McClatchy and Google started the Compass Experiment to fill a void in local news. Then its new hedge fund owner split the project up.
By Gabby Miller
Timeline of Compass Experiment, Source: Gabby Miller via TimeGraphics
In March 2019, McClatchy’s former President and CEO, Craig Forman, announced a new partnership with Google News’ Local Experiments project. Dubbed the Compass Experiment, the goal was to create three digital-only outlets in communities with little access to local news with the help of Google as a technology and innovation partner. According to Forman’s announcement, the Compass Experiment’s local news sites would be wholly owned and operated by McClatchy, a 163-year-old, family-run newspaper company. The project was to be funded for three years through the Google News Initiative, a wide-ranging endeavor that the company started in 2018 with a pledge to invest $300 million dollars over the course of three years to aid the ailing news industry. The shared vision between McClatchy’s Compass Experiment and Google was to explore new business models for independent, financially self-sustaining local news as more than 2,100 newsrooms have disappeared since 2004, and more than 100 outlets have closed or merged since the beginning of the COVID-19 pandemic.
As of this week, though, the initiative is splitting up and transitioning to new management, with larger newspaper chains now separately overseeing each of the local news startups.
In an email to the Tow Center, McClatchy’s spokesperson, Jeanne Segal, said this new direction was prompted by the “market conditions” of the past two years: namely McClatchy’s bankruptcy and new ownership under Chatham Asset Management, a private hedge fund that had for years been McClatchy’s creditor and majority shareholder. According to McClatchy, the initiative will continue to be funded by Google. Yet the Compass Experiment, which was intended to help make local news more sustainable in small to mid-size communities, is now being absorbed into one of the largest newspaper chains in the country under hedge fund control. The project will technically continue “to share the lessons learned by these startups,” per Segal’s statement, but with such a departure from the project’s original vision, the experiment is more like a dismantled shell of its former self.
The Compass Experiment first pilot “news laboratory” was selected in Youngstown, Ohio in July 2019, less than a month after the town’s 150-year-old newspaper, the Vindicator, had closed. Mark Sweetwood, former managing editor of the paper, wrote in a blog post on the Compass Experiment’s website that, without Compass, there was fear that Youngstown might become “the largest U.S. city isolated in a news desert.” (Sweetwood could not be reached for further comment.) Only 40 days after the Vindicator’s closure, McClatchy and Google launched Mahoning Matters, a digital-only news site to fill the town's local news void. Mahoning Matters hired three former Vindicator editorial staff, including Sweetwood. However, in her account of the Compass Experiment at Mahoning Matters in her book, “Ghosting the News,” Washington Post media columnist, Margaret Sullivan, wrote that Mahoning Matters would be unable to produce the same volume of local journalism that the Vindicator had because it was substantially smaller. And without a physical newspaper, much of the Vindicator’s former core readership would be excluded by the digital-only Mahoning Matters. Despite all of this, Mahoning Matters reporters had no choice but to pick up where they left off at the Vindicator; they began publishing in October 2019.
The Compass Experiment was also assigned a management team to spearhead innovation and to develop new potential revenue models for the new sites. Leading this effort was then-general manager, Mandy Jenkins, a self-described local news evangelist and expert in digital news startups. In a post announcing the Youngstown initiative, Jenkins wrote that Mahoning Matters’ goal was longevity: “We cannot ensure local journalism will survive for the long-haul without a focus on sustainability.”
The program initially appeared to be a success. In May 2020, as newsrooms across the country faced an explosion of pandemic-related cutbacks, the Compass Experiment was able to launch its second news startup in Longmont, Colorado—the Longmont Leader. The Leader would absorb the Longmont Observer, a community-operated, nonprofit news source that had been run by an all-volunteer force for almost three years. (The Observer was itself a local news fill-in for the Longmont Times-Call, the area’s legacy paper which was acquired by Media News Group and moved to Boulder in 2017.) And despite the economic fallout from the coronavirus, both the Leader and Mahoning Matters were able to discern which stories mattered most to the local community through extensive market research— with help from Google’s funding and collaboration. The project even had plans for a third local news startup.
The Compass Experiment wasn’t Google’s first foray into local news initiatives, though. In fact, 2019 marked the platform’s pivot away from focusing on news products like Apple News+ or Subscribe with Google in favor of news initiatives at the local level. As the Tow Center has extensively documented in its platforms and publishers reports, the relationship between tech giants and local news outlets is an “uncomfortable union.” According to Tow, platforms such as Google enjoy unequal power and influence as they become the “de facto policy makers of an information ecosystem not designed with journalism as top of mind.” By the end of 2019, Google, along with Facebook and the Knight Foundation, had pledged more than $1 billion in local news investments to be delivered over the next several years. The Compass Experiment was borne out of this initiative.
In a recent interview, Mandy Jenkins told the Tow Center that in spite of a global health crisis that’s affected thousands of newsrooms across the U.S., Google-funded Mahoning Matters was doing well. Throughout 2020, the news site was not only experiencing growth, but also developing what Jenkins believed was a real path towards future sustainability. According to Jenkins, reader revenue was up, a fundraiser for their six-month anniversary raised around $8,000, and an end-of-year drive brought in 80 new first-time donors. Local sponsored content was growing, too.
