Gannett vs. newspapers

John Temple:

From 20 feet away, one designer used to tell me, all newspapers look the same: vertical rectangles with black ink on them. But the announcement earlier this month that the country’s two largest newspaper companies have agreed to merge is a reminder that there are actually two very different ways to look at them. To some, local newspapers are simply cash machines, from which investors can make withdrawals until there’s nothing left. To others, they are community trusts, essential civic resources to be sustained.

The acquisition of Gannett, publisher of USA Today and other papers, by GateHouse Media represents the apotheosis of the newspaper as a financial instrument. GateHouse, the buyer, is the largest owner of U.S. newspapers by titles. Gannett is the largest owner of U.S. newspapers by circulation. The new company, to carry the Gannett name, would have a print circulation of more than 8.5 million.

Should the Department of Justice approve the deal, it would be allowing the creation of a behemoth that dwarfs other newspaper companies, one that would dominate local journalism in many states, and have unparalleled national reach in print. The new company says its first order of business will be to realize $275 million to $300 million a year in “run-rate cost synergies.” In plain English, that means many journalists will lose their jobs.

Print advertising and print circulation are declining at a rapid rate, and digital growth is not making up the difference. Gannett and GateHouse are hoping that, together, they can grow efficient enough to survive. But the deal makes me think of two drowning giants grabbing onto each other to try to save themselves. While I long ago learned to be careful about predicting the future in print, my guess is that it won’t be too many years before they pull each other under.
Just consider these recent findings from the Pew Research Center. U.S. newspaper circulation is now at its lowest level since 1940, even as the national population has grown from 132 million to nearly 330 million. Last year, daily circulation—print and digital—was down 8 percent, and Sunday circulation was down 9 percent. The numbers were even worse for print, which posted 12 and 13 percent declines, respectively. While overall digital advertising spending increased by 23 percent in 2018, that wasn’t enough to offset the losses in print advertising—total ad revenue for newspaper companies was down by 13 percent. In consequence of this decline, newspaper-newsroom employment continues to shrink. It’s down 47 percent since 2004.
But even if the new Gannett manages to beat the odds and stay afloat, the prognosis for the papers it owns is grim. Gannett papers today largely look and sound the same. They feature similar, centrally produced news reports, and offer little individuality or quirky local flavor.

Gannett was the pioneer of this approach. As it grew, from the late 1960s until the early 1980s, it boasted that its quarterly profits were always bigger than the one before. The result, according to the Pulitzer Prize–winning journalist Ben Bagdikian in his 1983 book, The Media Monopoly, “Profit squeezes and indifference to comprehensive local news is the norm.” GateHouse came along in the late 1990s and one-upped the earlier generations of newspaper chains. It went bankrupt in 2013 after it had spread across 330 markets in 21 states. The reborn company now operates in 612 markets in 39 states.

The consequences of this approach for local communities and for the fabric of our country are already clear—and grave. If some of these papers shrivel or even shut down to produce “run-rate cost synergies”—since the merger announcement, GateHouse has already cut staff at four newspapers—we’ll end up with more news deserts, communities without local newspapers. Other papers may be so diminished that they’re local newspapers in name only. That will leave some of the country’s most vulnerable residents without the information to help them participate in public life, including by voting, or the protections that investigative reporting can bring. The decline and failure of local newspapers means fewer eyes on the powerful, higher public borrowing costs, and more.

Something like this has already happened in recent years to local television news. Sinclair Broadcast Group, the nation’s largest broadcaster, is notorious for distributing packaged segments to all of its stations, and for having its anchors across different markets use exactly the same words, sometimes reflecting partisan positions.

It’s reasonable to fear that the new Gannett—which would own more than 260 daily news organizations, and hundreds of weeklies—might have a similarly negative impact on even more parts of our country.

Many dedicated, talented journalists are doing meaningful work today at both GateHouse and Gannett newspapers. I know some of them. In my role at UC Berkeley’s Investigative Reporting Program, I work closely with Gannett journalists I admire. And earlier this year, I was among the judges who gave GateHouse the top award for innovation at a major newspaper conference. Not for its journalism, though. Instead, Gatehouse was recognized for its booming and profitable events business, which it has successfully replicated in many of its markets.

However, the positive efforts of some at the two companies today don’t lessen the profound reason for concern.

There has to be a different path forward, one that doesn’t call for emptying newspapers like ATMs, or consolidating them under the control of a massive corporation. Every community deserves to have a place it can turn to each day to understand itself, to see itself reflected truthfully, and where its members can learn about others who are different from themselves and get the information they need to participate in our democracy.

One promising model is being tested in Pennsylvania. The Philadelphia Inquirer is now a public-benefit corporation, owned by the nonprofit Lenfest Institute for Journalism. Instead of maximizing profit for shareholders, the Inquirer can balance meeting the needs of its community with the need to make a profit. It can seek community support in new ways because it’s acting as a community resource, not a money machine.

