Allison Beck logged into a Zoom meeting late last week and was confronted by two people the Fort Lauderdale-based journalist had never met. On the other end were executives with the struggling newspaper chain McClatchy Media, who informed Beck and dozens of other journalists nationwide they were out of jobs.
“One of them just read off a script and said they were sorry and said if I had any questions I could ask them,” said Beck, an early-career journalist who reported on Florida’s Broward County for the Miami Herald before being laid off last Thursday. “And then when I asked those questions, they said, ‘Oh, we don’t have those answers for you.'”
“And then it was kind of just on to the next person,” Beck said.
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Last week, McClatchy carried out sweeping layoffs from coast to coast, affecting local news outlets from The Kansas City Star to the Sacramento Bee. At the Herald, which has won 24 Pulitzer Prizes, including one this year for reporting that led to sex-trafficking charges against Jeffrey Epstein, more than one-third of the editorial staff was let go as the struggling newspaper chain sees its revenue plummet 41% and readership dwindle.
McClatchy and its owner, the New Jersey-based hedge fund Chatham Asset Management, have made multiple attempts in the last several years to turn around a company that once faced bankruptcy. The layoffs last week are the latest effort in years of aggressive cost-cutting since Chatham took over in 2020.
But continued investment in local journalists was no longer a viable business model, Greg Farmer, McClatchy executive vice president for local news, told staff in a letter obtained by Straight Arrow. As the company laid off journalists embedded in communities nationwide, it’s tried just about everything — a paywall, lifestyle articles generated with artificial intelligence, even merchandise — to turn around its poor fortunes.
Layoffs and other cost-saving efforts at McClatchy reflect the challenges facing news organizations across the country, which are increasingly owned by hedge funds and private equity firms. As investors and executives seek revenue, experts told Straight Arrow, they’re turning away from coverage about the communities they’ve served for years.
‘Optimized for profit’
The formulaic script used to break the news to laid-off journalists, Beck said, “made me feel like a non-person” and was emblematic of a company that’s increasingly pivoted away from coverage about the communities it serves — and toward AI-generated articles about sober sauna raves, nugget ice and poop.
“It just felt that much more plastic, in the same way that the AI stories feel plastic,” Beck told Straight Arrow. “Like so many other things in the world now, it just felt optimized for profit.”
McClatchy faces a tough financial reality: Newspapers nationwide have struggled for decades, and some 40% of all local U.S. newspapers have closed shop in the past decade, including more than 130 outlets in the last year alone. Journalists have been confronted by waves of layoffs after layoffs. Such is true at McClatchy, with one reporter at The Kansas City Star characterizing the company as one that is “hemorrhaging people.”
McClatchy didn’t respond to emails from Straight Arrow seeking comment.
In interviews with Straight Arrow, McClatchy journalists from across the country said the company’s leadership was, at least in part, to blame for its troubles. Met with the insurmountable challenge of keeping the lights on at a legacy media brand founded in 1857, current and laid-off McClatchy workers said, leaders lack a clear vision for how to save the business.
Just two years ago, McClatchy acquired a suite of lifestyle magazines like Soap Opera Digest and a company that uses AI “to glean insights into consumer trends.” Whether any of those deals have helped the company remains a mystery, said Kristine Sherred, chair of the Washington State NewsGuild.
“It’s a private company owned by a hedge fund so we don’t know all the numbers on that,” said Sherred, who is also the food and dining reporter at The Tacoma News Tribune. “But pointing to consumer revenue being down and then not acknowledging all of these other expenditures feels questionable.”
Research, meanwhile, finds that when hedge funds and other investment firms take ownership of local newspapers, layoffs are quick to follow — without an end in sight.
Like newspapers nationwide, McClatchy outlets have embraced paywalls, even as research suggests that few people ultimately open their wallets and, in many cases, seek work-arounds. In a recent analysis of online readers at a large U.S. newspaper, researchers found that just 0.21% of people — that’s 21 out of every 10,000 — subscribe when they hit a paywall.
Report author Vamsi Kanuri, a marketing professor at the University of Notre Dame, said that as news outlets turn to paywalls to generate revenue, “content is king.” And the most valuable content to readers, he told Straight Arrow, isn’t AI-generated lifestyle articles. It’s information they can’t get elsewhere.
“I keep telling every newspaper I talk to that they should invest in the most scarce news possible because that’s what creates a competitive advantage,” he said. “That scarce news happens to be investigative news and local journalism.”
‘Agentify the entire enterprise’
Initially after getting the bad news, Beck was in shock, spending the day “on my couch with my cat,” and building a “layoff playlist.”
On repeat, Beck said, is a song from “High School Musical 2”: “Gotta Go My Own Way.”
What way Beck goes next is unclear, but the 23-year-old hopes to land another job in journalism. For Beck and other reporters, however, jobs — particularly in local media — are increasingly rare.
In the last six months, Beck said, working for the Miami Herald had become “just dehumanizing,” as executives sought to squeeze more stories from reporters with fewer resources. Then came the company’s full-throttled embrace of AI.
“We started being told we had to use these AI tools basically without being consulted about it,” Beck said. “When we raised issues, they were ignored.”
Key to the strategy is an AI-powered tool called the “content scaling agent,” which uses a chatbot to repackage human-written news articles at varying lengths for different audiences — complete with reporters’ bylines.
