As Gannett, GateHouse merges, newspaper savings persist

NEW YORK (AP) – Just one week after announcing its $ 1.4 billion acquisition of Gannett, GateHouse Media was again laying off journalists and other newspaper workers, possibly to look for the future that awaits employees in what will become the largest US newspaper company.

GateHouse and Gannett say that the merger will allow GateHouse to accelerate the newspaper's transition to digital while paying down huge sums of GateHouse borrowed to fund the acquisition. But it's unclear how that will make it.

Last week, more than two dozen newsroom employees and other workers were laid off by 10 newspapers, from Providence, Rhode Island, to Brockton, Massachusetts, to Oklahoma City. The Associated Press confirmed several of these layoffs with the affected employees, others in their newsrooms or union representatives. GateHouse did not announce the reduction in the workforce, and neither the company nor its owner, New Media, had any comment on this story.

Gannett also declined to comment, but pointed to previous public statements by New Media CEO Mike Reed where he said the merged company "will not only preserve but actually improve quality journalism."

The latest layoffs may not be directly related to the merger. GateHouse also reportedly laid off dozens of employees in May and in the winter. The income statement shows that revenues decline when the effect of acquisitions is removed.

Further cuts in the newsroom show that "GateHouse does not have a vision to increase revenue, only cuts costs," charged Andrew Pantazi, a Florida Times-Union reporter, a paper from GateHouse in Jacksonville, Florida, and the head of a union chapter there. "In the end, costs will run out."

Many in the newsrooms and communities that rely on the newspapers mourn the changes made by previous GateHouse cuts and support more. Others, who note that both readers and advertisers have left newspapers for more than a decade, claim that being part of a larger chain is the only way to survive for smaller articles that often struggle to migrate their publications on online.

For 15 years, GateHouse has closed five daily newspapers and closed or merged dozens of weekdays, according to "The Expanding News Desert," a University of North Carolina study on the state of local news coverage.

GateHouse, whose management includes current and past members of the Associated Press, is trying to reassure employees and investors. It says merging the two companies will lead to about $ 300 million dollars in annual cost cuts, and promises several sources of digital revenue to maintain the combined company and continue its commitment to quality journalism.

Some argue that such consolidation is the key to saving local journalism, which also competes for people's attention with TV and Facebook. "They ultimately support hundreds of individual publications that would not stand a chance to stand on their own," said David Chavern, CEO of the news publisher's trade group News Media Alliance.

But first, GateHouse must pay down debt, including $ 1.8 billion borrowed from private equity firm Apollo at a high interest rate to get the Gannett deal done. It has also promised to continue a dividend and said it expects it to rise.

GateHouse has kept competitors from adapting to a post-print world. Digital business accounts for only 12% of revenue, compared to 36% for Gannett. Such digital revenues include online subscriptions and newspaper site ads, as well as revenue from separate businesses such as online marketing and productivity tools for small businesses.

While the company says they will invest in digital, such investments are likely to be in the new Reed Phillips, managing partner of Oaklin's DeSilva + Phillips investment bank.

"The trend line for newspapers continues the erosion of revenue," he said, which is likely to lead to further cuts in the newsroom.

Newsroom staffing at U.S. newspapers has dropped 47% to 38,000 people in 2018 from 72,000 in 2004, according to Pew Research. Circulation has fallen in pace. Pew estimates week-day circulation fell nearly 48% over the same period to $ 28.6 million.

While a few national publications like Jeff Bezos-owned Washington Post, New York Times and Wall Street Journal have successful online operations, the situation is very different on smaller local newspapers across the country.

After GateHouse purchases a newspaper, cost cuts usually follow. Features such as page design and copy editing are relocated to external hubs that handle the work of multiple newspapers. (Other newspaper chains also have editing and page design hubs.) Critics say media companies backed by financial firms, such as GateHouse, are particularly aggressive in closing or selling newspapers in decline.

The Worcester Telegram & Gazette, which has been publishing in Massachusetts the second largest city since 1866, has been through four owners over the past decade, including GateHouse, which purchased it in early 2015.

Overall, the newsroom has shrunk to 25 reporters, copy editors and photographers from 47 during their four years at GateHouse, said Rick Eggleston, copy editor and head of the local union. "The mantra at GateHouse does more with less."

Having fewer reporters outside Boston who question state officials "hurts the rest of the state," said Tim Murray, president of the Worcester Chamber of Commerce and a former lieutenant governor of the state. "It's hard to hold people accountable."

Despite cost savings, GateHouse newspapers strive to engage readers who are constantly getting news on their phones. The Cape Cod Times in Hyannis, Massachusetts and Columbus Dispatch in Ohio were cited among "10 Newspapers Doing It Right" by the media trade publication Editor & Publisher, which cited innovative digital projects that have boosted readership.

For example, The Cape Code Paper launched a program that invited readers to submit investigative story suggestions. Similarly, the Fayetteville Observer in North Carolina started a new feature that invites readers to answer a relevant question it asks every Sunday.

But Observer, purchased by GateHouse in 2016, has struggled. Acquisitions followed the acquisition, and last week, GateHouse eliminated the job as the newspaper's publisher, and assigned this responsibility to an executive who already oversees four other papers in North Carolina.

Cape Cod newspaper, meanwhile, laid off the courthouse reporter Wheeler Cowperthwaite last week. Cowperthwaite said GateHouse offered him only $ 400 in severance pay – which, if he accepted, would have prevented him from seeking work in GateHouse newspapers for two years.

He rejected it.