Study looks at the performance of three media spin-offs and sees the newspaper side lagging
The Pew Research Center report looked at Gannett, Tribune and Scripps, and compares earnings and stock performance, though it might have wanted to look at additional spin offs involving print media companies
The Pew Research Center yesterday looked at media spin-offs and found that newspaper companies were outperformed by the broadcast companies created by the spin-off. The finding is hardly surprising, as the goal of these spin-offs was, in fact, to separate out print from broadcast due to the declining fortunes of print.
Pew looked at three companies, Gannett Co. Inc., Tribune Company, and E.W. Scripps Co., each of which owned both newspapers and broadcast properties, and each of which completed their spin off in 2014 or 2015.
“An analysis of the spinoffs shows that the broadcasting components of the original companies (which also retained many digital properties) have mostly outperformed their publishing counterparts in terms of operating profit margins and stock prices,” said Alex T. Williams, an intern at the Pew Research Center.
Gannett’s spin off was the most straight forward of the three, with newspapers remaining under the Gannett banner, and broadcast becoming the new company TEGNA. The new broadcast company just reported strong quarterly earnings, with revenues up 7 percent. Gannett also reported higher revenue, 3 percent, but that was attributable to the acquisition of Journal Media Group – pulling that out print ad revenue would have shown a decline.
Journal Media Group, the newspaper company acquired by Gannett, originates from the media asset swap completed by Journal Communications and E.W. Scripps Co. Journal Communications assumed the newspaper properties from Scripps and became Journal Media Group, and Scripps received the broadcast properties from Journal Communications and retained its original name. The new company, Journal Media Group, then was acquired by Gannett.
Gannett is also looking to acquire the newspaper company that was created by the spin off that occurred at Tribune Company. The spin off created a newspaper company, Tribune Publishing, and a broadcast company, Tribune Media. Tribune Publishing then went through a major management shake-up, and is now called tronc.
It was tronc that John Oliver made fun of during last Sunday’s segment on the state of journalism (more on that here).
Williams gets close to understanding why it is that these spin offs have performed well for some but not all the companies involved when he says “Comparisons between companies are never exact, and in this case the three spinoffs were structured so that each of the new print companies has a considerably different mix of debt and equity.” Debt certainly is a major factor, but so too is the diversification of the new companies, and the assets they start life with.
When you look at Tribune Publishing, the company was started with a massive debt load, and only newspaper properties. Nonetheless, it was able to acquire the San Diego Union Tribune, strengthening its Southern California market position.
A spin off that Williams did not examine was News Corp, and if he had added that one to the mix might have discovered some important lessons. The News Corp spin off created 21st Century Fox, the film and television company, and News Corp, the news and information company. What makes this spin off so different is that Rupert Murdoch did not saddle News Corp with a debt load, and the new company formed was somewhat diversified in that it owns newspapers, book publishing and market services. It further diversified by acquiring the digital real estate serves company Move.
Another interesting spin off to look at is Time Inc. Spun off from Time Warner, it is not involved in print newspapers but is in the magazine business. But it, too, was saddled with debt, and started life with mostly print properties. It has since looked to add more digital assets, but it continues to struggle with revenue growth and earnings – the lesson being that media spin offs are particularly tough on the print side, and made worse when the new media company has debt and few valuable digital assets.
Williams is a doctoral student at the Annenberg School for Communication at the University of Pennsylvania and hopes to get his Ph.D next year, according to his resume. After doing his study he may be thinking that staying in academia is a good career choice.