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Bernie Sanders Backs Deadspin Staff in Clash With Private Equity

Deadspin Revolt Is Latest Clash as Private Equity Swallows Media

(Bloomberg) -- Their employees call them “soulless” and “vultures” -- as does presidential candidate Bernie Sanders. Their focus on cost cutting has sparked newsroom rebellions. And they are snapping up more and more of the media landscape.

These days, whenever there is an uprising in the media business, the chances are that a private equity firm is involved.

The latest clash happened this week at the sports website Deadspin, where the interim editor in chief said he was fired for refusing to limit the site’s focus to sports coverage. Afterward, at least eight journalists resigned in protest, including more than half of the site’s writers.

Sanders, the independent Vermont senator seeking the Democratic nomination for president, chimed in late Thursday with a tweet supporting Deadspin workers and lambasting Jim Spanfeller, chief executive officer of Deadspin parent G/O Media.

G/O Media is a collection of websites owned by the private equity firm Great Hill Partners. Two months earlier, Deadspin’s former editor in chief also quit, claiming that Great Hill Partners wanted to cash out quickly rather than invest in the long-term growth of the site.

‘Metastasizing Swath’

Sanders wasn’t the first to invoke carrion birds in criticizing the new ownership class. “A metastasizing swath of media is controlled by private equity vultures,” Megan Greenwell wrote in August after resigning. She said they “genuinely believe that they are rich because they are smart and that they are smart because they are rich, and that anyone less rich is by definition less smart.”

Christopher Gaffney, a managing partner at Great Hill Partners, and Spanfeller declined to comment through a spokesman. In a statement, G/O Media Editorial Director Paul Maidment said Deadspin journalists “should go after every conceivable story, as long as it has something to do with sports” and the company is sorry that some staffers don’t agree “to work within that incredibly broad mandate.”

Private equity’s growing influence over the journalism industry is a reflection of the broader economy. Since the financial crisis, private equity funds have acquired a wide range of struggling businesses, including doctors’ practices, pet stores and retailers, typically with the goal of fixing them up then selling them a few years later at a profit. There are now more than 8,000 companies backed by private equity firms.

While workers in other industries may also bridle at their new bosses, they typically don’t make as much noise as journalists who have a large platform to express their dissatisfaction. The revolt at Deadspin, once part of Nick Denton’s irreverent Gawker Media empire, has been particularly raucous.

Splinter Shuts

Shortly after Great Hill Partners bought the portfolio of websites in April, one of them, Splinter, published an article describing private equity as “one of the most perfectly soulless industries ever invented by capitalism.” (In October, G/O Media shuttered Splinter, citing a lack of readers.) Earlier this week, a former employee of one G/O Media site wrote a post mocking the CEO with the headline “Jim Spanfeller is a herb.”

The uprising at Deadspin “seemed to be about hurt feelings more than anything else,” Jay Rosen, a journalism professor at New York University, tweeted Thursday. “The dudes with capital just could not get over the fact that the writers knew more than them about the property. So they wrecked it.”

In September, G/O Media said its collection of websites, which include the tech site Gizmodo and the women’s site Jezebel, operated at a profit for the first time since 2015. The profit, the company said, was driven by a “tighter control on costs,” including reducing the budget for freelancers and cutting staff.

The growing role of private equity in the media world has been playing out for years. In 2016, Michael Ferro’s private equity firm, Merrick Ventures, became the largest shareholder in Tribune Publishing Co. Ferro became board chairman, changed the name of the newspaper chain to Tronc, oversaw more layoffs, then stepped down last year after Fortune magazine detailed sexual-harassment claims against him by two women. A spokesman for Ferro said at the time that the allegations involved “private conduct with private individuals” who didn’t work for Tronc or other companies he ran.

Largely Dominated

The newspaper industry is now largely dominated by the private equity firm Fortress, which manages and controls New Media Investment Group Inc. New Media is poised to become the largest U.S. newspaper publisher when it closes its acquisition of Gannett Co. It’s also expected to cut more than 10% of Gannett’s workforce, according to analyst Ken Doctor.

Private equity firms have a financial stake in the magazine industry, too. In October, Sports Illustrated cut about 40 journalists, or roughly 25% of its staff. The sports magazine was bought this year by Authentic Brands Group, whose largest shareholder is BlackRock Inc.’s private equity fund. Authentic Brands then sold publishing rights to a firm called TheMaven.

A union representing Sports Illustrated said the cuts would “not only be sudden and devastating to the staff directly impacted, but severely compromise the ability of the remaining staff to put out a quality product, thus imperiling the future of Sports Illustrated.”

It’s unclear if the backlash from journalists will have any impact on private equity’s appetite for media properties. The publishing industry is struggling as readers move online, where Facebook and Google are gobbling up most of the advertising dollars. Outside of private equity, buyers are scarce.

“Private equity firms are less likely to care about press because by their nature they are less in the public eye,” said Gregory Brown, a finance professor at UNC Kenan-Flagler Business School. But their investors, including foundations and endowments, are often sensitive to negative publicity “and they don’t want to upset their investor base,” he said.

In a statement, Great Hill Partners said it has “significant additional investment capital” to make more acquisitions and turn G/O Media into a bigger digital-media company.

“We are in this for the long term,” the spokesman said.

To contact the reporter on this story: Gerry Smith in New York at gsmith233@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Felix Gillette, John J. Edwards III

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