GCI shares rose 6% yesterday, partly because of another favorable article in financial weekly Barron's. The Dow Jones & Co. title interviewed Douglas C. Lane, president of money manager Douglas C. Lane & Associates. An excerpt (paid subscription usually required) from the story:Barron's: The stock's been on steady descent, going from north of $60 a year-and-a-half ago to around $18 as we speak. What do you like about the company?
Lane: The question is: Is it a newspaper company or is it a news-gathering organization that is going to be able to find a way to monetize the news beyond newspapers and through the Internet and other means? All newspapers are going through that transition. But Gannett is better-financed than most going into the transition, so they are going to have a better way of getting through it. It's a question of whether merchants are going to pay for Internet advertising or for newspaper advertising, and how much.
For years, the local newspapers could count on a 4% price increase in advertising rates, but the world has changed. The profitability of local newspapers will decline -- but from a very high level -- so they are not going to go out of business. You would have to convince me a lot more that the Internet is going to replace newspapers. I remember when TV was going to replace radio, and cable was going to replace the movies, and none of that happened.
Barron's: So the business model of providing local information, including news, is viable?
Lane: People are going to want to know what is going on in their town, and the only way to get [that news] is for someone to gather it.
Barron's: At $18, the stock trades at less than six times forward earnings.
Lane: We got interested in it when it was in the $20s, so we are not too bad off now. We are not blind to the changes that are occurring in the newspaper industry. I can't draw the plan that they are going to use, but I know that most of these guys, particularly the guys at Gannett, get it.
Earlier: Barron's says GCI among 10 worth 'learning to love'
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ReplyDeleteReflections of a Newsosaur blog rolled out its Default-O-Matic update: TribCo at most risk.
A supporting graphic shows Gannett to be the third LEAST likely to fail of the newspapers and corporations listed.
Here's the fundamental flaw in the thought process of the analyst cited in the story:
ReplyDelete"People are going to want to know what is going on in their town, and the only way to get [that news] is for someone to gather it."
The typical newspaper newsroom in a mid-sized market still employees more reporters, photographers and editors than all of the TV news departments (and all-news radio staffs) combined, and might still have a higher head count if you throw in the staffs of the alternative weekly and the neighboring community weeklies.
But that still isn't nearly enough manpower to fulfill the mission implicit in the statement above.
Gannett is not solely at fault in this respect, but too much of the information being gathered and disseminated by newspapers is trivia rather than news.
I don't need to see pictures of Fluffy and Rover on the web, I need to read reports about break-ins and fires in my community.
I don't need school lunch menus and quarterly honor roll lists in my town news weekly insert, I need to know why the school budget is going up at twice the rate of inflation.
I don't need fluff features about mom-and-pop start-ups on the business page three days a week, I need to know what's going on with employers whose 5,000 or 10,000 workers happen to include my family and friends.
Don't give me daily coverage of the Little League team's games (supplemented by "publish your own story" crap online), attended by no one but the players' parents. Give me more news about the college or minor-league sports team's game, attended by 4,000 or 6,000 people last night.
The old "work smarter, not harder" mantra is a bigger-than-ever joke these days. How about getting management to "think harder" before they drop or consolidate important beats and let go of skilled reporters.
I, too, like the idea of buying Gannett stock at $18 a share or so, but that's largely because of the because of the dividend.
But that dividend is not sustainable. Even the most optimistic analysts say net gains made through online advertising and non-daily publication launches won't offset net declines in the daily product's revenues for at least 5 to 8 years.
In the interim, there's just nothing left to cut (although corporate will find a way to cut it anyway), which will make the gathering of real news increasingly impossible and continue the marginalization of the product in the eyes of the reader, whether he/she looks at the product in print or online.
The comparison to radio is apt. Radio survived, but not as a news-gathering powerhouse. Vry few cities have signficant local news departments, and those that exist are so small they can cover only a selective sample of local events. Most of the local news they report comes from the local newspaper.
ReplyDeleteSo, again, nobody can cover local news adequately without a lot of boots on the ground. But neither advertisers nor readers seem willing to pay the price for those boots. So that vital public service is in imminent danger of going away for good, unless someone comes up with a way to get a helluva lot more revenue flowing.
You would have to convince me a lot more that the Internet is going to replace newspapers. I remember when TV was going to replace radio, and cable was going to replace the movies ...
