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How much more savings can GateHouse squeeze out of News Journal?

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Local business leaders are holding their breath to see what form the “investment in newsrooms” will take at The News Journal once the acquisition of Gannett Inc. by rival New Media Investment Group is completed later this year.

The owner of The News Journal announced Aug. 5 that it will be acquired for $1.38 billion in stock and cash by New Media, which does business as GateHouse Media. The Gannett name will be retained going forward.

News Journal owner Gannett and GateHouse predicted that they’ll be able to accelerate a digital transformation and realize hundreds of millions in annual cost savings while continuing to invest in newsrooms, thanks to the increased scale from the combination, according to a press release announcing the deal.

What that means exactly for The News Journal and Gannett’s other publications remains to be seen but observers say the two companies hope to attract more digital subscribers and advertisers at a time when newsrooms across the country – The News Journal included – have been buffeted by staffing cutbacks. Locally, The News Journal has seen a significant decrease in daily and Sunday print circulation in recent years.

A Forbes magazine columnist took a dim view of the merger’s prospects. In a column titled “Why the Gannett-GateHouse Merger Will Speed the Demise of Local News,” NYU Stern School of Business Professor Michael Posner said “GateHouse and its New Media Investment group have also followed a business model that seeks to maximize financial returns by reducing the costs of production. Inevitably, this has meant a reduction in the number of reporters covering local news.”

Posner quoted from studies by the Knight Commission that said “more than 25,000 fewer journalists are working today in communities across the country than in 2007, even considering employment growth from digital news outlets” and from the University of North Carolina that said the United States has “lost more than 1,800 local newspapers since 2004. Today, more than 1,300 communities across the U.S. are without local news coverage from a paper.” Posner concluded that “this week’s merger will almost certainly accelerate these negative trends.”

Mike Feeley, executive editor of The News Journal and Delaware Online, referred questions on the impact of the merger on the local newsroom and on its current level of digital and print subscriptions to a Gannett spokesperson, who did not return calls.

“I knew The News Journal in its heyday and built great relationships with their reporters,” said Bill Freeborn, who has been heavily involved over the past 34 years in Delaware politics, business, and most recently in the nonprofit sector as head of the Wilmington Land Bank. “They always had their finger on the pulse of the community and while that’s been lost in recent years with the shift to digital and a change in ownership, it will be fun to see if they [rediscover] the value of local coverage, telling a story,
and community relationships.”

After recalling past News Journal reporters and editors like Ralph Moyed, Celia Cohen, and John Taylor, Delaware Business Roundtable Executive Director Bob Perkins said “the success of a newspaper is determined by the quality of the reporting, not the number of ads in the paper. Delaware needs a robust statewide paper because ‘sunshine is a wonderful disinfectant’ and through this merger they will hopefully rediscover the importance of reporting and overcome the cutbacks and the trends in media.”

Nevertheless, says Caesar Rodney Institute Chairman John Stapleford, “the unanswerable question in the digital age is whether a return to more substantive reporting will attract readers and thereby drive up advertising revenues.”

More than a dozen other local business, government, and nonprofit leaders declined comment, citing a variety of reasons that would not be fair to outline without direct attribution.

Following completion of the merger later this year, The News Journal will no longer be Gannett’s only Delaware newspaper.  In Delaware, GateHouse Media publishes the Dover Post, Hockessin Community News, Middleton Transcript, Milford Beacon, Smyrna/Clayton Sun-Times, and Sussex Living. Gannett publishes The News Journal, the Daily Times, which covers Sussex County from Salisbury, Maryland; the Delaware Coast Press; and the Delaware Wave.

GateHouse has initiated major cuts at three of its Pennsylvania papers — The Bucks County Courier Times, The Doylestown Intelligencer and The Burlington County Times, according to the Philadelphia Business Journal.

The combined company will own more than 250 daily newspapers and hundreds of weekly and community papers in 47 states, reaching more than 145 million unique visitors each month and significantly expanding the existing USA Today Network. 


