Weak Tribune Publishing and Scripps earnings make the case for spinning off newspapers

Tribune Publishing and E.W. Scripps this morning reported disappointing fourth quarter revenues from newspaper operations, matching the pattern established by other public companies.

At the same time, the results suggested some of the logic behind divorcing newspapers from broadcast, as Tribune Publishing did seven months ago and Scripps plans for this April.

tribune-logo-300Continuing the tone he struck in the company's first earnings conference call with analysts, CEO Jack Griffin said "we're playing catch-up" on a number of key initiatives to strengthen the business.

For instance, Tribune Publishing as a Tribune division had made only a minimal effort to register print subscribers as digital users, he said.  Now 659,000 of those are counted as paying for digital access and Tribune Publishing has more than 60,000 digital-only paid subscribers.

In advertising, Griffin said, the company has reorganized its national sales strategy with a digital emphasis and installed a new chief revenue officer.  He used the metaphor of a barbell for the effort.  On one end,Tribune Publishing is trying to build a strong system for the fast-growing business of programmatically purchased ads and believes it can charge premium rates.  On the other Tribune is developing capability for "multi-platform, idea-driven" campaigns.

Typical digital display ads remain in the middle of the barbell, Griffin said, but he conceded that "is a weak business."

When Tribune Publishing spun off it incurred new costs, notably needing to pay rent for its eight newspaper organizations to parent Tribune.  Expect more progress in cost reductions through centralization and other strategies in 2015, he said.

In summary, Griffin said, the company continues to execute a digital transformation game plan, but "any successful journey takes time."

Though he didn't say so explicitly, Griffin's account suggested that while associated with growing TV and freestanding digital businesses of Tribune, needed changes to the newspaper side did not get much attention or investment.

Gannett and Scripps (combining its newspapers with the Milwaukee Journal Sentinel) are going down the spinoff path in 2015.  I would look for both to unveil new transformation strategies with a splash later in the year.  Gannett already has with a package of digitally focused "newsroom of the future" changes at all 80 of its community papers.

For the quarter, Tribune Publishing reported revenues down 4.9 percent. Net income was $15.5 million on revenues of $457 million, a margin of 3.4 percent.

Scripps_logoScripps, in its next-to-last quarter before the spin was buoyed by strong political advertising and retransmission revenues at its TV stations. But revenues in the newspaper division were down 7.9 percent compared to the fourth quarter of 2013. Advertising and marketing service revenue was down 9.7 percent and national advertising by nearly half for the quarter.

In midday trading, Tribune Publishing shares were down 8.3 percent, reflecting that the results fell short of earlier analysts' estimates but later rallied.  Scripps' were trading down at 1.8 percent.



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