Friday, August 22, 2008

Breaking: Gannett says July's revenue fell 12.3%; no change in downward trend; USAT improves

[Downer: July's GCI revenue compared to earlier periods]

Updated at 5:49 p.m. ET. Gannett just reported that last month's operating revenues tumbled 12.3% from July 2007, as classified advertising losses accelerated. The revenue results were slightly worse than June's 12.1% drop. Yet, they're in line with CEO Craig Dubow's warning in the second-quarter earnings report.

Flagship USA Today bounced back: Its advertising revenue fell just 5.5% from July 2007, a big improvement over this June's year-over-year 27% plunge.

Gannett's classified advertising trend -- especially real estate -- only got worse last month, the new monthly statistical report shows:
  • Overall classified: down 25.2%. (June's was down 21.6%.)
  • Real estate: down 38%. (June's was down 34%.)
Investor reaction? Z-z-z-z-z-z. Gannett shares closed at $17.67, up 12 cents, amid a broad stock market rally, Google Finance says.

Gannett Blog Reax
From the comments section, below:
  • "Don't look for improvement in August. Expected Olympics ads have not showed up, and I hear contracts for back-to-school have been miserable."
  • "Let's be clear about these results. Revenues are down, and have been declining, but Gannett is NOT losing money. All, or nearly all, properties are profitable. . . . The profit margins of at least three papers -- Palm Springs, Guam and Green Bay -- continue to be near, at or above 40%."
Please post your reactions in the comments section, below. To e-mail confidentially, write gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green sidebar, upper right.


  1. Just shows how much of a drag the community newspapers have been on GCI.

  2. So, yeah, let's just keep cutting our way to prosperity. It's working so well!

    Thanks, Information Center! Thanks, DIG!

  3. So is there a list paper by paper of what each brought in revenue wise? I'd be curious to see it broken down... I don't believe all the papers are losing that much.... And I believe some are losing MORE than that...

  4. Advocacy is an advertising category? What's that mean? What does an advocate ad look like?

  5. If the stock continues to hover below $20, does anyone think a broadcast spin-off is inevitable? I keep hearing this on he rumor mill but can't imagine it to be true. The newspapers by themselves are worthless. I bet they couldn't sell them for scrap.

  6. Don't look for an improvement in August. Expected Olympics ads have not showed up, and I hear contracts for back-to-school have been miserable.

  7. I'd be willing to bet the papers in Florida, Detroit, and Arizona are taking in the shorts for different (yet similar) reasons.

  8. How is Google performing in comparison, considering everyone considers Google the newspaper killer?


    Trading up on news of a deal with Verizon, that whole wireless thing that Gannett keeps ignoring.

  10. Let's be clear about these results.

    Revenues are down, and have been declining, but Gannett is NOT losing money. All, or nearly all, properties are profitable. They're just not making as much money as they have been in the past. These revenue figures indicate revenues are down to previous months / quarters / years for a similar time frame.

    I'm not trying to sugar coat the downward trend because it doesn't instill confidence.

    But you can be certain Gannett is still making money - millions to billions (depending on the time frame reported).

    The profit margins of at least three papers - Palm Springs, Guam and Green Bay - continue to be near, at or above 40%.

    There is a report shared monthly with publishers (and often operating committee members) outlining the performance of each newspaper in Gannett to plan (budget), to last year and profit margin. (I'm guessing a similar spreadsheet exists for broadcast.) Properties are ranked according to performance, no matter the size.

    Even though Gannett is a publicly traded company, it does not break down performance by individual newspaper (except USA Today) or TV station, but only reports results by division.

    Some smaller properties MIGHT be breaking even or losing money, but they would be the exception rather than the rule.

    What is hurting Gannett in Q3 is that Olympic and political advertising revenues aren't meeting budgeted expectations. Why? Because campaigns are using the internet more efficiently (and at less cost), NBC and its affiliates owned the Olympic coverage in the U.S., and replays of events were almost immediately available (upon completion) on YouTube ... not USA or or

    Still, the average profit margin for Gannett's community newspapers is probably between 19% and 23%. Except for the oil companies, there probably isnt' an industry out there that wouldn't take those margins.

    Just ask the airlines (save Southwest).

  11. Here's the report from Yahoo Finance:

    Once again, "Gannett did not say how much revenue its online properties generated."

    That's not a good sign. Gannett wouldn't hesitate to share the number if it was good.

    Other key indicators:
    -- Publishing ad revenue fell 16.7 percent.
    -- Classified ads slumped 25.2 percent.

  12. Hey honey, my diet is going great, I've lost eight pounds.

    Wow, eight pounds in just a week.

    Yes dear, and cutting off my right arm did not hurt at all.

