December 2, 2019

A week and a day after the GateHouse takeover of Gannett, CEO Mike Reed found himself in Nashville addressing the staff of The Tennessean, one of the newspapers acquired. A source provided me with a recording.

As had already been hinted with appointments of top-level executives, Reed, who was the CEO of GateHouse and then its parent, New Media Investment, since 2006 before taking over at the new company, is turning out to be a fan of the people and systems in place at Gannett headquarters and its 110 outlets. He also was blunt in discussing changes needed at GateHouse papers, at one point calling the chain of 160 dailies a “hodge podge” assembled over five years from 20 different companies.

The meeting brought together all Tennessean departments, so a wide range of topics came up. Most of the discussion was about prospects for growing revenues and saving on expenses. The tone stayed cordial, with jokes and laughter punctuating pointed questions and candid answers.

As for company-wide layoffs?

Reed said that he did not know yet exactly how many there will ultimately be. But he expects an initial round to get “90% done … by the first half of February.” Company-wide, Reed has set a savings target of 8%, he continued, and “about 50% of our cost structure is people.”

So roughly 4% of new Gannett’s 24,000 employees — about 960 — will probably be let go. Reed did not say whether newsrooms will have the same level of reductions as other departments or whether the first layoffs (as I have been told) could be coming this week.

Another exchange:

Question. “What worries you most?”

Reed: “A recession next year. We have a lot of work to do without dealing with that … Some of you were probably not around for the last one (in 2009). It was just awful.”

Here are more highlights as Reed and the staff of one of old

Gannett’s largest metros met for the first time:

My recording picks up with Reed discussing GateHouse’s events division, which includes various running races, high school sports banquets and “best of” awards for local businesses.

Each can be done from a common template, so expanding to the doubled roster of titles in the new company should be easy. The events now attract both local and national sponsors. New Gannett, he said, could realize added revenue of “several hundred million dollars over five years.”

On the expense side, Reed said that he expects big savings from consolidating printing, circulation and other business functions, particularly in states like Florida or Michigan, where both companies have a number of papers.

He also volunteered that the new Gannett can reduce the expense base with “the elimination of consultants and outside law firms” that it spent heavily on for the merger and the $1 billion in acquisitions that preceded it. (My earlier scan of a 384-page Securities and Exchange account of putting the deal together chronicled dozens of meetings and studies by top-dollar firms.)

Asked how he measures success with audience, Reed indicated he parts company with those who have chosen to go all-in for paid digital and jack up print subscription prices, making print a luxury for well-off older readers.

“Our engagement measure going forward is going to be how many people within the community we touch in some way — a number, not a certain kind of person.”

Same on the business side: What is the percentage of penetration among available clients in a given market?

Gannett is among the chains that have aggressively raised the price of print plus digital subscriptions. Reed said that he would consider freezing or even reducing those rates. “If you could get 50,000 more customers that would be worth doing … But you would have to be pretty certain (through testing) that it would be a good trade.”

“Is this merger the end game or will you now start making more acquisitions?”

“Neither,” Reed replied. “It’s not the last acquisition. (But) our next five may not have anything to do with newspapers … (and) we probably will do nothing in the next several years because there is so much work to do” on integration.

To a question about customer service: “There’s room for improvement at both companies … Having been a subscriber to the Rochester (New York) Democrat and Chronicle (once old Gannett’s headquarters flagship) because I live in Rochester, I know that to stop it for a week when you go on vacation can be hard.”

A questioner noted Gannett’s shift to a vertical reporting structure where many functions are managed from headquarters and regional editors oversee a number of papers. Will that be extended to the GateHouse papers?

Yes, Reed said. “We’ve gone so far down the road, it is probably not reversible. Our top 15 (GateHouse) markets still have their own publishers. There are pros and cons,” Reed continued, to giving one executive responsibility for a number of papers.  “For us, the cons have outweighed the pros. We have actually seen an impact on financial statements — revenue declines and profit declines … Conceptually it makes sense. We just haven’t done it very well.”

Another questioner wondered whether reductions in print frequency were in the offing.

No, Reed said. “That would encourage our customers to go elsewhere.” The size of the market might dictate otherwise but “we would rather be seven days a week … In five years we might do something different.”

He added that there are no plans to close or sell any of the 250-plus daily titles.

Endorsements? “There will be no national policy. Local markets can do what they want.”

Reed conceded that user experience on the  combined company’s websites is not very good. “Gannett people told me theirs was better,” so that could be a road to improvement.

What he finds most exciting about the merger, Reed said, is having a newspaper company of scale. Within a few years, he hopes to be able “to say we are not declining.” That would also shoot up the valuation of the company’s stock.

Both of the merged companies have been building a local-to-national and national-to-local network. Reed noted that GateHouse owns the paper in Augusta, Georgia, “so we will be able to share (Masters coverage) across the whole country.”

Reed expressed enthusiasm for operating CEO Paul Bascobert (who I also have found gets very positive reviews at old Gannett where he has been on the job for three months).

“One thing I like about Paul is that he is an industry outsider. I love the fact that he challenges how newspapers have been run.”

“GateHouse has been terrible at taking its whole portfolio and monetizing advertising,” Reed continued. Gannett’s superior national ad sales force can help fix that.

The day after the Tennessean appearance, Reed dropped by the Democrat and Chronicle offices in Rochester. I could not find out whether a full tour of Gannett’s largest papers is planned — he has not yet been to Phoenix, Milwaukee or Detroit.

Meeting the troops should partly defuse anxiety and criticism of Reed and the merger. Given the new company’s huge $1.8 billion debt load to finance the purchase and promises of at least $275 million in cost-cutting “synergies,” staffers have every reason to worry about their jobs and other budget pinches. (Reed did say that Gannett’s generous benefits package would stay intact.)

He closed the Tennessean meeting on a positive note: “We have an opportunity to be an organization that turns around the industry narrative.”

In a brief email exchange, Reed told me he is not bothered by attacks from the NewsGuild and other critics. “Rising tide lifts all boats. I remain optimistic about the future of local news, and will do everything I possibly can to see it survive and thrive. I hope you will do the same …”

Rick Edmonds is Poynter’s media business analyst. He can be reached at 

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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…
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  • 12-05-2019- Layoffs begin = 6500+, mainly distribution and production

  • Rick, thanks for the reporting on this. The right words are being said…we can only hope the right actions follow. An old columnist named Gene Graham was my inspiration to get into the news business, so I hope the Tennessean continues to thrive.