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April 30, 2017

Good Gracia Almighty; It's What the Gannett CEO Didn't Say That Matters

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First published at Harvard’s Nieman Journalism Lab

U.S. daily publishers stiffened their stomachs, knowing that print ad revenues would continue in 2014, after three years of more or less 8% annual declines. The first quarter was decent, a little better than expected, but 2Q is turning out to be ugly. McClatchy reported a 9.6% print ad decrease in 2Q last week, and the New York Times followed its unexpected 1Q 4% increase with a 6.6% decrease (“A Stormy Set of Revenue Numbers for The New York Times“).

Gannett’s decline was a bit better — at 5.1% — but showed the same substantial weakness. Gannett’s newspapers were down 3.7 percent year-over-year overall in revenue. Digital revenues were up 4.3 percent.

A big, looming issue: Circulation revenue went negative, down 0.6 percent. That’s a red flag in the reader revenue revolution.

The paywall revolution was supposed to put newspaper companies on a path to ramping reader revenue growth. But what we are seeing at Gannett (and at other companies) is that the first- and (sometimes) second-year impact of higher-priced all-access subscriptions is waning. Further pricing is constrained by too great a loss in print subscription volume. If that continues — and if regional newspaper companies either don’t produce niche paid products or believe those products won’t resonate with buyers — then the blush of reader revenue growth will have been a short one.

It wasn’t Gannett’s number, though, but rather its CEO’s words that prompted a small brouhaha. It was a Gracia Martore did she or didn’t she moment. The company’s own USA Today had to run a clarification that it had “mischaracterized” its own CEO words.

To a question from financial analyst Ed Atorino about Gannett’s willingness to get into the market for newspapers (as its done in TV, as a buyer), Martore (transcript for the call is available from Seeking Alpha, herereplied:

Yes, there are newspapers for sale. Look, what this company is focused on, and laser focused on, as I said before is creating additional strong shareholder value. And we are open to any opportunities that will do that. And we’re, the Board and I and the management team, continue to look at ways to increase shareholder value as we have successfully done with our superior returns over the last three years. We said last quarter that we were laser focused on Belo and now with the London Broadcasting stations. And as you can see from the results that was precisely the right focus for us to have, but we are an incredibly shareholder-oriented company and we are always evaluating the best ways to continue to meaningfully increase value for both the near and the long-term.

It was that “newspapers for sale” line that got her into trouble. Did it mean Gannett newspapers are for sale? Listening to the audio, I doubt it. I think she meant: Yes, there are sellers of newspapers out there. But it was awkward and confusing. One thing a CEO doesn’t want to do is introduce public uncertainty into the fates of thousands of its employees.

More interesting that what Martore said is what she didn’t. She didn’t take the opportunity to support Gannett’s newspaper investments and their importance to her or the company’s future. Instead, we heard the boilerplate of what any investor-pleasing CEO has to intone: Job one is maximizing shareholder return.That’s fair, of course, but it would be refreshing to hear a news company CEO who is also laser-focused on the readers. It also raises the question how much stomach Gannett — which is rapidly becoming a TV company, with its 2013 purchase of Belo TV —  retains for the newspaper business.

Further translation of the whole episode: Gannett’s newspapers aren’t now on the market. That, though, is more becoming a “when” rather than an “if” question.



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