Originally published at: How Private Equity Killed the Media Industry - TPM – Talking Points Memo
I learned many surprising lessons from my 20 months as editor-in-chief of Deadspin, the skeptical, irreverent, hilarious, trailblazing sports outlet that entertained, offended, and educated audiences in roughly equal measure. I learned from a cease-and-desist letter that Jacuzzi is a trademarked brand, and that the hotel room in which a world-famous soccer star was alleged…
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Another piece of evidence that western civilization is doomed.
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(Relatively) unregulated capitalism, ain’t it great!
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“We will exit having increased shareholder value.”
This will be the epitaph of capitalism.
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My heating and air conditioning business I’ve used for 35 years informed me I would be charged 110$ to come to the house to diagnose the problem in addition to fixing the unit. Found out the company, Joyner and Dickens of Sanford NC had been bought by a private equity firm intent on capturing most of this business in a 4 state area. Used a different local HV/AC which sent a rep same day, found the problem, a shifted sensor, fixed it and charged me nothing.
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Thanks, great reading. Also, I am sorry for all of us…
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Thanks Megan Greenwell for your take on Deadspin and its demise at the hands of Great Hill Partners, a private equity firm. However, you might have helped readers not familiar with the term “private equity” by explaining it a bit more. GHP, like its brethren, is NOT listed on any stock exchange. Only high net worth people ($1 million plus-worth, not including personal residence) can even be considered as investors in such private equity firms. Mom-and-pop investors who may own shares in stock-exchange-listed companies and mutual funds are excluded. Only very rich people and institutional investors are eligible to potentially invest in ventures like GHP.
As a longtime lover and consumer of journalism (and I used to be a newspaper employee myself) I’m also dismayed by the continuing decline in the number of news organizations, and weird blogs, at the hands of rapacious private equity firms.
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Shorter: It’s where millionaires or richer collect their money away from the hoi polloi to screw the rest of us.
And if they need a concrete example, Bain Capital, where Mitt Romney made his money, is one of these entities.
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Defector is still weird and it wouldn’t exist without you! Subscribe to Defector and all subscription based G/O outcasts and the rest!
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I hope so, and soon!
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I think that it is also the ultimate proof of the saying “die a hero or live long enough to become the villain”. Everything becomes co-opted. My current example is Daily Kos. 20 years ago it was the insurgent voice of progressives. Now there are still progressive voices there, but go into the comments and it’s establishment central.
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I’m convinced that MBAs are the greatest curse on the world.
A big thanks to the Chicago Boys.
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Been to the veterinarian lately? It’s getting expensive and the reason. Just like Deadspin, private equity firms are buying them up and raising the prices. Sharks on a feeding frenzy.
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Private equity folks have made a mockery of the limited-liability corporation structure. In theory, officers have a fiduciary duty to the corporation they’re managing. But in practice, that means the majority shareholders. So if they decide that voting themselves bonuses, special dividends and fees that will bankrupt the underlying organization (and then taking on piles of debt to finance more bonuses, dividends and fees), that’s just fine.
And as long as they don’t commit to writing their knowledge that the loans they’re forcing the underlying company to take on will be impossible to pay off, the bilked creditors can’t come after them.
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There are in fact many weird blogs still existing…head on over to the IndieWeb and check em out.
The Dead Internet Theory only applies to that part of the web that’s been consolidated and then colonized by corporate interests. The real web still exists. And it’s free.
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There are cycles in all things, my 140 lb puppy’s need for a hug or a pee, to having to eat certain times of the day. AI will run its course, into a tree most likely. This currently popular Capitalistic feasting will die off, probably because the pitchforks and torches held by those who lost their jobs will make them uncomfortable, but more likely because they will have killed off their prey much like the dodo bird.
But humans are creative and resourceful. Eventually, this will also pass. We will dance on the ashes of bond traders and take over assholes, when the next revolution comes. Probably around the time the donOld tRump is behind bars.
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I was thinking the other dayabout all those first-wave messianic fantasies about the Long Tail. That was only until the market could be fully rationalized.
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I’d really like to see a nuts-and-bolts explanation of how a private-equity outfit can increase shareholder value by bankrupting the companies it buys up. It makes about as much sense to me as Milo Minderbinder buying eggs in Malta for seven cents each and selling them for five cents each in Pianosa, and somehow making a profit.
Whether it’s Deadspin, Toys R Us, or whoever, there has to be a good description somewhere of how this actually works.
I’ve heard that part of it has to do with loading the bought company with debt, with the borrowed money going to the private equity company and its shareholders rather than the bought company. That would work - but how many times, before the banks catch on and stop lending money to the private equity outfits or the companies they’ve bought? Because I’d think that this game would be pretty obvious after you’d seen it once.
I just don’t get it.
Does it make more sense if the banks are in on it?
This is where securitization comes in. The “smarter” banks don’t lend money directly to the vultures; instead they underwrite bonds that then get sold to the investing public, aka muppets. So the banks get their underwriting fees, the bondholders lose, and the minority shareholders of the company (if there are any left, depending on the transaction) also lose. But the vultures make out just fine because they can install a board that declares a “special dividend” to pay off the original borrowing used to buy control of the company. Plus consulting and management fees.
In theory, a bondholder could sue the underwriting banks for fraud, but proving that they absolutely knew the deal was going to go south would be very difficult and expensive.
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