Last year when I wrote about Gannett, the US’s largest newspaper chain had a tough story to tell. It was shedding staff to cut costs and financial performance was shaky. There were signs of growth in digital subscriptions, but not enough growth to be confident a turnaround was on the cards.
For the first half of the 2023 financial year, Gannett has had – at least taking this week’s financial reports at face value – a better story to tell, posting two consecutive quarters of year on year improvements in net income (if not revenue). Perhaps even more encouragingly, both quarters saw the company raise its full year outlook, first to somewhere between a loss of $15mn and a profit of $15mn, and then to between a loss of $10mn and a profit of $20mn. It’s also been paying down its debt faster than expected, something that has not gone down terribly well against a backdrop of layoffs. But it does at least ease some financial pressure.
Yet that optimism for the full year to come has drained away in its third quarter results released yesterday 2 Nov.), with Gannett now predicting somewhere between a loss of $20mn and breakeven.
Yes, predictions are just that, and even a $20mn loss would be an improvement on the $78mn loss reported in 2022. But there are also other areas of concern in its latest figures and, indeed, its performance over the year to date.
Even in those optimistic first two quarters of the year, digital revenues were basically flat, accounting for roughly 40% of total revenue. They were up slightly year-on-year in Q3, but only by 2.7%. Perhaps the most worrying figures, however, are for digital-only subscriptions. Year-on-year, digital-only subs in the first quarter were up 15.4% to 2.02mn. But, in the following quarter, that figure fell to 1.95mn, and only recovered slightly to 1.96mn in the third quarter. Digital only subscriptions are clearly stalling.
Digital-only subs are of course only a small part of Gannett’s total revenues, $40mn out of a total of $652.9mn, but that, really, is the problem. Gannett is diversified to some degree (it has a big marketing services division accounting for about 20% of total revenue). But the business it is known for – the one that makes it important to US democracy – is newspapers, and, in particular, local and regional titles. Keeping those open as viable enterprises has to involve digital subscriptions of some kind. Print is in decline, and digital advertising – even if it can be a long-term basis for some media – is ill-suited to local news outlets which inevitably can’t compete on scale.
Gannett, of course, knows how important digital subscriptions are, and last year’s progress was encouraging. The company’s leadership can’t be happy with this year’s performance, and must know that number needs to start growing again. Yet two recent stories suggest that there are competing pressures that may not exactly help make digital subs the strong and bigger part of the business they need to be.
The first was the posting of job ads for two specialist journalist roles at Gannett, reporters each dedicated to covering one of Taylor Swift and Beyonce. There is a certain sense to boosting coverage of two of the world’s most famous women, for which there is undeniably huge demand for stories. If the Athletic can hire reporters focused on individual football-soccer teams, why not also double down on covering individuals who also regularly fill stadiums?
But it’s not the kind of role you invest in if your priority is growing and keeping local subscribers who care about news. If, as unions claim, Gannett has reduced the rest of its workforce by almost half over the preceding three years, it’s going to need an awful lot of Swifties to decide that only Gannett is producing the Taylor content they crave, to make even a tiny dent in the number of local news consumers who notice quite how reduced local coverage is.
Then there are the more recent reports that suggest AI-generated posts have been popping up on Gannett’s Reviewed product recommendation site. The articles were first noticed by Reviewed staff, who saw posts with bylines they didn’t recognise, for people with seemingly no online presence. Running those through AI-detection systems suggests that at least some were likely written by computer. Gannett has outright denied the stories are AI-generated, but admitted they were produced by a “third party marketing agency” and were not labeled appropriately.
Neither of these stories are necessarily a big deal on their own. Gannett might not be the first media organization to make questionable forays into either AI or third party marketing content, nor the first to hire dedicated beat reporters for eyebrow-raising subjects.
But both point to a company experimenting in controversial ways of tapping audiences that are unlikely to sign up for digital news subscriptions, while that area of its business is stagnating. It’s hard to see how Gannett’s long-term future isn’t tied to its digital subscriptions, and getting those back on the path to growth surely has to be the company’s top priority. What will they do and when?
