Gannett has ordered furloughs on a widespread basis six times since the first quarter of 2009. The last big one, for USA Today and Gannett Publishing Services, was in April 2012. For the company's biggest operating division, U.S. community newspapers and its 18,000 employees, the last furlough was in the first quarter of 2012.
Since then, GCI's finances have grown more stable, and the company's stock price has climbed substantially. In 2012, companywide revenue grew on an annual basis for the first time since 2006. That was powered by the broadcasting division's record year selling advertising amid the summer Olympics and the presidential election. And it also reflected the average 25% increase in newspaper subscription rates with the introduction of paywalls across the U.S. newspaper division.
GCI shares soared more than 70% since April 4, 2012, to yesterday's close of $25.96. Shares have traded even higher over the past year, reaching $26.75 on June 13 after Corporate announced plans to buy TV company Belo for $1.5 billion in cash plus assumption of $715 million in debt.
But Corporate has made clear that, in the quarter that started less than two weeks ago, and extending at least into the fourth quarter, GCI will struggle to keep revenues growing higher. The Olympics, which GCI carries on its 12 NBC affiliates, occurs only every two years. And the presidential election only every four.
Meanwhile, the 25% rate hike was a one-time event. Although readers will continue to pay those higher subscriptions, any future increases will be relatively small. The Belo deal isn't expected to close before the end of this year, so its impact on revenue and earnings likely won't be felt until sometime next year. And as blogger Alan Mutter wrote yesterday, TV may be just one step behind newspapers in losing advertisers.
Print ads' steady decline
That leaves two other sources of revenue to pick up the slack: Digital Services and the USA Today Sports Media Group, each of which is supposed to produce more than $300 million in additional revenue -- but by 2015.
The problem, as aways, is the company's single-biggest revenue source: advertising in newspapers and other print publications. In the first quarter, those ads totaled $526.5 million, or 43% of the $1.2 billion in overall revenue. That was down 4.5% from the first quarter of 2012. (Changes in print ad revenue since Q1 2012.)
As near as I can tell, print advertising peaked at $1.4 billion in the fourth quarter of 2006, when it was 65% of overall revenue. It's been sliding since then.
Now, we come to the current quarter, and prospects for another round of unpaid one-week furloughs for U.S. Community Publishing's 81 coast-to-coast dailies, from Elmira, N.Y., to Palm Springs, Calif. A reader in a position to know tells me publishers could be given new cost-cutting targets as early as this week.
Any such cuts, which also could include eliminating open positions or more, would arrive in time for the second-quarter earnings release, set for July 22, when CEO Gracia Martore and other top executives brief Wall Street media analysts.
A 2% annual pay cut
In years past, when GCI had more employees, companywide furlough savings ran as high as $25 million in a single quarter, according to regulatory filings. On a per-employee basis, an unpaid week off represents a nearly 2% reduction in annual pay.
Any new round of furloughs would come as an unpleasant reminder that GCI has not completely righted itself as the overall newspaper industry stumbles through its transition to digital.
Since then, GCI's finances have grown more stable, and the company's stock price has climbed substantially. In 2012, companywide revenue grew on an annual basis for the first time since 2006. That was powered by the broadcasting division's record year selling advertising amid the summer Olympics and the presidential election. And it also reflected the average 25% increase in newspaper subscription rates with the introduction of paywalls across the U.S. newspaper division.
GCI shares soared more than 70% since April 4, 2012, to yesterday's close of $25.96. Shares have traded even higher over the past year, reaching $26.75 on June 13 after Corporate announced plans to buy TV company Belo for $1.5 billion in cash plus assumption of $715 million in debt.
But Corporate has made clear that, in the quarter that started less than two weeks ago, and extending at least into the fourth quarter, GCI will struggle to keep revenues growing higher. The Olympics, which GCI carries on its 12 NBC affiliates, occurs only every two years. And the presidential election only every four.