Gannett employees received the following memo on Monday afternoon, according to the Poynter Institute for Media Studies, which describes itself as a “global leader in journalism education and a strategy center that stands for uncompromising excellence in journalism, media, and 21st-century public discourse.  The memo has been edited to focus only on the acquisition and does not include some staffing changes.

Dear Colleagues,

Today we made two significant announcements for the future of
our company.

First, together with our second quarter 2019 financial results,
we announced an agreement under which New Media will acquire Gannett. Following
the close of the transaction, both New Media and its operating subsidiary
GateHouse will be rebranded and operate under the “Gannett” brand. The combined
company will be headquartered in McLean, Va., with a continued corporate
presence in existing locations.

Current New Media Chairman and Chief Executive Officer Michael
Reed will remain Chairman and CEO of the public company. Our own Chief
Financial Officer Ali Engel is expected to become CFO of the public company
upon closing.

We are confident that this transaction will create tremendous
value for both Gannett and New Media shareholders, yield benefits for our
audiences, clients, communities and, importantly, lead to significant
opportunities for Gannett employees as part of an expanded, better-resourced
organization.

Transaction with New Media: A Strong Partner to
Drive Growth in the Digital Future

The transaction with New Media represents an exciting new
chapter for Gannett. Like Gannett, GateHouse is one of the largest publishers
of locally based print and online media in the United States. Together, we will
create the largest U.S. local news organization by number of titles and
circulation and create a leading digital media player, with 263 daily
publications across 47 states and Guam and USA TODAY, reaching more than 145
million unique visitors every month, in addition to Newsquest. We see
significant opportunities to leverage the combined company’s enhanced scale and
financial strength to accelerate our ongoing digital transformation and drive
growth. And importantly, we will have an expansive journalism network of
national and local reporters with the resources required to deliver unique and
award-winning content for local communities and national audiences.

New Media recognizes our journalistic excellence, admires the
sophistication and quality of our people and appreciates the continued progress
we have made in our digital transformation. Importantly, Gannett and New Media
share many of the same values, including trust, integrity and a
focus on providing impactful journalism to the communities we
serve. Our companies also share the same strategic vision that a digital
transformation of the newspaper industry is vital to preserve the future of
journalism.

The new combined company represents a significant expansion of
the USA TODAY NETWORK, adding such award-winning brands as the Austin
American-Statesman, The Columbus Dispatch and the Providence Journal.

Our key acquisitions, including ReachLocal, SweetIQ and
WordStream, have driven innovation and made Gannett a leader in providing
advertising and marketing solutions. With the addition of New Media’s UpCurve
and GatehouseLive, this transaction will position our company as THE trusted
digital marketing partner to local and national businesses.

As we worked with New Media on the key elements of this planned
merger, our discussions centered on the commitments that have earned us the
trust of the communities we serve. The combined operating company will be
guided by a focus on high-quality journalism, our ongoing digital
transformation and strong corporate governance. Importantly, New Media will
also be expanding its Board to include three Gannett directors and, as noted
above, the combined company will retain the Gannett name and headquarters. We
should be proud of New Media’s strong interest in our brands and our team’s
outstanding work.

In short, we have found in New Media a strong partner and
cultural fit for Gannett as we come together with a shared mission to create
the nation’s largest local media organization and best-in-class marketing
solutions partner.

Please keep in mind that today’s announcement is just the first
step. The transaction is expected to close by the end of 2019, subject to the
satisfaction of customary closing conditions, including receipt of regulatory
clearances and approval by the shareholders of each company. Until then, we
will continue to operate as separate companies, and it will remain business as
usual for all of us at Gannett.

Your Board and management team are deeply grateful for your
dedication and focus throughout countless external distractions. Your
contributions and care for our clients, communities and each other make a
positive difference every day. And you have our sincere thanks as we continue
to serve those who depend on us.

Sincerely,

Jeff Louis

Chairman, Gannett Board of Directors

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1 Comment

  1. Avatar photo
    Jeanette Robinson August 12, 2019

    It seems ominous to me that our local newspaper is owned by a large corporation because with more profit, the ability to control content is enhanced. Large corporations have power to strongly influence government policy with huge “contributions” to candidates and members of Congress as well as buying power to create legislation that will benefit them through high-paid lobbyists.

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