[Digital segment revenue vs. overall revenue; figures in millions]
For the third consecutive quarter, Gannett's portfolio of digital businesses remained stuck in neutral, as it failed to boost its share of the company's overall revenue, last week's first-quarter earnings report shows.
The Digital Segment portfolio comprises digital-only businesses: CareerBuilder, PointRoll, ShopLocal, Planet Discover, Schedule Star and Ripple6. It doesn't include any revenue from, for example, websites run by the community newspapers division.
Digital is the engine of GCI's future growth, so its revenues should be growing faster than overall revenues. But its biggest business, No. 1 jobs site CareerBuilder, has been plagued in recent quarters by weak demand for employment during the deep recession, company executives have said.Gannett created the Digital Segment as a separate accounting category with the third-quarter earnings report in 2008.
The company doesn't break out revenue figures for individual subsidiaries. Overall Digital Segment revenue in the first quarter fell 1.8%, to $141 million, vs. a bigger 4.1% decline in Gannett's $1.3 billion in overall revenue. So, digital's share of total revenue held steady at 10.6%. (See graphic, above.)
Hints at other digital revenue
We can glean a sense of newspaper and TV station digital revenues from the quarterly and annual earnings reports.
From last week's first-quarter report: Company-wide digital revenues, which include the Digital Segment and all digital revenues generated by other business segments, totaled $225.7 million for the quarter. So, subtract the $141 million in Digital Segment-only revenue from the total $225.7 million, and you get $84.7 million for other divisions, including the papers and broadcast.
From the report for all of 2009: For the full year, total digital revenue was over $925 million vs. $586.1 million for the Digital Segment alone. That means digital revenue other than from the Digital Segment was $339 million.
Earlier: Chief Digital Officer Saridakis leaving for e-commerce company post
There is revenue from the newspaper websites that isn't flowing straight to Gannett? From what sources? You mean local ad revenue? Be interesting to know what that looks like.
ReplyDeleteHas anyone heard a single kind word about ShopLocal? I haven't.
I worked at Pointroll up until recently and we did not interact that much with Gannett, but Gannett certainly enjoyed our earnings. And they probably continue to do so each and every day!!!
ReplyDeleteFor example, some of you might not know that that PointRoll and ShopLocal will produce over $125 million in revenues and over $62 million in NIBT this year.
The combined companies have about 350 employees.
The end of this year, it looks like Gannett will bring in $550 million in NIBT and Pointroll and Shoplocal will be about 15% of their overall earnings!!!
Put another way, 15% of Gannett's 2010 earnings will be brought in by 1% of the employees!!! You do not find those margins in a newspaper business do you Jim?
Will it be $62 million -- or $550 million in NIBT in 2010? You've given two different figures.
ReplyDeleteJim,
ReplyDeleteI think PointRoll employee was saying that of the $550 million in NIBT that Gannett is going to bring in this year, $62 million of that is from PointRoll and Shoplocal. That looks like about 15%.
Pretty interesting. Sheds new light on Gannett's earnings to me.
D'oh! Missed that. Now, I understand. And it's very interesting, assuming those numbers hold up by year's end.
ReplyDeleteRevenue from ShopLocal and banners at most sites come from bundled contracts with print advertising. That's where the big stall comes from in online. Only a few online ventures are capable of standing on their own: Cars.com, Careerbuilder, Homefinder.com, Apartments.com. Everything else relies too much on print. The revenue soon won't be able to justify the payroll. Expect at least a 60% staff reduction over the next five years if something doesn't change.
ReplyDeleteI'm from Missouri, so I'll believe it when I see it. Funny, but I seem to recall similar happy forecasts when Saridakis got on board with his Ripple6. As Jim points out here, it hasn't quite worked out that way and as we know Saridakis is no longer with us.
ReplyDeleteThe internal accounting for these bundled contracts sounds awfully squishy.
ReplyDeleteExample: If ABC Hardware buys a $500 contract for a print ad, with $200 worth of online banners thrown in for "free," how is that accounted for? Is it $500 in print-only? Or $300 for print, and $200 for digital?
What difference does it make. It seems like the accounting of and arguing over if ad money is digital or print defeats the whole information center concept. Geeze. Information is information and ads are ads---just sayin.
ReplyDeleteIt matters when it comes to handing out annual bonuses.
ReplyDeleteI think we have a case for an SEC investigation here. If they are comingling digital with print revenues, then Dubow is lying by issuing an annual report that reports separate figures. Lying in your annual report is a crime.
ReplyDeleteMaybe it's time to hand out the bonuses based on how information centers perform, not based on the digital "side" and the print "side." Why does this company insist on taking sides on everything?