Meanwhile, the 25% rate hike was a one-time event. Although readers will continue to pay those higher subscriptions, any future increases will be relatively small. The Belo deal isn't expected to close before the end of this year, so its impact on revenue and earnings likely won't be felt until sometime next year. And as blogger Alan Mutter wrote yesterday, TV may be just one step behind newspapers in losing advertisers.
Print ads' steady decline
That leaves two other sources of revenue to pick up the slack: Digital Services and the USA Today Sports Media Group, each of which is supposed to produce more than $300 million in additional revenue -- but by 2015.
The problem, as aways, is the company's single-biggest revenue source: advertising in newspapers and other print publications. In the first quarter, those ads totaled $526.5 million, or 43% of the $1.2 billion in overall revenue. That was down 4.5% from the first quarter of 2012. (Changes in print ad revenue since Q1 2012.)
As near as I can tell, print advertising peaked at $1.4 billion in the fourth quarter of 2006, when it was 65% of overall revenue. It's been sliding since then.
Now, we come to the current quarter, and prospects for another round of unpaid one-week furloughs for U.S. Community Publishing's 81 coast-to-coast dailies, from Elmira, N.Y., to Palm Springs, Calif. A reader in a position to know tells me publishers could be given new cost-cutting targets as early as this week.
Any such cuts, which also could include eliminating open positions or more, would arrive in time for the second-quarter earnings release, set for July 22, when CEO Gracia Martore and other top executives brief Wall Street media analysts.
A 2% annual pay cut
In years past, when GCI had more employees, companywide furlough savings ran as high as $25 million in a single quarter, according to regulatory filings. On a per-employee basis, an unpaid week off represents a nearly 2% reduction in annual pay.
Any new round of furloughs would come as an unpleasant reminder that GCI has not completely righted itself as the overall newspaper industry stumbles through its transition to digital.
$300M, not $300, Jim. You need a proofreader as much as the Gannett papers (but they can afford one)!
ReplyDeleteThank you; I've now fixed that. And you're 100% right about proofreaders.
DeleteI just got a $75 dividend check from Gannett. If they're still paying dividends and institute another round of furloughs, shame on them. Of course, the Gannett board apparently is incapable to feel shame or remorse for anything.
ReplyDeleteI think it's pretty much a given at this point that Gannett will continue furloughs and layoffs into the foreseeable future. It might ebb and flow for the next several years, but I see nothing that indicates vast economic improvements for this company. In fact, I believe Gannett will have a hard time attracting the kind of top talent that will be needed to remain a top news media player. Because of many of its heavy-handed actions with employees over the last several years, the word is pretty much out on the street that even USA Today is no longer a good or safe place to work. In time, that tarnished reputation will raise red flags for job-seekers who have employment options. Why choose a company that decimated lives of thousands of loyal employees when you can work somewhere else, where there might be a little less blood on the floor?
ReplyDeleteGannett has a rotten core, and it was fully exposed when times got hard. Instead of protecting employees and weathering the storm through other means, Gannett chose the easy route back to relative financial stability. It slashed and burned its newsrooms and other departments. Professionals in the field won't forget that.
Where is the like button? Well said.
Delete2:28 tens of thousands of companies layed employes off over the last five years. The economic systems of the US virtually almost imploded. Yet you single Gannett out as if it acted in a vacuum. It sucks that anyone list their job here or anywhere else but don't try to reinvent history. The whole half decade stinks. He'll, even Jin's revenues have plummeted.
DeleteYou could be working for Gatehouse whose core is rotten way past anything Gannett's is
DeleteI think 2:28 put it well. Everybody knows the economy has been down the past five years. Very few companies as profitable as Gannett has been over the last five years have conducted the lay offs in the numbers Gannett has. If they have can anyone name them?
DeleteI agree with 2:28. The problemmhas been compounded by the poor hiring choices made by current management, which lacks the basic ability to judge talent, make sound news decisions or stay ahead of even second-rate competition.
