If Gannett is a bellwether, 2014 will be another tough year for newspaper advertising
Since the Newspaper Association of America stopped reporting quarterly revenue results last year, I have looked at Gannett's numbers as a reasonable proxy for the industry. Here are three takeaways from yesterday's second quarter earnings report and conference call with analysts.
- National advertising was terrible in the second quarter (down 16.3 percent compared to the same period in 2013) for Gannett's publishing division. Despite a small gain in digital advertising and marketing services, overall advertising was down 6 percent.CEO Gracia Martore told analysts she had heard of similar weak national results from friends in the industry, as have I. One explanation, on top of the stop-and-go economic recovery -- the World Cup was an attractive advertising opportunity for big companies, and they pulled from print budgets to go heavy in social media.
The third quarter is looking somewhat better, she said.
- Gannett's results show just how unequal the local broadcast and local newspaper businesses have become. Through the first six months of 2014 publishing had $1,709,000,000 in revenues, 2.2 times as much as broadcast's $781,000,000. However broadcast's operating income was $326,000,000, 3.4 times as much as print's $96,000,000.
By my math that makes broadcasting 7.5 times more profitable.
No wonder Gannett has bought two station groups in the last year and is on the prowl for more. Martore also said she would consider buying more TV stations or digital properties but was not interested in acquiring more papers. She added that the chain's 81 local papers are not for sale. I also don't think a spinoff of the whole division like the one Tribune is doing in early August is in the cards.
- Circulation is a relative bright spot, though overall it was down slightly year-to-year in the second quarter (by 0.6 percent). Martore and other executives continue to be pleased with a program putting a section of USA Today news in its 35 largest local papers. That helps justify higher rates, strengthens subscriber retention and has supported gains in home-delivery numbers and revenue. (USA Today is taking deep cuts in single-copy sales as part of its current strategy, depressing the total result.)Martore said that the company will roll out a smaller USA Today section in 13 more of its local titles later this year and may sell the supplement to others. With the Washington Post now offering a free digital subscription to digital subscribers at a number of regional newspapers, these extra helpings of national news may be a mini-trend.
The Gannett results include its substantial holding of newspapers in Great Britain, which are having a reasonably good year. So the numbers might have been a little worse otherwise. I look for similar trends as the New York Times Co., McClatchy E.W. Scripps and other publicly traded newspaper companies report second quarter earnings in coming weeks.
(Clarification: An earlier version of this story said that Martore would consider selling some Gannett papers. In fact, she said that some papers of other companies are on the market. but Gannett will not be a buyer.)