The Washington Post - 06.08.2019

A26 EZ RE THE WASHINGTON POST.TUESDAY, AUGUST 6 , 2019

Most newspapers still derive the majority of their revenue from printed ads and print subscriptions, both of which have been in decline for years. Digital ads remain a minority of the revenue pie, primarily because the competition for advertising is dominated by tech giants such as Google and Facebook and because digital ads sell for mere fractions of the cost of the print kind. Proposed solutions to the problems — generally focused on cost-cutting — have sometimes worsened them by turning off readers. The weaker newspapers get, the more readers and advertisers abandon newspapers, lead- ing to the next round of cuts. It has also complicated publishers’ efforts to sell digital subscriptions: With weakened newsrooms, digital newspapers often offer less to justify the cost of paying for the news. Ever since Gannett four years ago spun off from Tegna, its broadcasting arm, it has been looking to grow through mergers or acquisitions, with little to show for it. “I think Gannett is looking for some sort of solution to its future,” said Arthur, of Huber Re- search. He said the chain could save a few hundred million dollars up front by eliminating du- plicate management and back-of- fice positions in departments such as human resources, technology, finance and accounting. In some cases, the combined company could save money by printing its newspapers at one facility instead of two, and by combining and centralizing copy editing, design and daily print layout functions. Further savings might result from volume dis- counts on the company’s massive purchases of paper and ink. But newspaper companies have been employing similar corporate machinations in search of a solution for local news for more than a decade, with no end to the industry’s problems — particularly in small-town and rural America — in sight. “If you’re not The Washington Post, the New York Times, hope- fully the L.A. Times and to a lesser extent the Dallas Morning News or the Chicago Tribune, this has become sort of a death spi- ral,” Arthur said. [email protected] [email protected]

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American University, said she worried about the viability of local newspapers whose parent companies respond to stockhold- ers’ wishes, even at the risk of letting competitive journalism slip by the wayside. “The business model is under duress, and the urge to consolidate and the pressure to consolidate and only look at the bottom line in a very shortsighted way is growing,” Hall said. “I find this depressing.” Gannett recently fended off a hostile acquisition attempt from Digital First Media, the hedge- fund-backed chain that sells off newspapers’ real estate and cuts newsroom jobs more aggressive- ly than most other owners. Digi- tal First argued that Gannett ought to ditch its efforts at growing its digital audience and prior- itize cost savings. Gannett and GateHouse both instituted layoffs earlier this year and have indicated in public filings that cost savings will be an ongoing focus.

duced their print schedules to four or even three days per week in an effort to save money. Aside from national brands such as The Washington Post, the New York Times and the Wall Street Journal — which have sold millions of digital subscriptions — no newspaper owners have been immune to the need to cut costs in the face of declining subscriptions and advertising rates. As of the start of 2018, daily newspapers in the United States numbered 1,277 with a circulation of 29.2 million, according to the latest data from Editor & Publisher. “The newspaper industry is going to have to consolidate,” said Michael Kupinski, an analyst at Noble Financial. “You need scale to transition to the digital future, and so cutting out costs through consolidation of facilities and distribution facilities is very important.” Jane Hall, a professor of journalism and media studies at

Arthur, an analyst at Huber Re- search. “So, there will be a lengthy conversation around how this is going to be a digital powerhouse.” Greater digital ambitions aren’t likely to prevent more short-term newsroom cuts, which have ravaged the local news industry in recent years. Whatever the ownership structure of newspapers, so many of them have closed in recent years that there are at least 1,800 fewer newspapers in the United States than there were in 2004, according to a study by the University of North Carolina. Employment in the newspaper industry fell about 47 percent between 2008 and 2018, a decline worse than coal mining over approximately the same period. Most recently, the Youngstown Vindicator, a locally owned Ohio paper, closed shortly after its 150th anniversary. Its owners said they had lost money in 20 of the previous 22 years. Several other once-daily papers have re-

investor call said they have re- quested approval from federal regulators and that it is also subject to approval from share- holders. Analysts say the combined company could generate hun- dreds of millions of dollars in savings from reduced overhead and more efficient printing and distribution, which could help stave off the effects of an industry in deep decline. The combined company will also enjoy an expanded digital platform that executives are expected to pitch as an attraction to advertisers. GateHouse publish- es 156 daily newspapers and 464 community newspapers, reach- ing more than 22 million people each week. Gannett remains the country’s largest publisher by circulation, led by its flagship USA Today and publications including the Ari- zona Republic, Indianapolis Star and Louisville Courier-Journal. “Bigger is better if you’re going after digital reach,” said Doug

