Divestiture

is the opposition of investment and involves the selling off of assets for financial (or political) gain. Media companies have a long history of jockeying their properties to gain advantage in some respect. Sometimes the advantage is political in nature, but almost always, there is financial incentive to either purchase more assets or sell them off. The Great Recession, which started in December 2007, led to a panic-driven divestiture trend that at least temporarily altered the conglomeration trend of the previous three decades. The landmark newspaper chain Knight Ridder exemplifies the divestiture phenomenon. Knight Ridder was the second largest media company in the United States specializing in newspapers and Internet publishing. Because of declining value, shareholders made a decision to sell the company to the McClatchy Company in March of 2006 for $4.5 billion, which represented about 9.5 of its cash flow. Within months the McClatchy Company announced that it was selling off 12 of Knight Ridder’s newspapers for about $2.1 billion

Fast-changing economic realities have bred unexpected alliances. The struggling AOL Internet content company somehow came up with $315 million in 2011 to buy the Huffington Post news site. Newsweek magazine, hemorrhaging money, became part of the company that owned the Daily Beast news site. The New York Times Company similarly fell short of cash. Facing momentous advertising losses, the Times borrowed $250 million from Mexican telecommunications titan Carlos “Slim” Helú at a subprime rate of 14%. The Times repaid the loan early, but had the newspaper defaulted, Slim could have taken control of 17% of the Times Company and become the third-largest shareholder.

Writing Prompt Applying Your Media Literacy – Ownership Structures

How have media company ownership changes affected the performance of your local

newspapers and television and radio stations?

The response entered here will appear in the performance dashboard and can be viewed by your instructor.

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