CJR: 'Gannett’s print-focused paywalls flounder'

"The issue is one that will particularly affect newspapers like Gannett’s that have leaned on large print price increases as part of their paywall strategies," writes Ryan Chittum in a new Columbia Journalism Review story. "For lower-quality publishers like Gannett, which has squeezed profits out of its newspapers for decades, the paywall money has been in print, not digital."

Earlier: Fourth-quarter report hints at looming paywall problem.

Edmonds: Gannett's fourth-quarter earnings report hints at looming problem with newspaper paywalls

After yesterday's fourth-quarter and full-year financial report, the Poynter Institute's Rick Edmonds notes that circulation revenue was up for the year (1.1%) but down for the fourth quarter (off 1.6%) compared to the same period in 2012.

Martore

CEO Gracia Martore explained in a conference call to analysts that the company has now “cycled through” the lucrative introduction of paywalls together with bundled print plus digital subscriptions at its 80 community newspapers, Edmonds says, adding:

"This raises the concern that capturing revenue from new digital subscribers and pairing 'all access' print/digital bundles with a big price increase could be a one-time revenue event. Gannett not only failed to continue gaining circulation revenue at the end of the last year, it lost a little, as these subscriptions came up for renewal."

To Edmonds analysis, I'll add the following from a post in December where I said Gannett's overall digital strategy was in danger of hitting a wall on growth:

A forecast boom in digital-only subscriptions aimed at a key audience, younger readers, has become a stunning bust. In the third-quarter earnings teleconference with Wall Street analysts, Martore conceded Gannett had sold fewer than 100,000 nationwide vs. a forecast 250,000 to 300,000 by year's end. If sales remain tepid, the company will be saddled with three million aging subscribers and no clear path to replacing them.

In yesterday's conference call, Martore didn't mention digital subscription goals -- and analysts didn't bother asking, likely because they knew the worrisome answer.

GCI extending Butterfly Project to 35 newspapers

As expected, the initiative to add dozens of editorial pages plus a local edition of USA Today will be expanded to another 31 dailies vs. the current four, according to a Gannett statement this morning. The rollout will take place during the first quarter. Corporate didn't identify the 31 titles.

Further down the road, GCI plans to extend the program to all of its 81 local newspaper markets, according to The New York Times.

Asked whether subscription prices would rise for readers getting the extra USAT content, Corporate's chief spokesman, Jeremy Gaines, told the NYT: “As we introduce enhanced products, consumers tell us they are willing to pay for the added value we’re bringing them.” (Translation: yes.)

The 35 papers that will be part of the Butterfly initiative have a combined circulation of more than 1.5 million on weekdays and more than 2.5 million on Sunday, according to USAT. That shows the 35 were chosen according to a metric other than circulation, such as annual revenue, because the highest-circulating 35 have combined volume of 2.4 million weekdays and 4.3 million Sundays.

This morning's announcement follows a relatively short test of the Butterfly Project since early October at four dailies in Fort Myers, Fla.; Indianapolis; Rochester, N.Y., and Appleton, Wisc. The expansion is designed to increase advertising and circulation revenue at the local level, plus ad sales and circulation volume at USAT.

Related: Corporate's press release highlighting this morning's UBS media conference.

Digital Divide | Along a journey to transformation, an aging publisher stumbles at a critical crossroads

Gannett's website markets newspapers and other subsidiaries as consumer brands.

In late October, when CEO Gracia Martore briefed Wall Street stock analysts on Gannett's latest quarterly report, she drew a bright line under another rise in digital revenue -- fresh evidence, she said, the company was successfully weaning itself from its legacy newspaper business.

This wasn't the first time Martore had swung the spotlight toward digital. Three months before, she said it had grown to 30% of all company-wide revenue, adding: "We are accelerating our transformation into the 'New Gannett' every day."

In fact, the nation's top newspaper publisher started aggressively retailing this new image last winter during the advertising industry's "upfront" market, where traditional print media jockeyed with TV networks for ad dollars. The chief of national sales, Mary Murcko, told the trade publication AdAge: "We are not the media company -- the 100-year-old newspaper company -- people still think we are."

This was a Madison Avenue milestone, the debut of a made-over publisher long dismissed as a relic sidelined by Internet and mobile technologies. Now it was a "media and marketing solutions company" pitching a portfolio of consumer brands. Gannett was finally running with the big dogs.

But behind the scenes, hundreds of pages of newly examined company documents tell a different story, one sharply at odds with Gannett's energetic public relations campaign to burnish its old school profile.

Although digital revenue did rise last quarter, regulatory documents show the growth rate has been retreating all year. It was 29% in the first quarter, 20% in the second, and 12% in the third. It will narrow even more in the current quarter, Gannett warned investors Nov. 6 in a U.S. Securities and Exchange Commission filing.

After jumping when Gannett started launching 78 newspaper paywalls two years ago, digital’s contribution rate to company-wide results only clung to 30% last quarter because overall revenue fell, SEC documents show.

Here's why: The paywalls are now running on fumes. They brought double-digit subscription price hikes, forcing readers to pay for digital access whether they wanted it or not. That ginned up untold millions in new digital revenue. But those more costly subscriptions are now fully in force; without another across-the-board price increase, paywall revenue growth could grind to a halt as soon as this quarter. No such increase is in the works.

Martore

A forecast boom in digital-only subscriptions aimed at a key audience, younger readers, has become a stunning bust. In the Oct. 21 quarterly earnings teleconference with Wall Street analysts, Martore conceded Gannett had sold fewer than 100,000 nationwide vs. a forecast 250,000 to 300,000 by year's end. If sales remain tepid, the company will be saddled with three million aging subscribers and no clear path to replacing them.

Revenue from Gannett's freestanding digital businesses -- chiefly, the big employment site CareerBuilder -- has been growing at only low single-digit rates after peaking at 13% in 2011. Year to date, it's up just 4% from a year ago, SEC documents show.

The digital squeeze is all the more worrisome because it comes amid an accelerating decline in the company's still-biggest source of revenue, newspaper advertising, which fell 6% in the last quarter. To be sure, revenue growth pulls back as any company's financial base fattens. Nonetheless, a plateau this soon raises concerns about Gannett's drive to become a digital powerhouse amid bruising competition from more fleet-footed publishers like Facebook and Twitter.