States employs thousands fewer
journalists than it did a decade
ago.
But the efficiencies wrought by
the merger also may result in
publications that rely less on
local reporters and more on USA
Today-type stories produced or
edited remotely and published in
dozens of the company’s publica-
tions. Journalists across the
country fretted over whether the
deal would mean a wave of lay-
offs.
In a memo Gannett sent to
employees Monday that was ac-
quired by The Washington Post,
management noted employees’
concerns about layoffs. The
memo said Gannett expects there
will be “some duplication and
overlap in roles” and that over
the coming months, executives
will review “how the operations
of our organizations will come
together.”
The deal may also mobilize
other newspaper chains, includ-
ing McClatchy and Tribune Com-
pany, to pursue their own merg-
ers in a battle for big advertising
dollars.
Rick Edmonds, a media busi-
ness analyst at the Poynter Insti-
tute, said other media companies
will be looking to cut costs and
consolidate. Edmonds noted talk
of deals between McClatchy and
Tribune.
“Even if it’s a tough climb,
you’re better off with more scale
and particularly with some of the
savings of not having to do hu-
man resources and all of that in
two separate companies,” Ed-
monds said.
GateHouse’s parent, New Me-
dia Investment Group, will pur-
chase Gannett for $12.06 in cash
and stock per share. Media exec-
utive Paul Bascobert has been
named chief executive of the
combined company. Gannett’s
board unanimously approved the
deal, which is expected to close
by the end of the year.
“Uniting our talented employ-
ees and complementary portfoli-
os will enable us to expand our
comprehensive, hyperlocal cov-
erage for consumers, deepen our
product offering for local busi-
nesses, and accelerate our shift
from print-centric to dynamic
multimedia operations,” Michael
Reed, chairman and chief execu-
tive of GateHouse’s parent com-
pany, said in a statement.
The deal will be financed by a
line of credit from Apollo Global
Management. Executives on an

GANNETT FROM A1

The Drone Fund is a group of venture capitalists investing in the industry that covers autonomous aircraft, including flying cars. The Japanese government has already built a test course for flying cars in Fukushima, which was hit hard in 2011 by a tsunami, earthquake and nuclear accident. It’s part of the country’s infra- structure plan to use the technology to deliver goods starting in 2023 and for everyday travel in the next decade, Ishiguro told the Associated Press. Monday’s test flight is a first for a major Japanese corporation, Bloomberg reported, and the latest advancement in the global race to create autonomous flying vehicles, which also includes Uber, Airbus, Volocopter and Boe- ing. [email protected]

battery life, safety and regulation. But the EVtol — or “electric vertical takeoff and landing” — technology is supposed to be cheaper, quieter and more accessible than helicopters, and it could be used to bypass traffic in heavily con- gested cities, transport cargo or just offer recreational travel. “You may think of ‘Back to the Future,’ ” Fumiaki Ebihara, a Japa- nese Ministry of Economy, Trade and Industry official who is over- seeing the country’s development, told CBS News in 2018. “Up to now, it was just a dream, but with innovations in motors and batter- ies, it’s time for it to become real.” And Japan is serious about turning that dream into reality, after falling behind on technolog- ical advancements like ride- hailing services and electric cars, Bloomberg reported.

BY HANNAH DENHAM

It’s like “Back to the Future,”
but real: A car took flight Monday
in Japan.
The prototype made by Tokyo-
based NEC Corp. looks more like a
large drone than typical car. The
unmanned, battery-powered con-
traption hovered 10 feet off the
ground for about a minute inside
a cage at a company facility in
Abiko, according to news reports.
“We at NEC believe that a revo-
lution of travel centered on flying
cars will occur,” Norihiko Ishi-
guro, vice president of the global
technology company, told the As-
sociated Press. “When that time
comes, we want to provide tech-
nology and services as a manage-
ment base.”
The technology still has a num-
ber of kinks to work out, such as

down by print publications. Still, the deal left many wondering how Gannett’s print division would grow if it was suddenly a stand- alone newspaper company. Gannett shares closed at $11.04 on Monday, up nearly 3 percent from Friday. In February, Gannett’s board of directors rejected a $1.36 billion buyout bid from the hedge fund that owns Digital First Media, ac- cusing the would-be buyer of try- ing to conceal its “inability to finance and complete” the deal. Digital First, at the time being rebranded as MNG Enterprises, was Gannett’s largest active share- holder. MNG executives argued that Gannett’s digital investments had not paid off and that the company should stop making any new digital industries and not fill key leadership posts until it launched a new strategy. [email protected]

