In new data, a stark portrait of digital’s newsroom

Two years ago this month, Gannett unveiled what it called the newsroom of the future: the Information Center, a strategic shift designed to bolster readership and advertising sales by emphasizing digital over traditional print distribution.

“Breaking news on the Web and updating for the newspaper draws more people to both those media,” CEO Craig Dubow told employees at the time. “Appealing to more and different readers helps bring us more and different advertisers.”

Now, new data show, Dubow’s Information Center strategy is failing to turn around Gannett’s biggest and most troubled business: the community newspaper division; its 84 dailies plus USA Today account for nearly 80% of revenue, and 65% of GCI’s 46,000 employees.

For the first time, Dubow is conceding that online advertising sales are now falling across those newspapers, following months of increasingly narrow gains. Online sales fell 7% in the third quarter from a year ago, Dubow told Wall Street media stock analysts in a Friday teleconference.

It was Dubow’s starkest concession that a cornerstone of his strategic plan was not delivering the goods, raising troubling questions about Gannett’s viability as the 102-year-old newspaper publisher steams into uncharted waters.

Newspaper losses accelerate
The fall in newspaper online revenue came despite higher website traffic, company documents show. Gannett captured 15.6% of the U.S. Internet audience last month, up from 15% in September 2006, according to Nielsen//NetRatings.

What’s more, the online revenue decline comes as newspaper advertising losses accelerate: Ad sales plunged $210.6 million, or 18%, in the third quarter from a year ago — the single-biggest drop since sales started falling early last year.

Meanwhile, Gannett’s purely digital businesses aren’t making up the difference, other data show. Digital sales totaled $77.6 million, up from $17.2 million in last year’s third quarter. This newly created revenue category comprises jobs site CareerBuilder, ad services company PointRoll, plus other ventures.

Tweak vs. fatal flaw
The bottom line: Gannett’s profit plunged 32% in the third quarter on a 9% decline in operating revenue, shaking investor conference, and guaranteeing another round of job reductions by year’s end, Chief Financial Officer Gracia Martore told the Friday teleconference.

Advocates of the Information Center model might argue that the newspaper division’s revenue losses would have been even worse without a big change in how Gannett gathers and distributes news. Rather than abandoning it, they’ve begun revising the concept.

But a mere tweaking will not address the Information Center’s fatal flaw: It was to be launched while Gannett simultaneously reduced employment in the newspaper division. Dubow didn’t make that clear in his original Information Center memo. It became obvious over the past two months, as GCI cut more than 1,000 newspaper jobs through layoffs and other means.

You cannot do this simultaneously and succeed: build an innovative digital start-up (the websites, moms microsites, Metromix, etc.) while also putting out 85 traditional daily newspapers — all at Internet speed, but with fewer employees, shoveling as much cash as possible to investors.

Gannett is now spreading the Information Center strategy to its TV stations and U.K. newspapers, even as the company plans more job cuts amid a likely global economic downturn. In Friday’s earnings statement, Dubow made clear he won’t turn away from that strategy. “While our results this quarter reflect the difficult and volatile economy both here and in the U.K., they also highlight our determination to move forward with our strategic plan,” he said.

And, yet: Is it determination — or desperation?

Please post your thoughts in the comments section, below. To e-mail confidentially, write gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green sidebar, upper right.

[Image: yesterday’s News-Press in Fort Myers, Fla., Newseum. The paper was one of the test sites for the information center concept]

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21 Responses to “In new data, a stark portrait of digital’s newsroom”

  1. Anonymous Says:

    I’ve said since day one there’s too much emphasis on the I-net. People still want the paper regardless of what higher ups (whoever they are) say and want. People don’t want to read a story only to get to the end and read “for more, go to ***.com” or for pictures go to ***.com. Not to mention ads costing way too much in good times…never mind businesses being as strapped as everyone else. Want more ads, make them attainable.

  2. Anonymous Says:

    I have to say for me here in NJ I do not see that the write for web first was ever implimented. Seems to me across our newsroom, the advertising managers and the finance department are still more focused on the old way of life which is our downfall. Online will not make up the whole of print revenue the newspaper industries have enjoyed over the years but with less of the newspaper is a dying market we have got to save every penny and more of working together with print and online being evenly combined we could as a newspaper industry pull this out. This is of course IMHO a person who works in online advertising.