The company has also brought on “content strategists” paid as much as $90,000 a year to produce AI-generated articles. Recent offerings, for example, explain how nugget ice “has become the craze worth understanding,” how saunas have “reshaped social wellness” and “what your poop color, shape and frequency say about your gut health.”
During a contentious, off-the-record virtual town hall in May, company executives said their business was in freefall — and positioned AI as its savior. Executives pleaded with skeptical journalists to get on board, and issued what appeared to be a threat: Embrace AI or face consequences.
AI-generated articles have flooded the internet, with one recent report finding they now account for more than half of articles on the web. Legacy publications have scrambled to adapt, with varying degrees of optimism about a future dominated by chatbots. At McClatchy, where reporters’ use of AI is now factored into performance reviews, executives made clear they plan to go all in.
“We have a company-wide effort to agentify the entire enterprise,” McClatchy CEO Tony Hunter said during the town hall, a recording of which was obtained by Straight Arrow.
On the inside, Beck said, business decisions — including shifting priorities and its growing emphasis on AI-generated articles intended to resonate with broad audiences — lack a clear strategy.
“I really, really struggle to see the logic of any of the decisions they’ve made in the past six months,” Beck said. “Where are the numbers backing all these decisions?”
The Pacific Northwest Newspaper Guild, the union representing workers at papers in Washington and Idaho, blasted the move as being driven by “short-term profits for a hedge fund.” Indeed, the company’s hedge fund owner is likely a contributing factor behind the layoffs.
In an analysis of 211 major newspapers from 2005 to 2022, research published by the American Academy of Political and Social Science found papers owned by hedge funds and private equity firms experienced the steepest cuts. Specifically, researchers found investment firm ownership led to layoffs of nine reporters and editors on average — or 14% of the outlets’ overall staffs.
“Even in a period of declining staffing across the local newspaper industry irrespective of ownership structure, these investment owners cut deeper,” said report author Erik Peterson, an associate political science professor at Rice University.
“We’re not saying investment owners are the sole cause,” of the news industry’s financial woes, much of which is attributed to deteriorated advertising revenue, Peterson said. “But they accelerate a lot of these broader trends.”
For the struggling industry, Peterson said, job cuts may ultimately come back to bite as diminished outlets offer diminishing value to readers. General assignment reporters and those on the local politics beat, he found, were most likely to get cut. The result, he said, are publications less capable of holding local governments accountable.
“The concern would be that these cuts are kind of a short-term fix where you’re trying to reduce costs,” Peterson said, “but potentially feeding into this longer-term erosion of local news.”
‘Employee appreciation’
As McClatchy branches out from local reporters in pursuit of revenue, it’s going beyond paywalls and AI-generated articles.
They’ve got merch, too.
In a move that one Miami Herald reporter said illustrates the company’s descent into “late stage capitalism,” the company has an online marketplace called the “McClatchy SWAG Shop,” which allows its employees to “purchase branded gear anytime.” Offerings include a $67 organizer case, a $107 cooler and a $27 T-shirt, all emblazoned with the company’s logo.
McClatchy CEO Tony Hunter told staff in an email in March the company was launching the SWAG Shop “to mark Employee Appreciation Day,” as a “new permanent online store where employees can purchase branded items anytime.”
McClatchy employees aren’t the only ones getting hit with T-shirt sales pitches. So, too, are the readers of its sports coverage. The first sentence in sports articles by The Kansas City Star and other McClatchy-owned digital news outlets now prompts readers to buy “Fan Gear,” including Kansas City Chiefs t-shirts and a “Travis Kelce Kansas City Ugly Sweater” for $53.99. The merch is sold by a vendor called “Sportserver,” which describes itself as a “site dedicated to the latest news and the best gear for people who love sports as much as we do.” It is unclear whether McClatchy receives a portion of revenue from the sales, or whether Sportserver pays for the product placements.
In some cases, the feature has led to pushback from McClatchy employees, according to Slack conversations shared with Straight Arrow. In April, an editor at The Charlotte Observer highlighted how the merchandising feature was embedded in a sensitive article about a professional basketball player accused of running over and breaking a 12-year-old fan’s foot.
“It seems a little awkward for the lede to have the link to buy Hornets gear,” the newspaper editor wrote over Slack. “Is there a way to turn that off?”
Other McClatchy staffers similarly took issue with the feature. An editor for McClatchy-owned Woman’s World Magazine noted she had to remove a shopping link from an article “that was the equivalent of selling shampoo in the opening line for a story about cancer patients who lost their hair.”
Even as McClatchy turns away from local news, on-the-ground work of journalists in Miami, Sacramento and elsewhere remains its lead sales pitch to readers. A paywall pop-up on The Kansas City Star advertises a $7.99-per-month subscription.
“Local reporting. Lasting impact,” the pop-up reads. “Trusted news that keeps you and your community informed.”
Yet, to Beck, McClatchy has all but abandoned Miami, Kansas City, Sacramento and the other cities whose names are on the front pages of the company’s newspapers. Met with the decision to serve readers or pursue revenue, Beck said, McClatchy executives have made their decision known.
Chatham Asset Management’s singular interest “is to make money, and that does not necessarily jive well with what journalism is,” Beck said. “When you have those competing interests, it’s pretty clear who wins out — and it’s the money.”
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