It also underscores the importance of Gannett’s takeover of Dallas TV company Belo. The $2.2 billion tie-up, which could close any time now, is crucial to boosting revenue and earnings -- and holding impatient investors at bay. Indeed, analysts are already asking whether Gannett should spin off its fading newspapers into a separate company after Belo is absorbed, essentially sending them to the corporate equivalent of a nursing home. That question may easily resurface Wednesday when Martore's team meets with analysts at an industry conference in New York.

Frank Gannett

How Gannett arrived at this crossroads is a story about a business Frank Gannett founded in 1906 with a single newspaper in Elmira, N.Y., battling for survival in a 21st century economy. The outcome, closely watched by other publishers, is of keen interest to a global constituency: 30,000 employees, 8,000 shareholders, and millions of others served by Gannett's 100 U.S. and U.K. dailies, 23 TV stations and more than 700 other media businesses.

The story is also about an entrenched board of directors, the opportunity they missed at a fateful moment, and two executives who led the company to a financial precipice -- only to pull it back before it tipped into oblivion.

Transforming vs. tweaking
There's little doubt Gannett has taken major strides toward its goal of becoming a more digital enterprise. Seven years ago, before digital got pushed to the fore, it was only 5% of annual revenue. Since then, it’s grown by $900 million, to last year's $1.3 billion. That came as the company reported its first annual increase in full-year revenue, $5.4 billion, since 2006.

Gannett has also reduced its reliance on newspapers; their advertising and circulation tumbled to 65% of all company-wide revenue last year vs. 83% in 2006.

The Belo takeover will almost double the number of TV stations to 43, transforming Gannett into a broadcasting company with a side business in newspapers. It will become the nation's fourth-largest owner of big network affiliates, with a bigger footprint in lucrative markets like Texas and the Pacific Northwest. Under the deal, which includes $1.5 billion in cash and assumption of $715 million in debt, broadcasting will eventually account for more than half of earnings, according to the company. Announced in June, the Belo purchase is a major reason Gannett's stock has surged during this year's second half.

From the depths of the recession, when shares fell below $2 as competitors went bust, Gannett is now trading in the mid-$20s; it closed Friday at $25.55. Year to date, it's up 42% vs. a much smaller 27% gain in the S&P 500 index. To be sure, shares were treading water all year before the Belo deal. And other publishers' stocks also have jumped during what's been a sizzling bull market.

The board of directors has boosted the dividend twice since slashing it 90% four years ago. The company has repaid billions in once-crippling debt. And Martore has pledged to return $1.3 billion to stockholders by 2015 through dividends and share repurchases.

But Gannett still faces enormous challenges.

The company remains heavily dependent on its most troubled division, newspapers. Their ad sales have fallen every year since 2006, with no end in sight. That includes digital advertising, too. Indeed, after nearly leveling off the end of 2012, losses have grown in percentage terms during each of the past three quarters.

Paton

Paywalls are on track to generate $100 million in new earnings. But that's fueled by the big subscription price increases in 2012 that aren't set to be repeated; Gannett says only that it's now selectively raising prices in some markets. The company's publishing partner in Detroit and elsewhere just announced similar paywall plans, but with little enthusiasm. "Let's be clear," John Paton, CEO of Digital First Media wrote last month. "Paid digital subscriptions are not a long-term strategy. They don't transform anything; they tweak. At best, they are a short-term tactic."

Although Gannett's TV stations contributed mightily to last year's year-over-year revenue increase, that stemmed from record political and summer Olympics ads on the core NBC affiliates. That's a revenue roller coaster only occurring every other year. Meanwhile, broadcasters are just steps behind newspapers in losing ads to rival publishers like Google and Tumblr, says media consultant Ken Doctor.

"Think about how much digital targeting could take away political broadcast money by 2016," he wrote when the Belo deal was announced. At best, "Gannett may have bought itself another three to five years of relative revenue stability."

In any case, it will be well into next year before Belo's operations are fully integrated. And it could then take as long as three years to achieve all the forecast savings by slashing overhead and negotiating more lucrative retransmission agreements to hit earnings targets, according to Gannett.

Digital weapons in Gannett's arsenal are in jeopardy, or are too new to make meaningful contributions.

USA Today's iPad app is still free.

The USA Today Sports Media Group underwent a shakeup when its founding president, Tom Beusse, resigned unexpectedly in October -- casting doubts on his promise to deliver more than $300 million in new revenue by 2015. USA Today, the company's most famous brand, has failed to attract a big enough audience willing to pay for digital access. Publisher Larry Kramer says only that paywalls are being studied.

Gannett is redesigning all its U.S. news websites and digital apps to boost readership and ads. But more than two years in, only USA Today and a handful of others have made the switch. That's despite a recent forecast they'd be installed in the top 35 markets by year's end. Indeed, at one point, Gannett said all 105 sites would be relaunched as soon as this past February.

The newly christened G/O Digital marketing services unit, which advises small businesses on using social media, is forecast to generate up to $350 million in new sales, but also not until 2015. Revenue there grew 90% in the second quarter and a smaller 70% in the third. Martore has declined to divulge dollar amounts when pressed by analysts.

To be certain, Martore has made no secret of the fact Gannett's strategy will produce uneven results. "It was never meant to be a quick or immediate fix," she said in July. "Our transformation plan is a complex and multifaceted process, and we do not expect linear growth each quarter."

Gannett's corporate communications department did not respond to my questions for this story.

Barbarians at the gate
Gannett's digital push began in earnest in 2005 when the board of directors was casting about for a new CEO to replace Doug McCorkindale. An attorney with no journalism background, McCorkindale had been a company executive 34 years. He was only the fifth CEO since Gannett's start a century before, one in an uninterrupted line of insiders at the core of an insular corporate culture.

Barron's not long before had put McCorkindale on the cover under the headline, "Gannett's Good News." Wall Street's must-read weekly gushed over his empire building. "I'm potentially interested in buying anything in the news, information, advertising and entertainment businesses," he said. "If the Pearson group wanted to sell the Financial Times, I'd look at it very closely. Dow Jones & Co. is a great franchise, and if it ever came into play, I'd be very interested."

And why not? Gannett had the requisite war chest: Annual revenue was headed for a record $8 billion. Earnings would hit $4.90 a share, just three cents shy of a record. From coast to coast, in Guam, and the U.K., Gannett employed 53,000 at hundreds of daily and weekly publications, magazines and the several dozen TV stations.

Zuckerberg

But time was running out. Publishers and broadcasters were finally facing real competition from a rising number of new, nimble start-ups. Only one year before, 2004, Google launched its IPO, and Mark Zuckerberg started Facebook from a Harvard dorm room. YouTube was brand new.

