July 19, 2019

Gannett is about to be subsumed by the parent company of the GateHouse chain, The Wall Street Journal and others reported Thursday night.

How did that come to pass? What would a combined company look like, assuming the deal is completed? And are rounds of deep newsroom cuts in the offing?

Both public companies have grown by acquisition over recent years — GateHouse to 156 dailies, Gannett to 109 plus USA Today. However neither is doing well financially in 2019. Share prices are way down for the since January highs (about 35 percent at GateHouse and 30 percent at Gannett before news of the deal).

By combining, GateHouse and Gannett should realize big savings and also some increases in revenue as they build out an audience for national ads. That is the basic logic that drives a calculation that they will be worth more together than they are separately.

The companies’ strategies match, too. Both are focused now on their largest metro papers like The Arizona Republic and The Indianapolis Star for Gannett and The Columbus Dispatch and Austin American Statesman for GateHouse. Both have sliced operations at smaller titles to the bone, often with newsrooms that number in the single digits.

So my hunch is that further deep newsroom cuts as a result of a merger sometime later this year may not be in the offing. But there are important qualifiers. GateHouse, by reputation, does operate more leanly than Gannett. And even once the chains combine, if revenues per property keep declining so will news staffing.

I assume, and several sources confirmed today, that New Media Investment Group, GateHouse’s parent, will be the acquirer and that CEO Mike Reed will run the combined company. (Gannett has been without a CEO since Bob Dickey retired in May).

Gannett, once the industry juggernaut, has successfully upgraded its USA Today network content in recent years, expanding local-to-national investigative reporting including a Pulitzer-winning project on the Mexican border and President Donald Trump’s campaign pledge of a wall.

But in other respects, Gannett has been on the skids. I confirmed my impressions talking with Judi Terzotis, a former regional publisher and president for Gannett and now president of The Advocate in Louisiana, who I met while covering the latter’s takeover of The Times-Picayune this spring.

About a year-and-a-half ago, Gannett properties swung sharply away from print to a true digital-first operation, Terzotis said. For group presidents like her “our jobs changed or went away. Most of the 12 of us left.”

As a business, Gannett untethered from its spun-off TV holdings in 2015 and was betting on its acquisition of a digital marketing subsidiary, Reach Local. That’s where Gannett was investing in growth, Dickey said repeatedly in earnings calls with analysts. Reach Local president Sharon Rowlands was considered his likely successor.

But that business soured some last year. Rowlands abruptly left the company in January, leaving succession and strategy in limbo.

“Their products are good,” Terzotis told me, “but the result was whiplash about how we would run the company, so we were shedding a lot of good talent.” Local sales teams were reduced so Gannett could focus on the pursuit of its national digital business.

Dickey’s attempt to take over Tribune Publishing (then called Tronc) dragged out over a year and was scuttled in late 2016, as bankers got cold feet. Then Gannett rejected a takeover offer from Media News Group this spring, arguing that there was no money behind it.

That’s not likely to be an impediment to this deal. New Media Investment Group, though a public company, is closely tied to the giant Fortress Investment private equity group. They will put their hands on financing if the benefits of the deal are convincing.

Savings will come as corporate and backroom functions are consolidated, with many on the business side of Gannett losing their jobs. Both companies have editing and production hubs that can be combined, and events businesses that are likely to grow.

Putting together content management systems and other technology, on the other hand, will probably be a protracted process.

Gannett alum Terzotis was not necessarily negative on the deal.

“It’s impressive to think of that scale … I hope they won’t get away from local journalism … That’s the sustainable business.”

Another potentially hopeful sign is that GateHouse has been assembling an investigative group of 30 reporters, editors and producers — similar to the USA Today Network’s. Putting those two operations together would make for a formidable team.

I am not betting, though, on the resurrection of true local reports in the smaller of the 250-plus daily markets the merged company would control.

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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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  • The problem with local news is selling enough advertising to support it. The problem with selling enough advertising is that internet advertising and content platforms are ineffective.

    Maybe it’s time to go old school. Freeze content in a PDF that looks like a newspaper (print edition). You can get creative and use that as a starting point, also adding multimedia content. Maybe you subsidize larger 10″ tablets for subscribers who want them. Newspapers in PDF form are very readable on a 10″ tablet. Less readable on a phone, but doable if you want.

    Point being, ads are more effective for advertisers displayed the old fashioned way. You might get them to want to advertise in your papers again if you gave them that. Use that as your starting point and build from there.