ReplyDeleteWhat this person doesn't understand is that the Internet (or more accurately the Web) isn't replacing newspapers. It's replacing all the media he listed. It's not a one-for-one swap. It's a one-for-all swap. This is old media not understanding new media. It's OK though. I'm sure someday when Barron's is online-only, they'll understand it too.
It is the "paper" part of the newspaper that will cause them to struggle. Newspapers require a sizable and trained production crew to get out a product. Add in increasing paper, ink and transportation costs and newspapers will find it difficult to compete against media that have small (or no) production crews and which use no materials. The physical parts of producing our media costs money that the electronic media do not have to worry about.
ReplyDeleteNobody ever takes into account the costs of the electronic side of journalism. Servers, software, support agreements, backups and storage, personnel, testing, development, upgrades, maintenance, licensing - all these things (and more!) cost money and lots of it. You might think that once you've bought something, that's it. But there's an enormous amount of effort and cash behind every piece of technology you use. Those costs may not recur as often as having to order ink or newsprint, but they are still considerable. And of course, Gannett has taken to limiting staff, moving support off-site (or contracting support out,)consolidating resources, etc. And some of these moves are fine and make some business sense. Some don't.
ReplyDeleteThe real issue becomes, with lack of maintenace dollars and a reduction of support staff, who takes responsibility. If there is a problem or a crisis, how is it handles? Who is affected? With a smaller or remote staff, how do you bring new products or services online? Many changes have already complicated the process of something as simple as getting a new user account.
I guess my point is that the electronics side is not as cost-free as some in on-line side would like to think. It is pricey and no one wants to spend the money to maintain it like it should be.
The positive article in Barron's probably contributed to a one-day pop in the stock, but even a simple stock screen using Bollinger bands, a one-year moving average and other basic technical-analysis tools shows that GCI entered severely oversold territory in mid-July and was due for a bounce. For those seeking a short-term trade, GCI still looks attractive -- but the long-term trend shows few signs of a resurrection.
ReplyDeleteMy bet is that yesterday's rise in the stock price is more tied to oil prices and the overall impact it had yesterday than on anything else.
ReplyDeleteHmmmm. I wonder if this current round of aggressive cost/job cutting is designed to stave off the threat of a downgrade on GCI debt? Didn't Moody's and S&P both say they were looking at dropping those grades, after the Q2 results?
ReplyDeleteto add to anon 10:19...Several years ago when we replaced a Composing Room staff with imagesetters the PD made a very wise comment: "So you get rid of a 40 thousand doller compositor and replace him with a 60 thousand doller technician..."
ReplyDeleteNot only does the technology cost money, but the level of expertise needed to maintain it costs more
On the Composing Side though you typically were replacing 20 compositors with 2-3 Imagesetters hopefully you added a technician to maintain the machines.
ReplyDeleteThe big question is where is the money? How do you make this shift in terms of monetizing the business? We see our audiences grow by adding great web sites yet print revenue declines and online revenue does not meet the pace to offset it.
ReplyDelete"We see our audiences grow by adding great web sites" What are you smoking?
ReplyDeleteLet's pretend audiences grow and the web sites are great. How does Gannett make money?
ReplyDeleteNews dug up and written by reporters, then spiffed up by the editor and copy desk, is what's being shoveled out onto the Web before the print product even goes to press. So the question of many former readers of a newspaper is, why should I buy it if I can read the same thing online?
ReplyDeleteThat's the Catch-22 the folks in the big glass offices haven't figured out. If you want your intellectual side of the business to keep feeding the electronic side, then how dare you lay them off? Hell, why not just get rid of the print product altogether and see what happens for, say, 6 months? See if you make more money on your sluggish, unattractive Web sites? See if you sell more ads for the sites. Run all AP wire copy online and have, like, two news reporters and two sports reporters do everything else. From a remote site! So you can sell all your real estate, too. Woo-hoo. Big bucks for the boys and gals in McLean.
That will save you about 30 billion or something.
But no one will read your blasted Web sites, and no one will advertise on them, and then...you have lost the great game and the joke's all on you. You have failed.
Too bad employees can't lay off executives who have failed, who have destroyed newspapers, who have made a mockery of journalism.
H.L. Mencken is rolling in his grave.