In 2006, Twitter fired off the first tweet; its recent initial public offering values the microblogging service at $24.5 billion vs. Gannett's $5.8 billion. Instagram would not start until 2010, only to be bought by Facebook two years later for $1 billion cash. (And it had only 13 employees.)

Against that backdrop, Gannett's board might have ignored precedent and hired an outsider with real digital chops as the sixth chief executive. But under McCorkindale, who also chaired the board, directors played it safe. They promoted Craig Dubow, 50, from broadcasting president to lead a company still dominated by newspapers. A University of Texas graduate, Dubow had been an employee 24 years, starting at Denver station KUSA.

Years later, after Gannett's battered stock had plunged to less than five bucks a share, an anonymous Gannett Blog reader recalled Dubow's ascension memorably:

"A myopic board of directors placed a man, a great, very likable man, with a brilliant broadcasting career, but a man that had not spent a minute of his professional life inside a newspaper, in charge of a company with 100 or so newspapers at the worst time in the history for print newspapers. It is like putting at the helm of Titanic a great producer of wheat from Indiana, who had never been at sea before. He could sink the ship even without icebergs."

But McCorkindale, announcing Dubow's promotion in spring 2005, thought otherwise: "Craig has all the skills a 21st century media CEO should have, from highly successful management experience and broad-based knowledge of the digital world to the vision and energy of a top-notch leader."

Dubow got a big raise: His first year's pay soared to $2.4 million from $1 million as head of broadcasting, according to SEC documents. Martore, chief financial officer at the time, became Gannett's No. 2 executive. They would work in lockstep when the company entered free fall.

That Wednesday afternoon, Gannett's stock closed at $75 a share.

Charting digital's new course
Dubow immediately set a new strategic plan focused on digital. Newsrooms were now "Information Centers," reorganized to favor websites over print in a bid to ratchet up traffic and ad revenue. Digital ventures would be nurtured within, starting with a "moms" site aimed at female consumers.

Dubow in 2006

Dubow launched the company's first R&D lab and a Gannett Digital division with this goal, according to his 2006 annual letter to shareholders:

"To move Gannett from a newspaper and television company with affiliated websites to a digital powerhouse, capable of capturing a growing share of what pundits believe will be a pool of Internet advertising dollars in excess of $20 billion by 2008."

Of course, Dubow hadn't inherited an analog dinosaur. The company already had that $400 million in digital revenue -- 5% of all. He closed his letter with a prediction: "With our employees, our discipline and our plan, I am confident 2007 will be as transformative as 2006."

He was right, although surely not as he'd imagined.

Financial panic erupts
The housing bubble floating the economy burst. Gannett was badly exposed in four states among the first to be hit hard: Arizona, California, Florida and Nevada. Combined, they accounted for 40% of the decline in the company's U.S. ad revenue.

The real estate bust spawned a global credit crisis and the Great Recession, slamming Gannett. Complicating matters, the company had accumulated $3.8 billion in long-term debt just as the recession deepened, sapping revenue needed to service it. Some of the debt stemmed from $1.8 billion in Gannett stock buybacks during 2005-2008 at prices averaging $64 a share, according to SEC documents. Most of those buybacks -- $1.3 billion -- were in 2005 alone, the year Dubow took over as CEO and Martore entered her third year as chief financial officer. (Based on Friday's $25.55 closing price, those shares are now worth well less than half as much: $726 million, excluding dividend savings.)

Certainly, other publishers -- the New York Times Co., McClatchy, Lee Enterprises -- had made similar blunders during an industry-wide spending orgy.

In the recession years 2007-2009, Gannett's annual revenue plunged 25%, to $5.6 billion. Dubow and Martore, by now his heir apparent, responded with draconian cost-cutting to stave off creditors: Massive layoffs. Furloughs. Wage cuts. A frozen pension plan. A tattered dividend. With newspaper values collapsing everywhere, Gannett wrote off $8.4 billion worth of its assets in 2008 alone.

To be sure, management took big hits, too. Dubow's annual pay fell to $4.7 million in 2009 vs. $7.5 million in 2007. Still, infuriating employees, the board of directors continued awarding large cash bonuses. In SEC documents covering those years, they cited a long list of accomplishments that specifically included whacking 11,000 jobs.

Dubow doubled down on his digital plan, hiring Gannett's first chief digital officer, Chris Saridakis. Gannett expanded the Moms Like Me network, entertainment site Metromix, and other non-print ventures.

Zell

But perhaps most important, that fall Dubow wrested razor-thin majority control of employment classifieds site CareerBuilder from Tribune Co.'s pugnacious CEO, Sam Zell. Dubow had an edge over Zell because Tribune was headed for bankruptcy.

With the $135 million CareerBuilder deal, Gannett made a big change in financial reports to Wall Street. It created a digital-only line consolidating all revenues from CareerBuilder and other standalone businesses.

Significantly, CareerBuilder meant Martore could book 100% of its revenue even though Gannett barely owned 51%. The very next quarter, the digital-only line surged to $170 million from $24 million a year before. In the years that followed, the accounting shift helped Gannett sell itself as more of a digital company, and less about paper and ink.

But it wasn't enough.

Just as the recession eased, some of the most high-profile digital efforts started fraying. In spring 2010, Saridakis quit as chief digital officer after only two years, complaining about the Dubow team's indecisiveness. In a prescient parting letter, he ripped paywall plans. Dubow took a full year to replace him with David Payne.

Payne shuttered the once-celebrated Moms Like Me consumer network after concluding further investment would be a waste. Entertainment site Metromix slumped. Other digital ventures collapsed. The ad services subsidiary PointRoll started churning through CEOs, threatening its hugely profitable pipeline. More recently, an online coupons site, DealChicken, has been retrenching.

A new Crystal Palace chief
In October 2011, with revenue still falling and plagued by back problems, Dubow quit. Reviled for the slash-and-burn tactics that ultimately cost 20,000 jobs on his watch, he retired with an estimated $32 million payout. The board promoted Martore, then 60 years old, to become Gannett's first female CEO.

Like Dubow, she also was an insider, always working at the corporate offices now housed in a glittering complex outside Washington that employees call the Crystal Palace. Martore arrived in 1985 as assistant treasurer, later rising to chief financial officer in 2003. Her bio reads like a classic American bootstrapper story, according to The Washington Post.

"Granddaughter of Italian immigrants," wrote Post correspondent Paul Farhi. "Father died when she was a kid. Held down three jobs to get through Wellesley College. Learned a skill and worked like the dickens."