  13. I think Anon 11:23 actually understates how profitable the Gannett is in margin terms.
    If you use figures published by Fortune magazine, the margin in 2007 was 14.11 percent or about the 63rd best of the Fortune 500. Gannett was ranked 332 in terms of sales.
    The margins are dropping pretty fast, though. They were 16.24 percent in 2005 and 17.36 in 1999.
    Still these are very high numbers.
    If you look at the numbers from the most recent quarter, Gannett's margin was 13.5 percent, while that poster-child for excess profits, Exxon-Mobil was 8.7 percent.
    Think about that as you or your friends are getting laid off. The company is making money at a faster rate than Exxon-Mobil, even though oil was running close to $135 a barrel during most of the quarter.
    Those margins can only be generated by many community papers that approach the 40 percent mark.

  14. your homework. While Oil Companies have huge profits in pure dollars they only have margins in the single digits. Yes, newspapers even in this terrible time are profitable...with the possible expection of some of the largest papers on both coasts.

  15. How much is the rent on Guam and do they have any job openings?

  16. I'm a former GCI employee who served on four different operating committees.
    -- There indeed used to be a monthly multi-page report, available to some -- but perhaps not all -- publishers that ranked all GCI newspapers by performance -- percentage to plan; gross margin; etc. I do not know if that report either exists or is circulated. One of the earlier comments mentioned that there was.
    -- No newspapers during my employment with the company, even during the down times, were actually losing money. What usually got a newspaper at the bottom of the list was poor performance to plan. Not actual monetary loss. I can't speak to what's happening now. Any reasonable person has to believe that there are some newspapers (especially those forced to incorporate USAT printing into their budgets) that are actually losing dollars.
    -- The smaller papers were often -- as measured by percentage -- the most profitable. Some operations -- usually in Sun Belt markets -- were scary in their ability to generate revenue.
    -- But losses within the Metro division papers made the profits of all the smaller (and sometimes even the medium size ) papers look like interesting parlor tricks.
    -- Owning newspapers remains a profitable business. At the same time I'm typing this I'm speaking with an owner of a small community newspaper interested in selling. Even this mismanaged little newspaper in question is cash flowing nearly 11%.
    -- Working for a newspaper or owning stock in one will continue to be a harrowing ride.

  17. Interesting insights, 1:28 -- thanks.

  18. 1:28 pm: One thing I would add is that in times when the economy slumps, newspaper production costs -- payroll, newsprint and distribution costs -- really shows. In the past, newspaper companies have been able to hunker down and breeze through recessions by keeping expenses down and perhaps even imposing a temporary hiring freeze. But this time, the economic downturn is coming in the wake of losses of both revenue and circulation that happened when the economy was good. That really has made production costs stand out, especially as both distribution costs (gasoline) and production costs (newsprint increases) are going up. There is nothing left to cut, except payroll.

  19. Look at the trajectory of the total revenue column, and it is steadily down every month January to July. If it keeps on at that path, there obviously will be even more layoffs or else there can be no more GCI.

  20. In a normal recession both energy and newsprint costs would nosedive saving the big G ten's of millions of dollars. Just the opposite has occurred this time.

    Other than Detroit and Little Rock the only Gannett newspapers to lose money were Westchester during the Wall Street downturns and the smaller sites that had to modernize to print USAT. The depreciation burden was so much for these papers that some would show a paper loss. On the flip side they still produced a great cash flow.

    One question I haven't seen answered. What were the tax implications of the the write down of the assets earlier in the year. If that writedown is tax deductable it will yield huge tax savings. Incrementally Gannett is near the 40% bracket so if the writedown is tax deductable the Fed's picked up nearly 40% of the cost. Jim a good question for Tara and Corporate Tax.

    I've noticed that lately the word verification to post has gotten longer. It's up to 8 characters today. Is this because of the increased blog traffic? Sounds like a story.

  21. Wow, that means I worked at two of the three Gannett papers to lose money, including the only one that was shuttered. They must have been happy to see me go.

  22. No, as I understand it, the write down of assets was an accountancy issue to try and correctly price the value of Gannett properties. It is required by accountancy rules for publicly-held stocks to prevent Enron-like overestimations of values.

  23. USAT looks pretty good considering the incredilbly down ad market in general.
    And when compared with other newpapers and pubishing companies, these latest numbers are pretty good.

  24. I don't believe the USA Today column. How could they go from down 26.5 percent in June, to down 5.5 percent in July? I think some of the figures are being shifted around here. If the community papers have seen a steadily increasing decline in revenues, USAT should also. I have been thinking about this, and I really don't recall seeing any remarkable increase in ad pages last month, and the earlier buyouts were registered earlier in the year.

  25. USA Today does not suffer from the mass erosion of classified ads to the web at the same rate as the local papers.

  26. For seven months of the year to date, total revenue fell 9.7 percent to $3.95 billion.

    Gannett is still making a lot of money. Given the pull back in ad spending by retailers with the down economy, it seems the declines are not that out of line with the market.


  27. I work at one of GCI's "struggling" properties in the community newspaper classification. We reported a net profit of around 30% in 2007.

    We just laid people off.

    We're panicking over what management says is a catastrophic business collapse.

    Maybe we'll drop to 29% this year.

