The Washington Post - 06.08.2019

(Dana P.) #1

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


Most newspapers still derive
the majority of their revenue
from printed ads and print sub-
scriptions, 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 be-
cause 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 adver-
tisers abandon newspapers, lead-
ing to the next round of cuts. It
has also complicated publishers’
efforts to sell digital subscrip-
tions: With weakened news-
rooms, 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 fu-
ture,” said Arthur, of Huber Re-
search. He said the chain could
save a few hundred million dol-
lars up front by eliminating du-
plicate management and back-of-
fice positions in departments
such as human resources, tech-
nology, 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 cor-
porate machinations in search of
a solution for local news for more
than a decade, with no end to the
industry’s problems — particu-
larly 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.
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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 consoli-
date and the pressure to consoli-
date 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 grow-
ing its digital audience and prior-
itize cost savings. Gannett and
GateHouse both instituted lay-
offs 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 circula-
tion 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 ana-
lyst at Noble Financial. “You need
scale to transition to the digital
future, and so cutting out costs
through consolidation of facili-
ties and distribution facilities is
very important.”
Jane Hall, a professor of jour-
nalism 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 struc-
ture 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, accord-
ing 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 ex-
pected 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 autono-
mous 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 technol-
ogy 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 lat-
est advancement in the global
race to create autonomous flying
vehicles, which also includes
Uber, Airbus, Volocopter and Boe-
ing.
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battery life, safety and regulation.
But the EVtol — or “electric verti-
cal takeoff and landing” — tech-
nology 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 fi-
nance 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 com-
pany should stop making any new
digital industries and not fill key
leadership posts until it launched
a new strategy.
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 More at washingtonpost.com/
business

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 cover-
age while also staying financially
viable hit Gannett and its competi-
tors alike. In 2014, Gannett an-
nounced it would spin off its news-
paper division into a separate
company. The separation created
one company dedicated to a digi-
tal 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 com-
pany 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 cre-
ated 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 nation-
al 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 ac-
quired 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 news-
rooms. 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 ana-
lyst 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 adver-
tising 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 consol-
idate,” 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.
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