It’s not a given that this approach will succeed. But I think it’s our best hope. I heard Terry Egger, the paper’s publisher and CEO, speak at a conference in Las Vegas this spring. He said he tells his colleagues that they don’t work for any of the company’s print or digital titles—they work for the region’s people. He asks them to ask themselves: How are you making their lives better?

His message to the community and his staff emphasizes the importance of a free press. It’s a message that he can offer unequivocally because he’s clear about the mission of his news organization. And he’s using it to seek and receive community support, from foundations and individuals.

It’s possible to imagine a very different kind of network from the one the new Gannett promises to build. Community foundations and leaders around the country, along with people and businesses who care about the health of their local communities, can band together to support their local press.

I was the founding editor of one such news organization, Honolulu Civil Beat. We started it as a for-profit company. But after a few years, its board concluded that it needed to take a different path. As a nonprofit, it could develop deeper ties to the community that would give it a greater likelihood of sustainability.

Today I serve as an adviser to the Colorado Media Project, an effort to help meet the information needs of Coloradans by strengthening the state’s news ecosystem. This effort was triggered by the gutting of The Denver Post by its hedge-fund owner, Alden Global Capital; the rebellion of its editorial page; and the departure of many of its best journalists to form a new local-news organization, The Colorado Sun.

The state, and nation, are facing a crisis in local media. Our answers don’t have to be newspapers as we’ve known them until now, ink on paper. Despite what my designer friend told me years ago, newspapers were never just that. They were reflections of the fabric of their community. Some, frankly, didn’t live up to their calling. Others punched above their weight class. But no matter what, we almost always knew that a community would be worse without them.

What we need is not a giant local-news company along the lines of the new Gannett, structured to reduce expenses and buy time until it finds a way to ride the digital wave. What we need instead is a network of local-news organizations that can offer tools that enable local people to focus on the important job of telling their communities’ stories.

The result may look like a vertical rectangle covered in black ink, or take an entirely different form. But what will really differentiate it is its commitment to the service of a common cause, one that’s essential if the United States is to thrive in the 21st century.

Everyone who subscribes to the Green Bay Press–Gazette, The Post~Crescent in Appleton, the Wausau Daily Herald or the seven other Wisconsin dailies owned by Gannett know what having Gannett as your publisher is like. (Gannett purchased eight dailies from Thomson, which was no one’s idea of a quality newspaper publisher either, in 2000.) The smaller the newspaper is, the more it is like the next-door newspaper, including a couple pages of rewarmed USA Today news (which I call USA Yesterday) and a generic sports section.

I was in Appleton in June for the state baseball tournament, held at Fox Cities Stadium in Grand Chute. I picked up The Post~Crescent on two mornings, and found not one word about state baseball, despite the fact it was held down the street from The Post~Crescent’s office.

How does the Gannett sale apply to the state’s largest newspaper, the Milwaukee Journal Sentinel? Bruce Murphy:

Back in the fall of 2015, when the purchase of the Milwaukee Journal Sentinel by the Gannett chain was announced, I predicted significant cuts for the newspaper under the new ownership. Looking at the staff count at other Gannett papers, and adjusting for market size, I predicted the Journal Sentinel would lose 35 to 40 editorial staff.

I was wrong. Back then the Journal Sentinel had 117 editorial staff (editors, writers, photo, design and online people). Today that’s down to 88 staff, a loss of 29 staff, not quite as bad as I predicted. That may be because the JS has always rated near the top among newspapers in market penetration — the percent of residents subscribing to the newspaper — which makes it a slightly larger readership than its metro population might suggest. 

Still, that was a 25 percent reduction in staff, which is huge, and there is every reason to believe more cuts are to come. That’s because Gannett is having financial problems which may force more cuts, and because it could be absorbed by Gatehouse Media (under a merger plan where Gatehouse would get slightly more stock — just over 50 percent — and thus control the new company). And Gatehouse has a reputation for slashing staff even more aggressively than Gannett has.

But that deal may not go through, because MNG Enterprises, the owner of Digital First Media, has just purchased 9 percent of the stock of the parent company of Gatehouse Media, with the apparent aim of trying to kill the merger with Gannett. Why? Perhaps because Digital First has also had its eye on Gannett, but back in February Gannett’s board of directors rejected the buyout bid from the hedge fund that owns Digital First Media.

If Digital First ever got its hands on Gannett that would be disastrous. As L.A. Times reporter Matt Pearce tweeted back when it was bidding for Gannett: “Digital First Media’s hedge fund owner slashes local newsrooms to the bone, soaks them for profits and then spends money on things that aren’t journalism. If they’re knocking on the door, you should lock the deadbolt.”

