Why Gannett is shutting down more presses

In a new post today, "Gannett profit slide points up industry peril," blogger Alan Mutter does a deep-dive into the company's financial reports going back to 2006 to arrive at some startling observations. Among them, he explains why the company is rushing to shutter more printing plants, shifting that work to non-Gannett companies. There are plenty more to close: As of December, 53% of GCI's 84 U.S. newspapers were being produced by commercial printers, or other Gannett and non-Gannett newspaper presses.

Mutter focuses on fixed costs, those a company must pay to stay in business, regardless of how much business you have. "Apart from the variable cost of newsprint, it essentially costs a publisher as much to be equipped to print and deliver 100,000 newspapers as it does to print 75,000," he writes. "Most fixed costs don’t go away when revenues fall by 30%, as they have at Gannett since 2006."

Mutter's post continues: "While publishers can trim so-called elastic costs by eliminating the op-ed page or shrinking the news staff, they can’t avoid the inelastic expenses required to operate complex manufacturing plants that are used only a few hours a day to make a highly perishable product that must be delivered on a demanding schedule by fleets of human-piloted vehicles. If sales cannot cover fixed costs and a business runs out of variable costs to cut, then the business at some point won’t be able to make a profit. Absent profits, a company eventually goes out of business."

Yesterday, Gannett executives made clear that the company is in cost-cutting mode for the foreseeable future. "We will continue to look at opportunities to further consolidate and restructure in an appropriate, strategic way while maintaining the quality of our operations,'' newly named President and Chief Operating Officer Gracia Martore told a conference of Wall Street media stock analysts.

Shutting down presses eliminates dozens of high-paying jobs; in Westchester, N.Y., The Journal News is cutting 166 jobs as it moves printing to a non-Gannett publisher in Rockaway, N.J. Gannett is considering at least eight more press closings, U.S. newspaper division President Bob Dickey has said. But there's been speculation that the number might be much higher. Employees at The News-Press in Fort Myers, Fla., worry their operation might be next because of a curious remark made by an executive at the nearby Daily News in Naples, Fla.

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