August 3, 2017 Last Updated 11:56 am

Gannett looks to drive audience growth to reverse revenue declines; Lee looks to cost cuts

Acquisitions are driving revenue growth, cost cuts drive profits, but none of the major newspaper chains have found a solution to declining ad revenue while maintaining newsroom levels

The earnings keep coming in, and with the exception of The New York Times, few print publishers are finding it possible to grow revenue while at the same time maintaining profitability. This morning Gannett was the latest to report second quarter earnings and the company reported a loss (see earnings here).

The problem is that it is easier to make an acquisition that will result in higher revenue, than have that acquisition lead to higher earnings. The buy is easy, stopping the print ad losses at the other properties remains difficult.

Gannett, led by an ad man in Robert Dickey, is one of the few still searching for ad solutions — that means I am cheering for them as I am a big believer in a balanced approach to publishing (neither relying solely on reader revenue or ad revenue, but both). But Gannett is a company that has always promoted from in, good in theory, but bad when it is necessary to bring in new talent and ideas. I simply don’t think the company has what it takes to turn this around.

Part of its strategy has been to grow its portfolio in order to better attract national advertising, that is what the effort to buy Tribune Publishing was about. It didn’t work out (for either Gannett, or I would argue, Tribune Publishing).

The other part of the strategy appears to be to grow digital, at least in part by moving digital marketing services clients to the ReachLocal platform, a company Gannett acquired last summer.

“We transitioned all of our core Gannett digital marketing services clients to the ReachLocal platform, signed a new employment advertising partnership with RealMatch, and created a new digital ad format powered by a proprietary data engine,” Dickey said today via the earnings statement.

“Moving forward, we will focus on driving audience growth and engagement through additional new product capabilities, while also expanding our marketing services to offer complete solutions for both local and national advertisers. At the same time, we will continue to maximize the economic value of our print business to allow for reinvestment to fuel our digital growth.”

This can be boiled down to the ol’ theme of scale, ‘if only we had more scale.’ That means more acquisitions.

For me, this is like relying on just one kind of revenue. A balanced approach would be acquisitions combined with a new approach to sales (either through new talent or a new strategy). These earnings reports don’t give us a clue to that sort of internal decisions so we’ll just have to keep monitoring the results.

Gannett stock has risen recently along with the rest of the market, but tumbled this week and is now over 30 percent below its 52-week high.

One thing Gannett did recently was enter into an agreement with RealMatch to grow its recruitment ad business. Newspapers have been bleeding classified revenue for a long time now, a totally righteous result of the publishers downplaying the rise of the Internet and other outside competitors (it is the main reason I left the business two decades ago, newspaper companies simply were in denial).

Classifieds often brought in more than 50 percent of total revenue at many papers, at least a third at the rest. But and, of course, Craig’s List, took the business away with the ease of a skilled pickpocket.

As any veteran classified manager will tell you, classifieds were rarely appreciated anyways, so losing the business was seen as simply a sign of the category’s insignificance. Those few publishers who realized the importance of classifieds had no first-hand experience with the category and so were helpless when their numbers began to tumble.

Most newspaper companies have decided that it is not worth their time to try to create their own digital solutions to the problem and so have resigned themselves to the permanent loss of the revenue, a few others have decided that third party partnerships is at least worth attempting.

But few newspaper publishers realize the real cost of the loss of classifieds: a direct tie-in with their readership and local businesses. Even those publishers that want to rely reader revenue going forward need to consider how they can build better relations with their readers and communities without the assistance of a robust classified ad solution.

In fact, even as newspaper chains expand, the goal is usually to grow digital national ad opportunities, not local digital or print. And so staff cuts are instituted on the local level to cut costs to help pay for the acquisition, and the ties to the local community decline further. It is a terrible cycle to promote.

Lee Enterprises also reported earnings today (see third quarter report here).

Unlike Gannett, Lee still is in the black — and while it has shown good digital revenue gains, it is really the cost cutting that has maintained profits. Still, print ad losses continue, with retail advertising down 10.6 percent, classified down 11.8 percent and national down 6.3 percent in the latest quarter.

But those cuts added up. Lee cut expenses 8 percent in the quarter, though because of ‘workforce adjustments’ the actual savings came in at 4.7 percent.

Lee Enterprises stock remains near its 52-week low, trading at $1.90. Its 52-week high is $3.92.

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