Newspapers and the Chop Shop Mentality of Private Equity

Alan D. Mutter gives us the lowdown on the damage done to newspaper as an insitution by Private Capital Management (PCM).

These folks are best known for forcing the liquidation of Knight-Ridder, and have been dumping their media holdings for quite some time (see pic).

That being said, Mr. Mutter missed the big picture, which is that most private equity functions as the equivalent of a chop shop. They part out businesses, or destroy the aspects of those businesses that made them valuable in the first place, in order to make their profit.

The current "crisis" in newspapers is less a function of declining ad revenues and readership than it is is the increasingly low quality product that is being produced to satisfy Wall St. investors.