The much-hated "Blue Ball" sculpture.

Martore quickly sought a less imperious image before employees traumatized by waves of layoffs. She ended reserved parking for top executives. And she ditched an executive suite sculpture dubbed the Blue Ball of Death for its role in the infamous firing of three USA Today employees in 2001. A big Red Sox fan, Martore soon enlivened dry analyst meetings with sports metaphors and even jokes.

One of her first, most important jobs was shepherding eagerly awaited newspaper paywalls into 2012. With newspaper ad sales still falling, milking circulation was a must. Management forecast those $100 million in additional annual earnings by 2013 with the paywalls and new apps. With relatively little investment in hiring and marketing, it was like found money.

By then, Gannett had been testing paywalls for two years. Dubow had said early data showed "very interesting results," although he was never more specific. Based on how the company eventually marketed them, however, the pilot tests didn't uncover much demand among the company's bread-and-butter customers: predominantly older, less technology-driven print subscribers.

Gannett gave its paywalls an ungainly name, all-access content subscription model, and sold them in just two flavors: a print subscription including Web and app access for up to around $25 a month. Or digital-only for $12-$15 monthly. Using a "metered" approach, non-subscribers could read a limited number of articles for free before getting prompted to pay.

But the paywalls arrived with an unpleasant surprise: those double-digit subscription price hikes at renewal. Trying to spin the bad news, Gannett said the substantially higher prices included digital access, ignoring the obvious: until then, digital had always been free anyway.

'Free is better than not free'
The roll out revealed a sobering truth. The only way Gannett could really ramp up digital circulation revenue was to force it on three million legacy readers as an embedded cost in their print subscriptions. The vaunted paywalls boiled down to an old-fashioned price increase with a digital veneer. No surprise to Paton, the Digital First CEO, who wrote early this year: "Most paywalls in the U.S. are simply initiatives in subscription price hikes -- bundling digital with print with no clear path for sustainable growth."

Yesterday's Register, Newseum.

Whatever their future, Gannett's jacked-up subscriptions didn't sit well with readers at papers like The Des Moines Register.

In June 2012, they groused during an online chat when Publisher Laura Hollingsworth tried to justify them. "My team and I are prepared to stand by our value and ask our communities to invest in the best news and information and reporting that can be offered," she said.

One reader's quick comeback: "Actually, free is a better value than not free."

Then another: "While I support the paper's move to a paywall for digital content, I calculated my increase at over 40%. It seems that the paper is punishing its print subscribers. Will the Register offer a print-only subscription?"

Hollingsworth said no.

To be sure, paywalls created a second, especially attractive revenue stream: digital-only subscribers. They skewed younger, the very market advertisers covet because they spend lots on electronics, dining, entertainment and home furnishings. Plus, digital subscribers were nearly Gannett's only hope to replace those millions of aging print customers.

At first, Gannett relied almost entirely on word-of-mouth sales. Early results were promising. "The good news," said Bob Dickey, the newspaper division's president, "is our new digital subscribers index younger, male, married with children and more affluent than we first realized, filling an important audience gap for us."

Crawling out on a limb
At the start of this year, Gannett had sold 46,000 digital subscribers across 78 markets. Then in early February, Martore made a strategic mistake: She forecast 250,000 to 300,000 by the end of this year, once Gannett started spending a "not inconsequential" amount on promotion. To be sure, it was a modest goal, averaging fewer than 4,000 per market. Plus, the company already had that running start.

Martore said: "Our focus is to take on new digital-only subscribers, and that's where our focus is going to be in 2013."

The campaign has bombed. By the end of September, the company had netted only 80,000, after some upgraded to print -- leaving Gannett far short of the forecast. All but abandoning the year-end goal, Martore tried moving the goal posts to the number of print readers who had activated digital accounts included with their print subscriptions: 1.5 million, about half of all.

She has called them "paying digital subscribers," comparable to The New York Times' 730,000 digital-only subscriptions sold after erecting its paywall in 2011. Inexplicably, Martore calls that an "apples-to-apples" comparison. (The number of Times digital subscribers has yet to plateau, soaring 28% in this year's third quarter alone.)

Pivoting 180 degrees, Martore dismissed young digital subscribers as barely consequential to measuring paywall success. "Frankly," she told the stock analysts Oct. 21, "that's probably one of the least significant and important metrics that we have used."

But analyst Craig Huber of Huber Research Partners pressed her to confirm Gannett had sold so few. Martore's reply: "If you're just specifically looking at that one small metric, yes, that's exactly what I'm saying."

As these typically deferential meetings go, this was close to taking off the gloves. And it may not be the last time.

Pushing for Gannett's breakup
Wall Street has started nudging Martore to spin off the newspaper business from broadcasting post-Belo. This would create two publicly traded companies, freeing the more nimble TV business plus the CareerBuilder stake and other purely digital businesses from the sluggish publishing division. USA Today and the U.K. Newsquest division, with 17 dailies plus hundreds of weeklies, could be sold separately.

Current shareholders would get stock in the new standalone newspaper company, allowing them to better gauge the relative worth of one business over the other. (In the argot of Wall Street, it's called unlocking shareholder value.) In an alternate scenario, Gannett could sell the papers piecemeal, but that would be a more drawn-out process subject to the vagaries of regional and local markets. In any case, the newspapers, unmoored from the financial resources but also the bureaucracy of a larger enterprise, would need to provide for themselves.

This has been done before. Belo itself split newspapers and TV stations in 2008. News Corp. did the same last July with The Wall Street Journal and dozens of other papers. Tribune Co., also bulking up on TV, has similar plans for the Los Angeles Times and seven others.

Martore isn't sold on the idea. Gannett's U.S. dailies and TV stations occupy a combined 111 markets, offering economies of scale no one else can match, she says. Still, if newspapers become an even bigger drag on growth, analysts will surely push harder for a breakup. Their next scheduled meeting with Martore's team is Wednesday morning at the annual UBS media conference in New York.

Even as she demurs, Martore leaves herself wiggle room, as she always does when analysts ask about future strategy. She and her fellow board members will never say never, she said in October: "We're always looking at different alternatives. . . . What we're in this business to do is to create additional shareholder value. And that's what we're focused on doing."

This much is certain: Martore now has fewer than three years to see her strategy to fruition; she faces mandatory retirement age when she turns 65 in September 2016. The president of the broadcasting division, Dave Lougee, is a logical successor. He's 54 and came to Gannett six years ago from Belo after a long TV career, a professional pedigree that doesn't show tremendous interest in newspapers.

