August 3, 2017

With print revenues plunging and digital businesses coming along slowly, Gannett is still sticking with its plan to acquire more local newspaper organizations.

In reporting second-quarter results today, CEO Bob Dickey said that his shopping list includes large metros (serving 500,000 to 3 million people) and smaller organizations that can be clustered geographically with its 109 regional properties.

Rekindling last year’s effort to acquire Tronc or some of its properties did not come up.

The expansion push is not necessarily paradoxical.  Gannett brings scale and savings to each acquisition.  It managed to operate at only a slight net loss for the quarter — $487,000 on revenues of $445 million  — by virtue of an 11 percent average decline in expenses year-to-year at properties it has owned for that full period.

The cuts are continuous. Just this week, Gannett has announced the shutdown of a layout and copy editing center in Nashville and an accounting service in Binghamton, New York, eliminating dozens of jobs at each.

A second driver of expansion is growing the footprint for national ad sales of the USA Today Network (USA Today itself and its other U.S. papers).  This was a bright spot, growing 15 percent year-over-year.

But the overall revenue picture was bleak.  With new properties, total operating revenue grew 3.4 percent.  But on a same-property basis, revenues were down 10.7 percent.

Same-store print advertising revenues were down 16.8 percent compared to the second quarter of 2016.  Circulation revenues were off too, by 7.4 percent.

A series of price increases will accelerate the decline in print circulation numbers but strengthen the properties financially, Dickey said. The company is pushing to add digital-only subscriptions, which have grown 50 percent year-to-year.

Gannett has made several major investments in upgrading its digital marketing services offerings.  But there is a lag in the payoff.  Because of existing contracts with other vendors, the company is only this quarter and next bringing the services of ReachLocal, acquired a year ago, to its own properties.

Gannett shares were trading roughly even at noontime at $8.43 but are down 16 percent year to date.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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