Gannett gets in line with the print/broadcast divorce
In the last year, a number of media organizations have spun off their publishing divisions from their more lucrative TV businesses. As inVocus predicted last week in an article detailing the departure of broadcast divisions from print, Gannett has joined the trend.
Gannett, the largest newspaper publishing company in the country, announced Tuesday that its 87 daily newspapers and many non-dailies will be spun off next year into a tax-free distribution of assets to shareholders. According to Gannett’s press release, “Gannett believes the separation of the two mediums will result in material benefits to both companies, including:
- Creation of a stronger growth profile and a more competitive position for each company with enhanced management focus and resources more directly aligned with strategic priorities to drive innovation and value creation.
- Optimization of capital structures based on the profitability, cash flow, and growth opportunities of each independent company.
- Realization of more targeted investment opportunities for shareholders with trading valuations that more accurately reflect the distinctive characteristics of each business.
- Opportunity to pursue value-enhancing acquisitions in each company with fewer regulatory obstacles.”
The press release also noted that the publishing business should be “virtually debt-free” after the division, with any existing debt remaining with the broadcast company. USAToday.com reported that Gannett print advertising fell 5.7 percent in the second quarter, while broadcasting rose 87.9 percent. Additionally, Gannett is also set to acquire full ownership of Cars.com. Gracia Martore, Gannett’s president and CEO, said in the press release:
“… Cars.com doubles our growing digital business, while our recent acquisitions of Belo and London Broadcasting doubled our broadcasting portfolio. These acquisitions, combined with our successful initiatives over the past 2-1/2 years to strengthen our Publishing business, make this the right time for a separation into two market-leading companies.”
Newspaper industry observer Jim Romenesko shared a link to his Facebook page, featuring responses relating to the news. Jeffrey Weiss, from CNN, Religion News Service and The Dallas Morning News, commented:
“Here’s the most important clause in the release: ‘The Publishing business will be virtually debt-free …’ That is huge and very good news for the newspapers. Belo did the same thing several years ago, splitting TV from print and dumping the debt with the new broadcast company. It was a lifesaver for the Dallas Morning News. Because the truth is that most newspapers are still making money if the measure is operating costs vs. income, but a lot less than they once did. Not needing to pay off debt means the glide path gets tremendously extended.”
While most commenters agreed it was a good move for Gannett, others had mixed reactions, including Dylan Smith, editor and publisher of the Tucson Sentinel:
“Gannett’s move is a way to firewall their new core — TV — off from an inevitable print cliff. Extract some more money while you can, but don’t let the stock price of the larger company be touched when the presses get jammed up.”
Meanwhile, yesterday also marked the split at the Tribune Company. The rebranded Tribune Media Company now comprises Tribune Broadcasting, WGN America, Tribune Studios, Tribune Digital Ventures, WGN Radio and Tribune Real Estate. The print side, Tribune Publishing Company, includes 10 major daily newspapers such as the Los Angeles Times, Chicago Tribune and Baltimore Sun.
This division of broadcast from print is a continuing trend. Early last month, the spinoff of Time Inc. from Time Warner’s broadcast division was finalized, while last week, Journal Communications and E.W. Scripps announced that they had decided to combine their broadcast entities and spin off the newspaper holdings into its own public company.
It looks like 2014 is becoming the year of the print/TV divorce. Hopefully, the new model will benefit both sides of the media coin and not forecast an even rockier road for the publishing industry.
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