Martore's October analyst teleconference ended, the meeting's mood far less ebullient than the one last March when Gannett mounted its spirited push to sell Madison Avenue on the "New Gannett."

Marketing chief Banikarim, right, with Kennedy at the "upfront."

The public relations campaign unfolded in midtown Manhattan with an elaborately orchestrated presentation to ad agencies and marketers during Gannett's first-ever upfront sales meeting. The venue was an auditorium at the AXA Equitable Center where Gannett staged a mock TV talk show it videotaped before an audience of 400.

The company's chief marketing officer, Maryam Banikarim, kicked off the meeting, where Gannett introduced itself as a company not just about newspaper brands, but also social media, video and leading-edge "rich media" ad services. At 44 years old, Banikarim is the more youthful face of the refashioned company, a job she got in 2011 as the first-ever marketing chief. (Martore, scheduled to be there, was home with the flu.)

On stage, the host-for-hire, comedian Andrew Kennedy, threw one of many scripted softball questions: "I thought Gannett was a newspaper company?"

Banikarim feigned a gasp. "Well," she said, "a lot of people think that. There's lots of interesting things about Gannett people don't know."

The Oracle of Omaha
Soon, she told the audience about Warren Buffett's just-published annual letter to Berkshire Hathaway shareholders, where the Nebraska industrialist talked up newspapers in the digital age.

There are good reasons to quote him. As one of the world's top investors, the "Oracle of Omaha" has snapped up more than 65 dailies and weeklies. In his letter, Buffett painted a rosy portrait of the industry's future. (This was before Berkshire dumped all its Gannett stock five months later.)

"My favorite line," Banikarim told the audience, "is where he says, 'wherever there's a pervasive sense of community, a paper with a viable Internet strategy . . . serves the special informational interests of that community and will be indispensable."

She added: "It's like I wrote it myself."

Buffett

Not quite. Here's a key passage Banikarim left aside:

"We do not believe," Buffett wrote, "that success will come from cutting either the news content or frequency of publication. Indeed, skimpy news coverage will almost certainly lead to skimpy readership. And the less-than-daily publication that is now being tried in some large towns or cities -- while it may improve profits in the short term -- seems certain to diminish the papers’ relevance over time."

And: "Our goal is to keep our papers loaded with content of interest to our readers and to be paid appropriately by those who find us useful, whether the product they view is in their hands or on the Internet."

*  *  *

A postscript
Two months ago, Gannett tore a page from Buffett's playbook, starting a closely watched pilot test of the Butterfly Project. It has restored hundreds of pages of weekly news drained in recent years from four newspapers in New York, Florida, Indiana and Wisconsin. The test includes a new daily local edition of USA Today.

Gannett hopes it will shore up advertising and print circulation when digital subscriptions have failed to gain traction. In the months ahead, it appears likely the initiative will extend to about three dozen of the company's biggest U.S. newspapers. Their combined circulation exceeds 2.3 million weekdays and 3.5 million Sundays.

USA Today, still recovering from a steep dive in ads and circulation, could claim an enormous increase in circulation as well.

It is a huge, surprising bet on print, a sharp turn even as Gannett continues its journey to a digital future that's anything but assured.

Nashville | Putting the digital cart before the horse

Corporate hopes to boost flagging sales of digital-only newspaper subscriptions as it launches new desktop and mobile app designs across the top 35 U.S. news sites.

But The Tennessean hasn't made the switch yet. So, why is it discounting digital subscriptions now? Shouldn't this promotion come with the relaunch, when there's something new to sell?

Screenshot shows promotion of digital-only subscriptions.

I'm now live-blogging the Q3 analyst conference

CEO Gracia Martore and other top executives are discussing the just-released third-quarter financial statement with stock analysts this morning. The 10 a.m. ET conference, lasting about an hour, is being webcast in listen-only mode for the general public. How to participate.

11:05 We're done. GCI's stock is still down. It recently traded for $25.78, down $1.71, or 6.2%.

11:03 Among last questions, what's status of Belo takeover given the federal government shutdown's delaying regulatory approval? "We are moving as expeditiously as we can," Martore says.

10:49 Martore and CFO Victoria Harker sound just a tiny bit rattled in answering some of these questions, and none of them are especially tough.

10:42 Digital-only subscriptions sales update? (Was 65,000 sold, the questioner says.) After much dancing around, Martore says 75,000 to 80,000 sold, when not including those who have since upgraded to add print. She says this is one of the "least significant "metrics they've used to gauge success of the paywall. What no one mentions is that Martore has been forecasting 250,000 to 300,000 digital-only subs by the end of the year. Clearly, the company will not come close to hitting that target.

10:29 Is there another subscription rate increase in the works? Newspaper division president Bob Dickey says "at this point in time we have not announced any.'' But he says they are experimenting with some in select markets.

10:28 The Q&A portion has begun. Martore is talking about impact of the federal government shutdown.

10:16 GCI's stock is now trading for $25.86, down $1.61, or 5.9%.

10:12 Big news is that overall revenue fell to $1.25 billion, down 4.3%. Wall Street had forecast $1.27 billion. But adjusted earnings per share were 43 cents, better than the 41 cents' forecast.

10:06 Among the highlights from the press release, newspaper and other print ad revenue fell 5.9%, steeper than the 5.4% in the second quarter. This is the third consecutive quarter of widening declines. But Digital Segment revenue rose 5%, a better performance than during Q2.

10:02 a.m. Martore has started with her overview, where she adds additional color to the press release issued earlier this morning.

USAT | Kramer: paper 'studying' paywall possibility

USA Today Publisher Larry Kramer said at a panel discussion in New York yesterday that the paper is "exploring" a paywall, according to Keith Kelly of the New York Post. Reached by e-mail, Kramer told Poynter Online: "No plan exists. We’re studying it."

Virtually all of Gannett's U.S. community papers erected paywalls starting in early 2012. They're among about 400 U.S. dailies now charging for online access.

It's unclear whether USAT's study of a paywall is new, or part of what I expect has been a long-standing examination.

In a significant advertising development, Kramer said print advertising was up in this year's first half vs. the same period a year ago -- the first such bump in five years. Kelly didn't say whether the increase is in dollars or lineage, however.

Kramer also said the paper will remove its trademark white boxes from some locations, Kelly reports. It expects sales from such boxes to decline by about one-third after a planned price hike from $1 to $2 next Monday. Kramer's remarks followed a Gannett Blog report about the forecast drop last week.

