Mike Reed, New Media Investment Group’s CEO and the company’s chief acquisitor, has so far shown himself to be tone-deaf to the multiple controversies. Largely declining comment, he told the Review-Journal little. It reported its conversation this way: “He also sidestepped when asked if his company or the casino mogul had already influenced editorial decisions made by Review-Journal Publisher Jason Taylor. ‘I don’t have a comment on that,’ Reed told a reporter. ‘My recommendation is focus your energy on making the brand stronger.’”
A newspaper brand, though, is nothing without the trust of its readers or its community, and that trust has been put into question.
And this is why Springfield-area residents should support the Save The SJ-R campaign.