Gannett Joins the Slide

Count Gannett (NYSE: GCI  ) among those newspaper publishers increasingly drained by the drip, drip, drip of lower advertising revenues and reduced corporate earnings. While major publishers' declines are rarely substantial year over year, they've nonetheless become nearly universal in the industry -- at least for this particular quarter.

In the Q1 2007 results Gannett reported late last week, the company earned $210.6 million in net income, or $0.90 a share, compared with $235.3 million, or $0.99 per share, a year ago. The company, which publishes about 90 newspapers and operates just nearly two dozen television stations, essentially saw a dip in contributions from both segments (factoring out results from acquisitions made in the past year).

On the newspaper side, advertising revenues would have been almost 2% lower had the company owned the same properties in the first quarters of both 2006 and 2007. Classified revenues fell 3%, and national advertising revenues dropped by 4.8%. At USA TODAY, the company's largest newspaper, advertising revenues were off 7.9%.

In broadcasting, reported revenues increased slightly, but on a same-asset basis, those revenues fell 6.3%. Without the benefits of advertising related to either the Olympics or national political elections, broadcasting revenues decreased somewhat in the most recent quarter.

The trends at Gannett, as at Media General (NYSE: MEG  ) , New York Times (NYSE: NYT  ) , and Tribune (NYSE: TRB  ) , depict steadily softening advertising results. Of course, in the current climate, the soggy housing and real estate markets have made material contributions to falling ad sales.

But blaming the bursting of the years-long housing bubble for newspapers' atrophying condition seems like pointing the finger at a colder-than-normal winter to explain some retailers' softening same-store sales. There's some truth to the contention, but it's only part of the picture. It's more likely that the Internet has effectively stolen a considerable portion of both newspapers' and TV's audiences. Housing bubble or not, the Internet's "thievery" is a long-term phenomenon, and it's almost certain to accelerate.

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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions and comments. New York Times is a former Motley Fool Income Investor pick. The Fool has a disclosure policy.


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