"Most people are not going to have eight quarters in their pocket,” Kramer told the Advertising Week panel.

With print in decline, USA Today Editor-in-chief David Callaway said he's already moved to a digital-first sensibility with the first story meeting of the day starting at 8:30 in the morning.

“The biggest thing now is the growth of the mobile business,” he said, according to Kelly. “Sixty percent of our digital traffic, as measured by page views, is from mobile platforms — either tablets or smart phones.”

USAT | Cover price said doubling to $2 on Sept. 30

In late July, during the quarterly earnings conference call, analyst Craig Huber asked a simple question: "What are you guys doing on the USA Today circulation pricing front?"

Today's edition detail, Newseum

CEO Gracia Martore, ever cagey when revealing strategy, gave a mushy reply:

"Right at the moment, we're obviously looking at a lot of things," she said, according to Seeking Alpha's transcript. "We can probably talk more . . . later in the fall."

But now it appears Corporate already had a price increase in the works. Readers tell me USAT's cover price will jump to $2 -- double the current one. The change will be effective Sept. 30, one reader says. It would be the first increase in five years.

[Updated at 6:30 p.m. ET: USAT has now confirmed the price hike.]

Any change at the company's marquee brand will come as Gannett relies more than ever on circulation dollars to bolster the top line: overall revenue. But it's a risky move because many readers will balk, further reducing USAT's circulation volume, once the nation's largest. That would cut even more into print advertising revenue, which management presumably hopes to offset through the higher cover price and more digital ad sales.

Bye-bye, ad sales
The plan would be part of a broader campaign to slowly wean GCI off print ads from its biggest and most troubled business, newspaper publishing, as it pivots toward digital and broadcasting with the $1.5 billion deal to buy TV company Belo by year's end.

The quarterly numbers tell the story. In the second quarter, circulation revenue rose about 12% across the 81 U.S. community dailies after the company imposed big subscription rate hikes last yar. At USAT, however, circulation revenue fell 11%, CFO Victoria Harker told analysts.

That resulted in a net circulation revenue increase of 6%, or $280 million, and substantially offset a $318 million decline in overall newspaper ad revenue during the quarter.

For the quarter, circulation revenue rose to 21.5% of $1.3 billion in companywide revenue. That was up from 20.2% of $1.3 billion the year before.

At USAT, circulation volume has been falling precipitously since the fall of 2009, after The Wall Street Journal overtook the paper as the nation's top-selling daily, when digital subscribers were included. In the most recent reporting period, the end of March, USAT fell to No. 3 after The New York Times marched ahead, also as a result of digital subscription growth. USAT doesn't have a paywall.

Circulation once 2.3M
For the six months ended March 31, USAT's circulation dove 7.9% to 1.67 million copies. Its national rivals surged: The WSJ jumped 12.3% to 2.38 million, and the NYT soared 17.6% to 1.87 million. The shifts also meant USAT lost its status as the No. 1 selling paper in print to the NYT -- one of its last bragging rights.

USAT last raised its cover price to $1 from 75 cents in fall 2008, just as the Great Recession was deepening. At the time, it was the top-selling newspaper, with an average 2.28 million copies sold.

The New York Times' cover price is $2.50, and The Wall Street Journal's is $2 in many markets.

Martore said Corporate would likely be able to talk about any USAT initiatives in the fall. That probably means mid-October, when GCI reports third-quarter results. Those initiatives almost certainly include a plan code-named Butterfly Project to inject even more USAT content into the community dailies.

Why you shouldn't over-promise and under-deliver: the Q2 report reveals a worrisome digital surprise

Six months ago, CEO Gracia Martore unveiled a rather unambitious goal for a very important campaign to help ensure Gannett's future prosperity. By the end of the year, GCI expected to have 250,000 to 300,000 digital-only newspaper subscribers across nearly 80 U.S. markets. I say it wasn't terribly ambitious because that averaged fewer than 3,900 per market.

Martore

Still, it would be a major new vein of revenue to mine. At the low end, it could generate $36 million in new annual circulation revenue at around $12 per subscriber each month. (Admittedly, not a huge sum, when GCI's revenue from all sources was $5.4 billion last year.) Equally important, digital-only subscribers "tend to be younger and therefore, more attractive in some ways to advertisers," Martore told a conference of Wall Street analysts after releasing fourth-quarter financial results.

Plus, these digital-only subs would be separate from the legacy print subscribers, an aging group whose numbers were literally dying every day. And with print advertising revenue falling, circulation revenue was more important than ever.

Martore's projection was noteworthy for several reasons. First, it didn't include any major caveats. Second, at the time she revealed the goal, the company already had sold 46,000 digital-only subs almost entirely by word of mouth as the company rolled out paywalls across the nation.

Even better, early evidence showed that most of the digital-only were new subscribers entirely; they weren't downgrading or giving up print subscriptions entirely.

Signs of trouble emerge
Martore said the company planned to spend "not inconsequential marketing dollars" to focus on "ramping up that level of digital." She didn't provide a timetable for that marketing effort.

Three months later, in the first-quarter earnings conference, GCI disclosed a worrisome figure. The net number of digital-only had increased by just 4,000, to 50,000. Now, however, there was a caveat: Some digital-only subs had converted to print. That had the effect of understating digital-only sales by 4,000. Still, even throwing those into the mix, the company had only sold 8,000 new subs over the previous three months.

Whatever the number, Martore was happy to report to analysts that nearly half the digital subs were under the age of 45 (that's what passes for young in the newspaper business).

"Of course, we obviously had younger people reading our content digitally before the subscription model was launched," she continued, according to Seeking Alpha's conference transcript. "What's different now is that we can count them as subscribers, gain a better understanding of their news consumption habits and use that knowledge to help our advertisers target and engage our readers more effectively. Expanding our digital-only subscriber base will continue to be a strong focus this year, and we are accelerating our marketing efforts."

She held to the projection of 250,000 to 300,000 by year-end.

'What needs to happen?'
Then came yesterday's second-quarter report, and another, more alarming figure: The total number of digital subs had grown to just 65,000 by the end of that quarter. Once more, the gross number of sales was actually higher, Martore said: 11,000 had started as digital-only, then converted to conventional print.

But even adding those, Corporate was conceding it had sold only 76,000 of the projected 250,000 to 300,000. In other words, having started the year with 46,000, it had now sold only 30,000 more in six months -- an average 5,000 per month. To hit even the low end of the 2013 goal, GCI would need to sell another 174,000 digital subs in the second half -- an average 29,000 per month.

