As Gannett's board of directors begins its two-day meeting, this chart shows the performance of GCI shares (blue line) vs. the S&P-500 Index (red line) over the past 12 months; click on the image for a bigger view. Google Finance data show GCI has plunged 49% vs. a much smaller 5.7% decline in the S&P, a broad measure of overall market performance.That's the backdrop for this: Soon after slapping my name on Gannett Blog, a Wall Street stock analyst asked for my thoughts about the company. (I'm not revealing his name because I don't have his permission.) Here's what I wrote him:
"I doubt that management really believes the current strategic plan for its newspapers will do much more than keep folks busy while the top brass tries to find a real plan to lift the company's revenue. Reorganizing the company's 85 daily newspaper newsrooms so they emphasize digital over print journalism (announced in October 2006) was an obvious, necessary step.
"But those newsrooms can't simultaneously build truly competitive websites and PDA-delivery streams while putting out a print newspaper -- all with reduced headcount. I didn't think that was reasonable when the plan was announced in 2006, and I haven't seen anything since to show that revenue (or the stock price) reflects any success under this plan. Doing more with less is the business model that got Gannett (and other newspapers, too) into the mess they are in now. Continuing down that path is a recipe for failure."I believe management's real plan is to milk the company for maximum profits while it can. That is not investing for the future, though."
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[Image: the proverbial deckchair, of rearranging fame]
As much as anything else, Gannett is crippled by the top-down management structure that governs virtually all aspects of the individual papers; it's safe to guess no one in the know believes his/her publisher when they talk about how much local autonomy they have.
ReplyDeleteOne-size-fits-all directives from the top work OK for Coca-Cola, which has dozens if not hundreds of bottling companies around the globe. All of those facilities are producing the same products in the Coca-Cola line of brands. Conformity has to be the rule rather than just a noble goal to which to aspire.
Ditto for McDonald's, Proctor & Gamble, etc.
But that approach fails miserably in our industry. Every community has different standards, tastes, areas of critical interest, etc. The local operations are critically damaged by having to wait for corporate to do its focus groups, beta launches in test markets and then network-wide rollouts.
You used to be able to get away with that mentality in print, when redesigns took place perhaps once every 8-10 years and the motto "there are no new ideas, just ideas stolen from other papers" came to reign once the industry had fully matured.
The online/electronic portion of our business does not remotely resemble that model. Change within the industry happens at breakneck speed, but we (actually, I should say "they" since I did a Gannett-ectomy on my career last year) don't have leadership that is capable of responding to change at lightning speed.
Their predecessors were bad but McCorkindale and Dubow have proved to be undeniable disasters. I can't imagine why anyone would want to take a stake in Gannett unless they were coming in with the ability to clean out the infamous "Blue Ball" suite in Tyson's Corner.
The guys at the top have no idea how to stop the bleeding, which hardly makes them unique within the newspaper industry. But Gannett's fall in the last three years threatens to turn into a complete implosion because of the insular culture. It's time to bring in outside help -- lots of it.
Here's something to think about.
ReplyDeleteIn 2004, Gannett's shares traded at a high of $90 per share. In November of 2007, it was worth $40 per share (Moody's rated it poor then). Today, as of Feb. 26, Gannett's shares are now trading at $32 per share. Let me repeat that - $32 per share.
Did you know that when PCM demanded Knight Ridder be broken up in 2006 its stock was trading at $53 per share, down from $70 in
2004? Sure, this doesn't account for inflation - but Knight Ridder was sold less than two years ago.
It's something to think about - for all you Gannettoids with your heads in the sand. The biggest axe to fall should come right down on corporate's head. There is SO much wasteful spending there (can you say shameful extravagant Xmas party despite 45 USA TODAY buyouts?) - it's atrocious. And scary.