Despite the successes of the local Compass Experiment sites, long-term, financial sustainability hadn’t yet been achieved. Back in 2006, in the midst of a general industry decline in advertising revenue and a major shift to digital news consumption, McClatchy had purchased rival newspaper chain Knight-Ridder for $4.5 billion. More than a decade of revenue losses and an industry-wide shift to digital news rendered McClatchy an unsustainable operation; the company filed for bankruptcy in Feb. 2020. Last September, Chatham Asset Management, a New Jersey-based hedge fund that manages over $4 billion in assets, purchased McClatchy and its 30 newspapers for $312 million. The sale included the acquisition of the Compass Experiment. Weighed down by more than $700 million in debt, McClatchy needed stability more than it needed experimental business models.
The sale meant that not only would McClatchy’s chairman, Kevin McClatchy, and its entire board of directors leave the newspaper chain, but CEO Craig Forman would also be departing. Forman had overseen the McClatchy/Compass Experiment’s launch only a year earlier, in 2019. Around the same time as his 2020 departure, the Compass Experiment downsized from three local news startups to two. Only Mahoning Matters and the Longmont Leader—the two sites where the leg-work toward business sustainability was already in motion—would make up the project going forward.
Then, on Feb. 3 of this year, Mandy Jenkins, Compass’ former general manager, abruptly announced in a blog post that Mahoning Matters would be “pivoting to further sustainability.” Mahoning Matters would now be directly operated by McClatchy’s news division, and the Longmont Leader would be acquired by Canadian media company, Village Media. As of this week, all three members of the Compass Experiments’ business team, including Jenkins, were laid off, and the change in management went into effect. Given the reported success of the Compass Experiment, and despite the initiative having Google-backed funding until 2022, the project lasted only 18 months in its original form. Jenkins wrote that the Compass Experiment was now shifting to test the lessons it had learned at the independently-run, local news sites to larger news networks with sizable output, faster growth, and more revenue-building options.
Why new leadership at Chatham Asset Management chose this direction for the initiative is not entirely clear. Back in April 2020, Axios reported that the Compass Experiment would continue on with the “many millions of dollars” Google had invested to fully fund the project despite the pandemic and McClatchy’s preexisting financial woes. “Market conditions” may have technically changed for McClatchy, but funding from Google had not.
While it’s been less than a year since Chatham Asset Management acquired McClatchy, the decisions it makes in the near future may indicate how it plans to steer the newspaper chains’ debt-ridden ship. As Nieman Lab’s Ken Doctor pointed out in his Newsonomics column last year, “Chatham managing partner Anthony Melchiorre has a chance to show not all hedge funds operate their newspaper properties the same way.” Doctor envisioned three options for Chatham going forward: focusing strictly on revenue (as hedge funds like Alden Global Capital have), merging with other chains like Gannett, or listening to civic entreaties and local philanthropists with the goal of “saving” local news, which could include continuing the Compass Experiment.
In “Ghosting the News,” Margaret Sullivan noted that while Chatham Asset Management may be what is keeping McClatchy’s 30 newspapers afloat, the hedge fund's acquisition of the company could also mean “severe cost-cutting and possibly the shuttering of enterprises like Mahoning Matters.” With only three full-time staff reporters and one Report for America journalist in the newsroom, there’s little room for cuts at the already slim operation. Sullivan published these concerns before the Compass Project was dismantled, though. And now that the team that was tasked with priorities such as community engagement and locally-focused advertising models is gone, Mahoning Matters’ future seems all the more uncertain.
On the other hand, the Miami Herald’s Tallahassee Bureau Chief, Mary Ellen Klas, paints an overall positive picture of newfound stability under Chatham/McClatchy ownership. In a recent episode of, “Political Party with Adam Smith,” Klas said: “It’s actually the best thing that’s happened to us. Chatham Asset Management bought us, they established a status quo, and we are now operating with little change.” (The Herald laid off 12 previously furloughed staffers from its advertising department last July, just before the Chatham deal was finalized.) However, as she stated in the interview on “Political Party,” Klas isn’t sure what will happen after September 2021, when the agreement Chatham made to guarantee no major cutbacks with McClatchy’s former owners is up.
To be sure, even with its newly announced “pivot,” the Compass Experiment has been far from a failure. In an email to the Tow Center, a spokesperson for the Google News Initiative, Maggie Shiels, said that Chatham’s decision to take Mahoning Matters in-house is a mark of success. Local reporters on the ground in Youngstown have forged strong relationships with the community and built up online traffic, and keeping them on is what Jenkins believes is the key to the news sites’ future success. “You’re never going to get them down as long as you’ve got the people who really made this happen still involved,” she said. The Longmont Leader continues to publish work under Canadian-based Village Media, a long-time partner of the Leader’s, which is currently looking to expand into U.S. news markets.
Achieving self-sustaining, independent local news takes time. But to pare down the Compass Experiment with at least another year of Google funding left while in the middle of a pandemic that’s accelerated the local news crisis may be one of Chatham’s first tests of how the hedge fund envisions McClatchy’s future and platform funding assistance generally.
Here’s an interactive timeline of the Compass Experiment since its inception in 2019. (Source: Gabby Miller, Tow Center)