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USA Today in airports and hotel lounges across the country. “That wasn’t there before [USA Today] started.” The newspaper was also heavily dependent on hotels to distribute USA Today across the country. But as hotels cut back on those pro- grams and readers got their news from digital platforms, circulation suffered. The pressures on newspapers to deliver comprehensive coverage while also staying financially viable hit Gannett and its competi- tors alike. In 2014, Gannett announced it would spin off its newspaper division into a separate company. The separation created one company dedicated to a digital and broadcasting business and another focused on the newspaper and publishing arm. The move came as other media companies, including Time War- ner and Tribune Company, real- ized their entertainment and broadcast divisions could perform better if they weren’t dragged

far-off events, according to a company history. Printing presses were adapted for color at the Gan- nett Rochester newspapers as ear- ly as 1938. A corporate airplane even helped gather news from dis- parate places. Much of Gannett’s greatest suc- cess came through the vision of Allen H. Neuharth, who started out delivering newspapers and be- came Gannett’s chairman in 1979. Under Neuharth’s leadership, the company enjoyed a steady growth period and eventually created USA Today, which initially drew skepticism for its cost and viability. Critics doubted the con- cept and dubbed the model the “McPaper,” even as the informa- tive charts and exhaustive national coverage caught on with readers nationwide. (Neuharth died in 2013 at age 89.) USA Today “was cohesive and brought together stories that would cut across local boundar- ies,” Vogel said, adding that he remembered picking up copies of

nett’s local sites, according to the company. Still, in January, Gan- nett slashed jobs at the Indianapo- lis Star, the Arizona Republic in Phoenix, the Tennessean in Nash- ville, the Citizen Times in Asheville, N.C., and other papers, Poynter reported. Gannett’s history reaches back to 1906, when Frank Gannett and others bought a half interest in the Elmira Gazette in Upstate New York. From there, Gannett acquired and oversaw other local newspapers throughout the Northeast and, in time, the rest of the country. The Gannett National Service was founded in 1943, pro- viding local papers with reporting from bureaus in Washington and elsewhere. The company went public in 1967. Gannett was also known for bringing innovations to its newsrooms. In 1929, Frank Gannett in- vested in the development of the teletypesetter. Newsrooms were later stocked with shortwave ra- dio sets to speed up reporting of

Edmonds, a media business analyst at the Poynter Institute, a non- profit journalism training center. Like print media everywhere, Gannett saw steep declines in print advertising with the rise of Craigslist and other online advertising platforms. Readers cut back on print subscriptions in search of digital and free news. Over time, those factors built pressure on media companies to cut costs and consolidate. “There are ways you can consolidate,” media analyst Harold L. Vogel said. “You don’t need two CFOs; you don’t need two chair- men or heads of marketing.” Gannett’s financial struggles and waves of recent layoffs follow a long run at the helm of American journalism. Today, Gannett’s vast portfolio includes USA Today, 109 local media organizations in 34 states, and dozens of other news brands online in the United King- dom. Each month, more than 125 million unique visitors access content from USA Today and Gan-

BY RACHEL SIEGEL

The merger announced Mon-
day between Gannett and Gate-
House Media — America’s two
largest newspaper chains —
comes amid turmoil for the print
journalism industry and shaky
times for Gannett, which fought
off a takeover attempt by a hedge
fund earlier this year.
The deal also marked an uncer-
tain new chapter for the McLean,
Va.-based Gannett, a former titan
of American media that boomed
in the latter half of the 20th cen-
tury. Its flagship publication, USA
Today, introduced the country to a
national newspaper that could
reach millions of readers, com-
plete with digestible coverage, col-
or photos and eye- popping graph-
ics.
With Monday’s announcement,
media analysts reflected on Gan-
nett’s fall and “how it came to be a
takeover target as opposed to buy-
ing most every newspaper that
came out of the market,” said Rick

Once a titan, Gannett now plans merger just to survive

A car flies in Japan, and the company

hopes prototype spurs the industry

KIYOSHI OTA/BLOOMBERG NEWS NEC Corp.’s flying car uses EVtol — or “electric vertical takeoff and landing” — technology.

Media experts say newspaper merger could lead to more

KATHERINE FREY/THE WASHINGTON POST Some of the newspapers displayed outside the Newseum in Washington are owned by Gannett, which is set to be acquired by GateHouse Media for $1.4 billion. The combined company is expected to save millions in reduced overhead costs, but employees fear layoffs.

The Washington Post - 06.08.2019

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