ReplyDeleteGannett's NITB for 2010 will be north of $600M. Very likely north of $650M. 2009 was $576M and (seasonally weak) 1Q 2010 beat 1Q 2009 by $57M. So. . . $700-750M might be in reach, particularly with a political year fattening the TV stations in part of 2Q, all of 3Q, and part of 4Q.
ReplyDeleteBut still, nicer numbers for PointRoll and ShopLocal than I would have expected.
Now if CB can get untracked again. . .
What is NITB? When i Google it for a definition, all I get is Northern Ireland Tourist Board.
ReplyDeleteThe correct acronym is NIBT; stands for "net income before taxes"
ReplyDeleteDon't you all mean EBITA? That's an acronym for a measure of profitability that stands for: Earnings Before Interest, Taxes and Amoritization expenditures.
ReplyDeleteBottomline...Pointroll is saving Gannett's ass everyday! The biggest mistake Saridaks made was selling it to a bunch of arrogant newspaper executives who are ungrateful.
ReplyDeleteJim,
ReplyDeleteThe Pointroll employee poster is dead on. The true story behind Digital is Pointroll. This company is killing it and the reason why they paid Dubow such a big bonus for retaining Saridakis was because they wanted him to keep his eye on that money machine. Not sure what happens now as Saridakis and his leadership team are eventually going to punch out of that place.
Gannett does not want to disclose Pointroll's numbers as it would highlight the failures in Gannett's other businesses.
Sorry, yes, "net income before taxes". If you look at Gannet's earnings releases, that line is usually labelled as "Income Before Income Taxes". It *does* include interest expense and amortization, so it isn't EBITDA.
ReplyDeleteInterest expense, btw, was about $5.5M less for 1Q 2010 than 1Q 2009, so that continuing (and increasing) reduction should add something north of $25M to NIBT over the course of 2010.
Jason Tafler is the man!!!
ReplyDeleteSo what of the information centers that were supposed to emphasize digital over print? Strikes me that Dubow's 2006 vision has hit a major roadbump or more likely a brick wall. Metromix has been a disaster and Moms never got much of an audience. With Saridakis' departure, Ripple6 and Pointroll look like they are langishing without their creator and chief promoter. Knowing how this company operates, a huge shakeup coming in digital within weeks.
ReplyDeleteDiscovered today that a local site requires payment to publish press releases and doesn't disclose as "PAID" when printed. Is this common practice? Sounds like a real lapse of journalist ethics.
ReplyDelete9:22 PM: So what of the information centers that were supposed to emphasize digital over print?
ReplyDeleteThey didn't, and they don't. The problematic issue is largely one of cultural change and lack of enough expertise. There are a lot of advantages that digital has over print -- reach, distribution, immediacy -- but there are some weaknesses as well, such as the time involved in putting together multimedia packages; the tools are clunky and the number of people who can use them are few (and can make more money elsewhere). In that regard, digital cannot react to large breaking events with the same speed as the newsroom. Put together a Flash presentation on how Flight 1549 landed in the Hudson? That won't happen in a day -- maybe a week if you're good.
The tools need improvement, the newsroom needs more expertise and we all need better compensation.
Actually, Jim, you should do a post about the reduction in debt at Gannett over the last year. That's the heroic story of what kept this company out of bankruptcy. Like most heroic stories, there are a lot of dead bodies lying around at the end.
ReplyDeleteRe "the tools need improvement".
ReplyDeleteWell, my observation of most "regional resources" movement of Gannett over the last year is that, generally, it sucks so far.
That's not to say it won't get better over time. But up to now, from my limited perspective of someone who has an "in" (but is not a Gannett employee, tho "spouse" is) at a major Gannett site that is in fact designated as a "regional resource" on more than one functional area, and is a customer of other so-called "regional or functional resources" on other functional areas, that's my considered non-axe-grinding opinion.
Early days, yes. But from what I can see from my perpsective there is a s**t-ton more lip service than reality in providing actually useful work in meaningful and timely manner from those regional-or-functional resources.
I'm not saying overworked staff aren't doing the best they can. They are. But it's just not there yet in a way that would get you to singing Kumbaya from what I can see.
Gannett's digital strategy is in a shambles. In addition to the revenue declines you point out, there are still two empires out in Gannettland -- one print, and the other digital. If you don't believe this, look around your newsroom and see the cliques. It's time for a new strategy. I think we should encourage the separation between digital and print. They are two different technologies. Print may well be dying, so separating the two could accelerate that process. I happen to believe that won't happen. I go to the store regularly and see people snapping up the print product. They don't know anything about the digital issues. Separating also allows digital to flourish on its own, with its own product. Kill the information centers and bring back the newsrooms.
ReplyDelete