Delete10:54. Not sure why you feel the need to defend Gannett in any manner, but this is a Gannett blog, so it would seem logical that 2:28 focused their post on Gannett.
DeleteI will also disagree with your assumption that Gannett wasn't any worse than any other company during the recession.
The facts are that some companies did everything possible to not lay people off, particularly employees who at a certain age would have a very difficult time finding work. That's called compassion. And being compassionate isn't just a good human trait, it's good business. People want to work for fair-minded companies. When hiring resumes, good job candidates will be attracted to good companies.
What Gannett did during the recession was ruthless and over-the-top. The company took advantage of a bad situation and made it worse for thousands of employees.
Maybe there were companies that were worse, but with Gannett's long history of unethical behavior and bad employee relations, I think you'd be hard pressed to find a company, that was still profitable, that laid off more people than Gannett. Even the flagship USA Today was pretty damn heavy-handed in the way it reduced payroll.
I agree with 2:28 that Gannett is rotten at the core. Always has been. And I go back to the early 80s with the company, and saw things then that would make your skin crawl.
This chain has a dark history. I would suggest that anyone who doubts how ruthless Gannett is to read the book "The Chain Gang." It only gets into one small aspect of the ugliness of Gannett, but it might open some naive eyes to what a company like this is really about.
No public corporation gives two shits about employees or "customers" that purchase their products or services. Their only focus is the true customer: Wall Street.
DeleteDo you know something for a fact, Jim, or is this all speculation?
ReplyDeleteIt is all speculation. Toss enough against the wall and if anything sticks Jim will beat his chest and say "I am the master." Gone are the days of real information. Why didn't he let this blog RIP? Now it is just going through a slow, agonizing death just like newspapers.
DeleteIt's not speculation when it's true. In any case, if my source is wrong or the situation changes, I'll say so.
DeleteAha! Nice use of doublespeak. Of course it isn't speculation when it is true but right now yo don't know if it is true. In fact, you state "...if my source is wrong..."
DeleteWhat the hell, it can't be both and right now you have admited your source could be wrong. That makes your statement, by definition, speculation.
You only know if it is true after the fact when it becomes reality. Of course, you also tossed in the old "if the situation changes" BS.
Sign.
This comment has been removed by a blog administrator.
ReplyDeleteIf anyone thinks USAT Sports Media Group is going to be our savior, then I have some property in Central Park I'd like to show you.
ReplyDeleteDear 12:16: Ask the people at the APP about compassion in light of how many staffers, especially very competent long time employees, got savaged in their reviews. The bad grades were handed out under the directive on one particular editor who ordered the people underneath him to "make it so" and trash their staffs. (unless you among the favored new hires.) Meanwhile these are the same people who implemented a content evolution plan which corporate initially kicked back to them for a re-write and which has failed to generated the desired result of more page views. APP'ers were warned that furloughs could be on the horizon if summer ad revenue was off because of superstorm Sandy- the jury is still out on that one. But the people in glass offices are literally throwing anything they can think of as far as content goes, against the wall to see if it will stick. Some high placed, well compensated heads should roll for this incompetance, but those people will likely get fat raises since the staff isn't. Because, this is Gannett, after all, where upper management rules-badly.
ReplyDelete11:36 It's true. End of July is the targeted date for action.
ReplyDeleteEnd of July for Q3 furloughs? Or for layoffs? Is it possible to squeeze furloughs into the two remaining months of Q3 if they wait that long?
DeleteAt my property, we are not replacing employees who resign. I think something is n the air and its not a furlough.
ReplyDeleteThe furloughs and layoffs started occured in Va last week at Army Times
ReplyDeleteThere will be layoffs happening July 29th at a paper in the central region. It was just announced in a leadership meeting this week. It includes freezing of open position, but also some staff being laid off.
ReplyDeleteWill this include GPS employees? They already struggle to get out the paper as it is now. they should have kept the single copy drivers.
ReplyDelete