With luck Gannett will avoid a buyout that ugly. But it is difficult to see any scenario — even if Gannett continues on its own — under which the JS doesn’t continue to bleed staff. Yet I don’t expect the JS to go out of business. From a market perspective there is sufficient reason to keep the paper going, yet little reason to resist more cuts in staff.

A newspaper like the Journal Sentinel has little market power in the digital ad world, which is dominated by Google, which makes nearly as much from advertising as the entire media industry. And that doesn’t take into account Facebook’s massive impact on where advertising dollars go.

Gannett’s strategy has been to build readership, market power and the ability to negotiate for better ad rates by buying up local newspapers, in essence trying to consolidate a declining industry. The company owns at least 104 local newspapers and more than 1,000 weeklies. Gannett’s goal is to gain as many local markets as possible to wrap some local coverage around its national USA Today stories, which can be republished at little cost in all of its local newspapers and weeklies.

It also consolidates costs by centralizing printing, circulation and copy editing for its newspaper chain. The JS newsroom is managed by the Gannett corporate office in Virginia. The JS website is also managed from the central office based not on the importance of a particular story, but on algorithms measuring traffic and then highlighting the most popular stories.

In short, there won’t be any sleepless nights at Gannett if a key story in city or county government is missed by the Journal Sentinel. First, because Gannet’s management doesn’t live in Wisconsin. Second, because the most popular stories at the Journal Sentinel are sports stories, typically seven to eight of the top 10 most popular stories on any given day. And third because covering city and county government is labor intensive and you can get as much (and probably more) readership at by simply republishing lifestyle or sports stories from USA Today or any of its 100-plus daily newspapers. 

When local and state news stories are published at jsonline, the algorithms take over: they might get buried by the website in half a day. The goal is to direct readers to the most popular stories and that’s typically sports and lifestyle, particularly dining, weather reports and then the national stories done by USA Today. It may also mean grabbing a story from another of its papers that did well and giving it prominence on the JS website.

The recent decision by the Journal Sentinel to put up a harder pay wall for most local and state stories has blocked all the free riders, reducing the readership even more for those stories, compared to those republished from other Gannett papers that have no pay wall.

So if you’re Gannett, from an online traffic perspective, whether it’s city, suburban or county coverage or education coverage, none of it matters much. The JS hasn’t had a full-time county reporter since Steve Schultze took a buyout some four years ago. And it barely covers City Hall any more. When future cuts come the 34 staff listed under News and Investigations will likely be the most vulnerable.

The staff you need to protect are sports reporters and the dining writer, because those stories get way more readership than news. The most important news beat is the state Capitol, because you have more potential readers impacted by state government, and there the newspaper has maintained two reporters. So far. Meanwhile there are 17 staff handling sports for the newspaper.

All of which I’m sure is killing Journal Sentinel editor George Stanley, who truly cares about covering the news, as well as the paper’s news staff. But when it’s not a priority for the owners, and when a reporter’s important but not-so-sexy story is soon buried on the website, it begins to seem silly to go to all that effort.

Apparently Murphy is OK with Stanley’s arrogance toward non-liberal readers, which is probably no surprise since Murphy is quite anti-conservative, and, for that matter, so is Journal Sentinel investigative reporter Dan Bice and whatever people make editorial decisions. Be that as it may …

Meanwhile, Gannett is doing all it can to push readers to drop print subscriptions and switch to digital readership. When everything is centralized and nationalized, an ever-thinner local print edition is not really a priority. Moreover print advertising is dying: the Sunday paper still looks fat, but that’s mostly adverting supplements prepared by businesses who simply pay an insert fee to be stuffed into the paper, which generates much less revenue than a display ad published by the newspaper.

While I have been describing the approach of Gannett, anyone who takes over that chain will operate similarly because of the brutal dynamics of the online ad market. The media is now competing with the massive international scale of monopoly companies like Google and Facebook, who can deliver ads to huge numbers of people, targeted to exactly the audience you want, say a young urban female interested in rock music. Which means news publications need the most online readership they can get, to give them more market power when competing for advertisers.

So Gannett or whoever buys the company has every incentive to keep every local newspaper going in those 100-plus cities. Gatehouse does look to combine papers in nearby cities, and should it take over Gannett would probably do some consolation of the latter company’s three newspapers in Wisconsin’s Fox Valley. But Milwaukee is far too large a market and too far from any nearby city to consolidate with another newspaper. Better to keep the JS going and simply trim its staff as needed.

All of which means the Journal Sentinel won’t go out of business, but will never again be what it once was. The paper is likely to continue losing staff and importance to readers who care about the news.

Temple poses an interesting idea that may work in some markets. His ignorance of how business works shows in the assumption that “nonprofit” means you don’t have to make a profit. “Nonprofit” means that profits aren’t distributed to owners and it doesn’t pay income taxes. “Nonprofit” doesn’t mean it can spend more money than it brings in, or even spend as much money as it brings in. Any venture that doesn’t bring in more money than it spends is doomed to eventual failure.

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