  28. I knew that any discussion of profits would eventually bring an Exxon comment. We need to understand that newspapers are not oil companies or any other manufacturing business. Oil company revenues continue through thick and thin because people need their product 24/7/365. Newspaper profits fluctuate wildly, from a license to print money in good times, to almost break even in bad times. Thus to compare Gannett profit levels with Exxon is apples and oranges.
    Gannett is still a healthy company, but as Jim's chart shows, has some serious problems. He should have posted the 2007 figures, because Gannett's problems and those of American newspaper companies, began then when revenues began to decline sharply. There was no economic recession in 2007 but, arguably, there is one here now in 2008 and things are getting worse. Yes there are very profitable papers still that Gannett owns, but they are small and cannot produce enough money with their relatively small circulation to offset the slide in revenues at the others.

  29. So excuse me for my economic ignorance, but if Gannett were to lower their profit margins would that mean those BIG salaries and bonuses in Va. would be either frozen or reduced? If so, you can bet they will continue to slash payroll with more lay offs to come.

  30. The suits can forget about their bonuses with this debacle. And yes, I expect further layoffs and cost-cutting of the payroll in coming months. I do think they will increase the ad sales force, but the information centers are really going to be punished. Bet they also look at uncoventional cost-cutting measures, such as contracting out printing operations and eliminating ad-light Monday papers.

  31. Shutting down Mondays would be a death rattle.

  32. Sometimes I like to argue with co-workers that our little newspaper would be better off without gannett. I often wonder if that is really true.

    Anyone have any idea what 'benefits' a local newspaper would be getting by being a part of the slowly sinking gannett?

    cheap content? reduced manufacturing costs? or are the little papers just paying dues to be part of a club thats destroying itself?

    I may be naive, but my questions are real.

  33. Some great info and insight here -- thank you all

  34. several issues resulted in longterm owners selling their papers to Gannett. Infighting among family members, estate tax issues and an inability to fund modernization by accessing credit markets. In some cases the families didn't want to take on the massive debt so they sold. The major advantages of being with Gannett is access to capital interest free. Consumables such as newsprint, Ink, plates cost much less because of Gannetts volume's and clout (or bludgeoning of vendors. There is lots of technical support which in todays environment is not easy to come by.Manufacturing costs would be higher in almost every scenario as would interest costs.
    Major diadvantages are loss of autonomy, finance driving every decision and local community alienation. In the past prior to the recent changes most smaller papers that Gannett purchased had a vstly inferior pension and disability plans.. if any and paid less. This was not necessarily the case with the larger papers such as Central Newspapers, Loisville and Des Moines.

  35. Why won't Gannett give online revenue figures?

    Just knowing how many people viewed pages doesn't say much, does it? Wouldn't that be like a merchant reporting how many window shoppers it had, but leaving out sales figures?

  36. In the past, the advantage of a chain was that it could help absorb the regional recessions. Newspapers become very costly in recessions because of all the labor costs, but chains can shift money from prosperous papers to those in temporary trouble. This recession is unusual because it has hit two huge profit-generating areas __ Calif. and Fla. -- together, and there is clearly a fundamental shift underway of ads from print to the Internet.

  37. Both chains and independent papers are suffering from the same problem: the failure to get younger readers. They were so greedy in the good times that they neglected outreach efforts to ensure there would be a new generation of newspaper readers. It's too late now, as you see kids with Ipods and laptops finding their own ways of getting information newspapers used to provide. Less than 16 percent of America's population reads newspapers, and the number is going down. Whether a Gannett paper or not a Gannett paper makes no difference because the suits were so busy pocketing their cash they didn't care enough to look to the future of the industry that provided them the money. Classic Golden goose story.

  38. My observation is that once it gets to the third or fourth generation after a newspaper founder, the family loses interest in newspapering. The founder's son wants to continue his father's legacy, and his son is also brought up in the business, but by the fourth, interest really wanes. There are also by that time a bunch of second and third cousins who inherited shares in the newspaper, but are only interested in the dividend checks. When profits wane and dividends are cut, they scream bloody murder because they are living on those dividend checks. To keep them quiet, the newspaper puts off buying new presses to keep up with technological advances and makes other cuts, and the newspaper slowly declines. Eventually so does revenue, and the cousins demand the paper be sold. They then put their money in Treasury bills to get a reliable paycheck.

  39. @9:49 am asked: "Why won't Gannett give online revenue figures? Just knowing how many people viewed pages doesn't say much, does it? Wouldn't that be like a merchant reporting how many window shoppers it had, but leaving out sales figures?"

    Earlier this spring, I asked company spokeswoman Tara Connell a related question: Why did the company stop publishing U.S.newspaper online growth rates? Her response: "We don't publish every number." See the full post at:

  40. Yes, profits in Guam, Palm Springs and Green Bay are all still "about" 40%. A year ago, they were at 50%. The good ship Lollipop isn't listing, it is sinking.
    Stay with the ship, Cap'n Craig.

  41. I got a grant from the federal government for $12,000 in financial aid, see how you can get one also at


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