The Daily Walk of Shame: Gannett's New Way to Fail

I love newspapers. I'm a member of a newspaper family. (In fact, I met my now-husband when we were both serving time on the obituary desk.) Heck, I get The Washington Post delivered to my door daily, and The New York Times on Sundays. I can't imagine my life without them.

But -- and it pains me to say this -- the industry is in deep trouble.

The point was driven home for me while I was perusing some blogs connected with my former hometown newspaper -- and former employer of 10 years -- the Gannett (NYSE: GCI  ) -owned Tallahassee Democrat. One particular post from executive editor Bob Gabordi piqued my interest. He'd just come back from a Gannett meeting of senior executives and editors, and he was discussing his lessons learned throughout the conference.

Gabordi listed a few overarching takeaways, but if I were a shareholder, none would offer me much hope. Here's why.

1. New age?
First, Gannett would like to continue its transformation from traditional newspapers to a "new-age media company," which, according to Gabordi, will better align the business side of things with the newsroom.

"The two must be in sync -- the right plan and the right passion," Gabordi says. "This is what those who suggest the death of newspapers and our company itself miss. They cannot measure what they cannot see. Such passion doesn't fit neatly onto a spread sheet to be analyzed. It is not a number to be crunched. It is why they are wrong."

Pardon?

That sounds more like new-age philosophy than new-age business thinking. Passion alone does not produce profit for companies. (Ask any number of failed dot-com companies led by inspired and inspiring entrepreneurs.)

There's a lot wrong with modern-day newspapers at the moment, but the reporters' lack of passion is not the source of those problems. Instead, blame the devolution of newspapers' fundamental business models -- namely, their adamant refusal to move forward at the beginning of the digital age -- for landing them in their present mess.

2. Local vs. national
The other takeaway addressed in Gabordi's blog is Gannett's apparent decision to use "more and deeper" national news reporting as a supplement to their local stories throughout each of their newspapers. For a national newspaper like USA TODAY, that's a fine idea -- it's clear that national news should be the bread and butter of a national newspaper. But for local newspapers -- even ones in larger localities, like Miami -- national news is a commodity. It provides no competitive advantage, no niche. In my view, local papers can't compete on that playing field; instead, they should stick to the local communities driving their subscribership.

3. Strategic direction
Finally, I'm concerned that Gannett's leadership seems so unsure about its 21st-century strategy -- even though we're a decade in! Quoting from Gabordi again:

This week's conference was not about corporate executives issuing marching orders from on high; it was, in fact, anything but that. Over and over, executives at the highest level of our company were, it seemed, looking for approval on the direction we are headed. Journalists were asked to pick apart plans and fix what doesn't make sense. We did, and we will continue to do so.

It's certainly noble to seek buy-in and support from the troops. But investors -- and, frankly, consumers of news -- should be pretty ticked off by the way Gannett has handled its march into the 21st century. These seem less like improvements to the business model, and more like spaghetti on a wall.

Again, I love newspapers. But Gannett's recent meeting of senior leadership tells me that we're in for a continued roller-coaster ride of tweaks and changes to a long-suffering and long-unprofitable business model, without addressing the root of the problem -- consumers' changing behaviors of news consumption.

The ups and downs aren't limited to Gannett, of course. The New York Times (NYSE: NYT  ) has struggled to adjust to the Web, while The Washington Post (NYSE: WPO  ) has cushioned itself mostly with its massive (non-newspaper) Kaplan educational division. Indeed, Yahoo! (Nasdaq: YHOO  ) and Google (Nasdaq: GOOG  ) have a larger share of the online news market than even The New York Times, according to traffic site Alexa.

Gabordi says Gannett's "competitive advantage has always been our journalists' hearts," and I applaud that. But whether passion can be parlayed into financial security at this late stage remains to be seen.

Frankly, I'm doubtful. But I hope I'm proven wrong.

What do you think? Do newspapers have some fight left in them after all? Is Gannett on the money or drowning in despair? Share your thoughts in the comments box below.

Hope Nelson-Pope, the Fool's online coordinating editor and a member of a family of newsroom-type folks, does not own shares of any of the companies mentioned, though she did work at the Tallahassee Democrat for the better part of a decade. The Fool has a disclosure policy.


Read/Post Comments (9) | Recommend This Article (19)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 08, 2009, at 5:07 PM, OldMedia wrote:

    "we're in for a continued roller-coaster ride of tweaks and changes to a long-suffering and long-unprofitable business model"

    Long unprofitable? Did you even bother to look at Gannett's SEC filings? They made a profit of $0.30 per share in the second quarter and they're predicting something similar for Q3.

    I'd take your analysis a lot more seriously if you got your basic facts straight.

  • Report this Comment On October 08, 2009, at 7:12 PM, TMFLucky11 wrote:

    Thanks for taking the time to comment, OldMedia. While it's true that Gannett did see profits in Q2, I'd say that profit is less a result of its business model -- which is what I was addressing in this article -- and more a result of layoffs and other cost-cutting moves. In other words, the business model remains unsustainable in its current form ... and layoffs can't boost the bottom line forever.

    Fool on,

    Hope

  • Report this Comment On October 08, 2009, at 9:11 PM, rgr04 wrote:

    Besides, earnings per share alone is an inadequate measure of profitability if not coupled with analysis of other ratio.

  • Report this Comment On October 08, 2009, at 9:16 PM, ozzfan1317 wrote:

    I wouldnt invest in any of the Newspaper companys even if they survive I doubt there will be much for a shareholder to gain.

  • Report this Comment On October 09, 2009, at 11:23 AM, solitarygardener wrote:

    Survival of the newspaper that used to be delivered to just about everybody's door or mailbox is going to depend on an entirely new strategy. If 'going online' were it, then The NY Times and Washington Post wouldn't be hurting for revenue.

    Our local newspapers already publish a lot of 'hometown' news - the market niche suggestion in your article. That helps, but it doesn't make up for the loss of readership as subscription prices have risen and advertising revenue has fallen.

    I can't imagine life without a hard copy of the news.

    Thanks for your thought-provoking commentary, Hope.

  • Report this Comment On October 09, 2009, at 12:01 PM, TMFJoeInvestor wrote:

    Great piece, Hope!

  • Report this Comment On October 09, 2009, at 1:10 PM, Ycity wrote:

    The "profit" they claim is reduced expenses at the cost of the actual quality of the product they produce.

    The upper management stumbles around like three dozen blind mice as the internet comes calling, and all they can think to do is ruin the physical product, further reducing the incentive to actually pay for the thing, and roll out poorly designed websites for the online version. When newspapers decided to be all things to all people, that is when the first lines of the obituary were written.

    I hope Gannett and the rest of the newspaper world survives, but if I were in charge, the upper management at GCI would be first against the wall.

  • Report this Comment On October 09, 2009, at 3:19 PM, canovair wrote:

    Actually...I think Hope is way off target. I know these guys from the inside and Gannett will be around for a long time.

  • Report this Comment On October 09, 2009, at 10:08 PM, TMFBrich wrote:
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