New Media Investment Group and Gannett ended their merger on Tuesday, positioning top executives to move forward with plans they believe will transform the new company's local and national news brands, including USA TODAY, into a reinvented digital media powerhouse.
The merger creates the largest US media company by print and one that will fight for the country's largest online news and information audience.
The new company's CEOs ̵
"Our mission is to connect, protect and celebrate our communities," Bascobert said. "Big journalism is really at the heart of that mission. The question really becomes, what is the sustainable and exciting business model that runs that mission?"
The company faces significant challenges – namely, how to counter the news industry's severe decline in print revenues with new sources of digital dollars.
Approved Agreement: Shareholders in the United States Today, Gannett and New Media Investment Group approve merger
The more than 250 daily publications that are part of the new Gannett – such as Detroit Free Press, The Columbus Dispatch, Arizona Republic and Austin American-Statesman – and hundreds of weekly publications have grown online brands in local markets. Now Gannett needs to find ways to make those connections more revenue.
Outlining a Strategy
Bascobert outlined a strategy based on lead generation in local markets – similar, he said, to the approach used by the home services site Angies List and Yelp, a reviews and directory service.
For example, do you need a plumber? A Gannett publication can help you find one and then earn a fee to help establish that connection.
"This is really us beginning this pivot toward more of what I would call a software-based business model" instead of "an advertising-based business model," said Bascobert, who pursued a similar model while president of XO Group, owner of wedding planning website The Knot.
His vision would represent a significant overhaul. In the first nine months of 2019, more than 51% of the total company's revenue came from advertising and marketing services.
But a wholesale invention is needed because of the "collapse of the newspaper advertising model," which is "the most fundamental business problem facing local news," said Jim Friedlich, CEO of the Lenfest Institute for Journalism, a nonprofit that promotes innovation in local journalism and owner The Philadelphia Inquirer.
Nicole Carroll, United States TODAY Chief, Center, and Maribel Perez Wadsworth, President of the United States TODAY Network, and United States TODAY Publisher, right, celebrate while the Arizona Republic with the United States TODAY Network received the Pulitzer Prize for Explanatory reporting for the Wall during a celebration in the US TODAY Newsroom following the announcement of the Pulitzer Prizes in 2018. Carroll was the Chief of the Arizona Republic during the coverage of The Wall.
The new Gannett, which offers digital marketing services through brands such as ThriveHive, ReachLocal and WordStream, will need to continue downward to become a sophisticated digital marketing provider, Sa Friedlich.
When local businesses need help reaching potential customers, Gannett's representatives must be able to help them. Otherwise, they will go to Google, Facebook, other online giants or other service providers.
"Building a new local marketplace on a large scale requires a long-term commitment of expertise and financial resources," Friedlich said in an email. "None of this will be easy," he added, but if Gannett can generate significant revenue from local marketers, "it won't just be their news properties, but the industry as a whole."
Throwing Overlapping Costs
I But in the short term, the success of the merger is related to the company's plan to throw out $ 275 million to $ 300 million in overlapping costs on an annual basis over the 18 to 24 months. It is crucial to pay off a $ 1.8 billion loan from private equity firm Apollo Global Management that New Media used to fund the acquisition.
These cost savings will come from a wide range of areas, including corporate functions, news operations and what Reed called "centralized" services where there is significant duplication. [19659003] New Board: New Media and Gannett Announce Board of Directors for Combined Company
He said the overall cost savings target is "very, very accessible", partly because it is only 7.5% to 8.5% of it combined the company's total revenue, compared with 10% to 15% in a typical corporate merger.
Concern for further cuts
Journalist advocates fear heavy-handed redundancies in already tense newsrooms, which provide content that drives readership, and provide digital fuel ads and attract paid subscriptions online and in print.
Jeff Gordon, a regional vice president for The NewsGuild, whose region represents reporters at four GateHouse newsrooms, expressed concern last week that the deal would cause further stress on newsrooms that have already met budget cuts. GateHouse, the operating division of New Media, ran the company's publications.
"The obvious concern the Guild has expressed is all debt incurred in the merger, which creates pressure to drive cash flow and could lead to further cuts," said Gordon, whose region includes Colorado, Illinois and other Midwest states and Great Plains.
Reed said he is confident the company can achieve its cost-cutting goals "without deep cuts in the newsroom."
Bascobert said that the new Gannett is "Committed to providing high quality journalism," including investigative work and meaningful local reporting.
"These are the things people subscribe to, and we think we deliver," he said.
Michael Silberman, senior vice president of subscription trading and technology provider Piano, who has counted New Media as a client, said that the new Gannett needs to cut unnecessary costs while investing in journalism to increase subscriptions.
In the third quarter, Gannett's digital subscription increased by 27% to 607,000 compared to the same period the year before. New Media's subscription rose 65% to 217,000 in the same segment.
"Our basic belief is that even in a small community, there is an opportunity to create value in the form of a subscription and get people to pay," Silberman said in an interview last week before shareholders approved the merger. "In some ways, that's the basis of the merger."
As print publishing and advertising continues to decline across the industry, the future of physical newspapers is clouded. But Bascobert said "print is a good business today" and generates profits for Gannett.
Can the company, which will be based in McLean, Virginia, cut unprofitable printing days on some of the publications, as has been done elsewhere in the industry?
"We are constantly looking at different versions of frequency of delivery or alternative delivery methods, but at this time it is a good product," Bascobert said. "There is nothing we are looking at right now to change any of these variables."
Contributor: Sarah Taddeo, Rochester (NY) Democrat & Chronicle
Follow United States TODAY reporter Nathan Bomey on Twitter @ NathanBomey .