William Bird, an analyst with Lazard Capital Markets, pressed the point during yesterday's conference call: "What needs to happen to hit the target?"

Martore then offered one of the more convoluted answers I've heard, according to Seeking Alpha's transcript. "There's a number of things, frankly," she said, "that we're working on in terms of enhancements, additional digital platforms and potentially a fairly exciting add to the consumer experience by blending some assets that Gannett is uniquely positioned to do. I can't say more about that, but that's something, as I alluded to in my remarks, that we're going to be looking at very, very carefully over the next few months and expect to have some news on probably in the late fall."

Then she mentioned the "fabulous" job The New York Times had done over the past two years in selling 700,000 digital subs. But she cautioned against comparing GCI's company-wide digital subs to the NYT's. GCI's print subscribers, who now got digital at no extra charge with their paywall subscriptions (more on that in a bit), had activated 1.3 million digital accounts.

"So the apples-to-apples number with the New York Times' several hundred thousand . . . is 1.3 million for us," she said.

Auditing real numbers
In some distant galaxy, I suppose, that would be an apples-to-apples comparison. But a separate report reveals a different picture. In fact, the NYT claimed 1.1 million in digital circulation as of March 31, when the Alliance for Audited Media published its most recent results.

The AAM (formerly the Audit Bureau of Circulations) defined digital as tablet or smartphone apps, PDF replicas, metered or restricted-access websites, or e-reader editions. The March 31 report of the top-25 dailies didn't include an overall digital number for GCI. Instead, it includes figures for only two of GCI's biggest papers: USA Today (249,900) and The Arizona Republic (7,048).

Because USAT doesn't have a paywall, I assume its figures are for replicas and other e-editions.

Digital-only subs are an important barometer of young consumer interest in newspapers. As Martore noted, this attractive demographic got free access for years. Now, they're being asked to pony up.

The company took a different tack with its legacy base of millions of older, traditional print subscribers. Last year, as the paywalls were introduced, the company socked those subscribers with average 25% rate hikes. The carrot: Their access to digital editions -- desktop and mobile -- would be included at no additional charge.

Candor about costs
Except, that's not really what happened. Martore herself conceded yesterday that those 1.3 million who activated their digital accounts were "obviously paying" for them. They just didn't know it. Goosing its digital revenue higher, Corporate had embedded the cost of their digital subs within their new, higher print subs -- then broke that portion out as digital revenue. That contributed to what Corporate says is company-wide digital revenue now accounting for nearly 30% of overall revenue.

Looks good on paper, of course, because GCI and other newspaper companies are racing to rebrand themselves as digital companies in a bid to better sell themselves to advertisers. But it would be more meaningful if the digital subs hadn't been forced on those existing readers.

More than ever through the rest of this year, every dollar counts. In yesterday's earnings release, GCI revealed that declines in newspaper advertising were accelerating while digital revenue growth was narrowing. Print fell 5.3% from last year. Digital rose just 2.9%. This spreadsheet shows the breakdown over the past two years.

To be sure, Wall Street analysts, often a fickle bunch, seemed unfazed. GCI's stock fell less than 2% to $25.87, even though the company missed revenue forecasts by $30 million. Today, GCI's trading for about $26.

Wall Street won't be patient forever. The quarter that began three weeks ago won't have the benefit of last year's outstanding Olympics and political advertising in the broadcast division that saved GCI's bacon last year. And those 25% subscription hikes have now been fully realized.

It's conceivable GCI still hasn't committed major marketing bucks to selling digital-only subs. A full-court press could bring in those 174,000 additional subs to hit the lower 250,000 goal. Plus, there's the pending launch of about 80 new newspaper websites and apps that could help with sales.

Still, GCI's challenge illustrates a time-worn truism in Corporate America: the way to keep investors happy is to under-promise and over-deliver. Better to surprise them with good news, rather than bad.

Earlier: crucial questions for Martore after yesterday's report.

I'm now live-blogging the Q2 analyst conference

CEO Gracia Martore and other top executives are discussing the just-released second-quarter financial statement. The 10 a.m. ET conference, lasting about an hour, is being webcast in listen-only mode for the general public. How to participate.

11:02 And we're done! GCI's stock is now down 3% to $25.56. Note: Later today, this conference's audio will be available for replay at Corporate's gannett.com website. Also later, I expect financial news site Seeking Alpha will publish a transcript; I'll post a link when it becomes available.

11:01 Martore and Harker are now trying to explain digital revenue growth in Digital Segment vs. company-wide to an analyst who can't read the statement properly.

10:57 We're in the final minutes of the conference. Q: What's status of CareerBuilder with GCI's partner Tribune Co.? Martore defers to Tribune. Ditto for Classified Ventures partnership.

10:54 Q: Interested in more TV stations? Any limitations because of regulatory rules? Martore says not just focused on investing in more broadcast, but any opportunity "at the right price."

10:47 Q: What about possibility of spinning off newspapers into their own division? Martore: focused on acquistion of Belo. GCI is committed to increasing shareholder value. "We always at the board level . . . are looking at opportunities. . . . We never rule anything out." [Hopkins: News Corp. and Tribune Co. are doing these spinoffs.]

10:46 Q: Taking out Newsquest, how would things have been with print advertising in Q2? Positive, Martore says.

10:43 First reference to royal baby! It's driving U.K. retail sales, says Martore.

10:40 Q: Advertising trends in July? Martore says broadcast has a tough comparable to Q3 in 2012. On U.S. Community Publishing, probably in line with Q2. Newsquest in the U.K. will improve, but they still have the drag on the currency side as British pound sterling is weak.

10:39 GCI stock is now down 3.3% to $25.50.

10:35 Q: Still expect 250,000-300,000 paying digital newspaper subs by year end? Martore: ended Q2 around 65,000. [Hopkins says: I don't see how they can hit even the 250K if they're only at 65K now.] Martore says the New York Times Co. has done a "fabulous job" with its paywalls. She's trying to shift attention to the number of existing GCI subscribers -- think it's 1.3 million -- who have activated their digital accounts.

10:33 Q: National advertising best in some time. What's going on? Martore credits USAT team in "really presenting the value USA Today brings in all platforms," plus value of print.

10:32 Q: What's the trend in TV advertising, including in Obamacare-related spending? Martore: Total TV revenues up in the mid-teens in Q3. Continued strength in auto. Corporate very focused on Obamacare reform ads. Broadcast President Dave Lougee says Obamacare will show up mostly in Q4.

