Illustration: Sarah Grillo/Axios

While big national newspapers grow stronger, local newspaper chains that have for decades kept the vast majority of the country informed are combusting.

Why it matters: The inequity between giants like the New York Times and the Wall Street Journal and their local counterparts represents a growing problem in America as local communities no longer have the power to set the agenda for the news that most affects them.

Driving the news: McClatchy, the publisher of dozens of local papers from the Sacramento Bee to the Kansas City Star to the Miami Herald, announced last week that it voluntarily filed for bankruptcy to allow the company to restructure its debt and pension obligations.

  • The bankruptcy ends family control of one of the largest newspaper publishers in the country, Axios’ Rashaan Ayesh reports.
  • It plans to hand the majority ownership to Chatham Asset Management, a hedge fund that also owns the National Enquirer tabloid.

The big picture: McClatchy’s bankruptcy is the latest in a string of major newspaper group fire sales and mergers in the past year.

  • Warren Buffett, a longtime champion of the newspaper business, sold his 30+ daily and 100+ weekly titles to Lee Enterprises earlier this month, after calling the newspaper industry "toast" due to terminal advertising decline.
  • GateHouse Media and Gannett, the two largest newspaper chains in the U.S., merged last year to create the largest newspaper holding group with over 650 papers. Its market cap today is .05% of Apple's.
  • Hedge fund Alden Global Capital became the largest shareholder in Tribune Publishing last year when it upped its stake in the newspaper giant to 32%. Employees at the Denver Post and the Chicago Tribune, both owned by Tribune, have complained for months about layoffs and staff cuts.

Meanwhile, the national giants are thriving.

  • The New York Times said earlier this month that it passed $800 million in annual digital revenue, most of which came from the 5 million+ people that now subscribe to the paper's digital subscription offering.
  • The Wall Street Journal said last week that it topped 2 million digital subscriptions for the first time.
  • The Washington Post has been profitable for the past several years under the ownership of Amazon founder Jeff Bezos, and has added dozens of positions to its newsroom in the past two years.

By the numbers: The past two decades have been an especially brutal time for the newspaper business. While some traditional ad businesses, like television and radio, have plateaued in the digital era, newspapers have completely fallen out.

  • Since 2005, newspapers have lost more than $35 billion in ad revenue, according to a report from PEN America.
  • Since 2004, newspapers have lost nearly half (47%) of all newsroom staff and nearly 1,800 newspapers — about 20% of the estimated national total — have closed.
  • Overall, newspaper guru Ken Doctor estimates that there have been about 20 newspaper bankruptcies since the Great Recession, many of which impacted family-owned newspaper businesses.
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Data: eMarketer and Zenith Media; Chart: Axios Visuals

Be smart: The national papers have been able to attract digital subscribers all over the country — and the world — because they've invested a lot in marketing themselves as having distinct brand propositions.

  • The New York Times, for example, bills itself as a lifestyle services company, offering recipes, crosswords and style features in addition to news.
  • Meanwhile, "local papers, which spent decades and in some cases, centuries, as the only news game in town, haven't," says Jaime Spencer, executive vice president and head of local media at Magid.
  • "Their brands were built around core journalistic issues, like trust and factuality. Those are important, but not enough on their own face to create distinction that would cause someone to subscribe," Spencer added.

What's next: There are dozens of efforts and lots of money being thrown at the local news problem, but lasting few solutions. McClatchy's bankruptcy will almost surely be followed by more local newspaper consolidations and closures.

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