10:29 Back to Martore. We're investing for the future, don't expect quick turnaround, etc. Now to the Q&A portion.

10:24 Relaunch of top 30 newspaper markets' digital offerings by year end. Unless I'm mistaken, that means GCI will miss its deadline of getting all done by the end of 2013.

10:17 Here's Harker. She's reading from a script that also highlights key figures from the financial statement. GCI stock is now down 2.6%, to $25.67. That's not bad, considering the company missed Wall Street's revenue forecast by $30 million.

10:12 Revenue in Digital Marketing Services is up 90%, albeit it off a small base. No dollar amounts given. The unit is expected to generate $275 million to $350 million in new revenue, also by 2015.

10:09 Martore talks about trends in the USA Today Sports Media Group. So far, I'm not hearing any specific dollar amounts as the unit aims for $300 million in promised new revenue by 2015.

10:03 And we're off. Here's Martore. She's recapping the financial statement. CFO Victoria Harker will follow. The most interesting part of the conference, as always, will be the question-and-answer session near the halfway mark.

9:53 I often wonder who chooses the background music we hear as we wait for the conference to begin. Right now, it's classical.

9:48 a.m. We're waiting for the conference to begin in about 10 minutes. In early trading, GCI's stock is down 4.3% to $25.22.

Earlier: Questions employees should ask during today's Town Hall meeting.

Related: Across Corporate America, earnings calls take on a whiff of show biz, according to The Wall Street Journal.

Why another round of furloughs may be near

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.

Tallahassee | Sunday back to $2, with an apology; price reduction followed 15% circulation decline

In a blog post today, Executive Editor Bob Gabordi writes about the Tallahassee Democrat's "big" mistake in conjunction with the Gannett-wide launch of paywalls last year.

"In the face of expanded readership, a year ago April we raised the price of the Sunday newspaper to $3 in vending machines and retail outlets," he writes. "We have since reduced the price to $2, but we did so quietly, and without saying we were sorry for the miscalculation."

Gabordi doesn't detail the price increase's impact on circulation. But the paper's overall Sunday sales -- including home delivery -- dove 15% to an average 39,685 copies by the end of last year from 46,801 in 2011, according to GCI's annual reports. That was a significant decline when Corporate was focused on shoring up Sunday circulation across the U.S. newspaper division.

Indeed, among all the U.S. community dailies, only Missouri's Springfield News-Leader reported a bigger rate of Sunday decline: 16%, to 52,958 from 63,413 in 2011. (This excludes the Detroit Free Press, where data in the annual reports show a near-doubling of Sunday circulation that I can't immediately explain.)

Division-wide, Sunday fell an average 3% last year from 2011 (again, excluding Detroit), according to the annual reports.

Nonetheless, overall circulation revenue rose 5% last year to $1.1 billion, because Corporate raised subscription prices an average 25% when the paywalls were introduced. That more than made up for lost circulation volume.

Your site's numbers
Other GCI newspapers raised newsstand prices on Sunday when their paywall was turned on. Has your site also backed away from its increase?

This spreadsheet shows daily and Sunday circulation for 2012 vs. 2011 for 80 U.S. dailies.

Please post your replies in the comments section, below. To e-mail confidentially, write jimhopkins[at]gmail[dot-com]; see Tipsters Anonymous Policy in the rail, upper right.

What you won't hear at today's annual meeting

There will be many huzzahs and much back slapping this morning when shareholders gather for their annual meeting at Corporate's Crystal Palace headquarters in McLean, Va.

And no wonder.

Last year, companywide revenue rose 2.2%, the first annual increase since 2006. Gannett navigated a tricky technology test, rolling out newspaper paywalls that allowed the company to justify average 25% subscription rate hikes.

Through some creative (ahem) accounting, the company claimed an impressive 19% increase in digital revenue. By the end of the year, digital represented 25% of total revenue, making GCI look more New Line than old. And the broadcasting division rode the summer Olympics and national election slugfest to its best year ever.

Cover of annual report

Those are exactly the bullet points in CEO Gracia Martore's annual letter to shareholders, in the glossy 2012 Annual Report.

The bottom line, as always, is of particular interest to stockholders: Total return to investors was 41% vs. 16% in the widely-watched S&P 500 list of companies, after a $154 million stock buyback and 150% increase in the annual dividend.

Good news like that landed GCI at No. 186 on Barron's magazine's just-published list of 500 companies that did the best job investing for growth. That was way up from No. 378 a year ago.

A different bottom line
But here's something you won't hear management touting this morning. It's from a less widely read regulatory document, the annual 10-K report. There's a table on Page 28 showing a very different bottom line, one of great interest to longer term investors, including many of the company's nearly 31,000 employees.

The table says GCI's annual return to shareholders continues to lag the S&P 500 companies when measured over a longer time frame, 2007-2012 -- a period when the entire newspaper industry was slammed to its knees. That's hardly surprising, of course, because it's an apples-to-oranges comparison. The S&P holds many companies driving the economy's future, including technology heavyweights Amazon, Google and Oracle.

But even in a more apples-to-apples comparison, GCI still came up short: $100 invested in the company's stock in 2007 was worth just $57.48 at the end of last year, according to the 10(k). Meanwhile, that same $100 invested in a peer group of other media concerns was worth much more: $110.71. Better than GCI, and the S&P, too. (Spreadsheet shows all figures for 2007-2012.)

Corporate chose the peer group. It includes A.H. Belo Corp., Belo Corp., Discovery Communications, E.W. Scripps, Journal Communications, McClatchy Co., Media General, Meredith Corp., Monster Worldwide, News Corp., New York Times Co., Washington Post Co., and Yahoo. Many of the group's companies have a strong publishing/broadcasting orientation, but the group also includes companies in the digital media industry, according to the 10(k).

GCI's stock closed Monday at $20.40, down 12 cents.

Recovery not assured
The company's been relying on those fat subscription price increases and broadcasting's bang-up year -- add-ons that will lose their mojo when comparisons cycle through during the quarter starting in less than two months. To be sure, Digital Marketing Services and the USA Today Sports Media Group are still forecast to pick up the slack, especially starting by 2015.

But by then, unless things change, the current top management team will be entering Corporate America's version of lame duck territory: Martore, 61, faces mandatory CEO retirement age in 2016.

If you bought GCI at the beginning of 2012, you'll be among the shareholders cheering on management this morning. However, if you're really long -- well, at least there'll probably be complimentary coffee and pastries in the lobby.

Related: a list of the annual reports to shareholders going back to 1998