  3. Anonymous Says:

    Using these numbers to judge the future of the Web as a news and advertising vehicle is just plain wrong.

    We are in the deepest economic valley we have seen for more than a generation. The pillars of newspaper advertising: real estate and autos are the hardest hit.

    The question isn’t what is going on today — it’s awful. The question is how do you build a structure that will be able to compete once the economy turns around.

    I still believe that the biggest problem for news organization’s was not recognizing the Web’s importance a decade earlier. That’s especially true regarding classified advertising, the heart of the franchise, but also the most vulnerable piece, as it turns out.

  4. Anonymous Says:

    9:21 No, the point of Jim’s post is it is not lining the pockets of the higher ups. It is a business disaster. Take a look at the figures. The I-net is producing less revenues for more effort. That is not a recipe for success, especially in a downturn. Now the question management faces is do they roll the dice and double down their bets on a disastrous business plan that holds no promise of providing a solid revenue base, or do they devise something different. I think the reason we have not yet seen layoffs is that they have not decided yet which way to go. The stupid bastards should have thought it through before implementing the information centers, and I am afraid they are so mule-headed they are going to plow ahead even though it will drag GCI down. They once had a successful product. They ruined it.

  5. Anonymous Says:

    Not to be a naysayer, but this is the way things will continue to go. I, personally, do not want newspapers collecting on my doorstep. Pretty much the only way I get my news is online.

    The problem: Gannett wasn’t built around the lean, fast moving, quick to adapt business model needed to be successful online. They’re trying to create that, but do it while maintaining the declining print model. As a consequence, both suffer. Newspaper quality sucks. Our websites are a cluster of cobbled together piles of crap.

    Ahead: More cuts. and cuts. and cuts.

  6. Anonymous Says:

    Publishing news first on the web – including data center info, expanded content, etc. for free, then in print over the next day or two or three is a model that needs to change.

    In fact, this model has only reinforced that I no longer need to pickup future editions. Don’t believe it? Then, place yourselves in the mindset of an average reader and try it for a while with a print paper you read everyday. At first it’s tough (especially for this newspaper publisher), but after awhile it’s great. You get all the news for free*, typically a day or two sooner – anywhere you want, and you can block the ads. My spouse significantly balked at first, and now she’s a believer. Weak moments whereby one of us gets a print copy (including free home-delivered samples), only reinforces the switch. It’s great for consumers, but not for print revenues.

    Yet, Gannett still clings to a model that delivers barely 5% of its total revenues (including Career Builder, Cars.com, moms, etc.) and there’s no sign of any real, exponential growth in the near future. It’s no wonder the stock price has been declining for sometime.

    *Free, except for papers like the WSJ. They have a great model for subscribers and non-subscribers. And, I’ve (personally) paid for the online portion for years. It’s time Gannett adopted it and invested more back into print again too.

  7. Anonymous Says:

    Sure. Put everything online and to heck with the hard copy. Know how many people will be left in the dark? Maybe that’s the agenda above all else? How can a once proud profession, and an equally proud company, turn it’s back on what birthed it, and it’s history? Sure. Put it online. Then gobbledegoop the web site so no one can muddle through it. For those who read the news online…when do you do it? When you’re supposed to be working? And our national productivity is where?
    Gannett, and newspapers as a whole, need to be newspapers again. Want to play in other arenas? Fine, but do it separately.

  8. Anonymous Says:

    9:21am: Our site sounds like your place too. They’ve replaced skilled veterans with kids still in college, or just out. Most have no experience. For example, our videos are horrendous. They’re just “raw” clips, cut together with no transitional continuity or narration. They look nothing like the local TV stations’ product, of course.

    And it’s no surprise that we never see them listed in our daily Top 50 hit lists.

    If they’re looking to lay off IC people for the new year, and truly focus on Least Bang for the Most Buck, video would be first to go.

  9. Anonymous Says:

    It’s not the fact that digital in some form is probably the future that I dispute. But I do totally disagree with the way one Gannett paper (USA TODAY) is handling the transition. From what I see, the implementation of all the details that either can make or break such a grand transition were totally ignored or grossly miscalculated. The little procedural things, bigger workflow issues, staffing, sensitive cultural (online vs. print) hurdles…they were all mishandled. That has created havoc in some segments of the editorial operation that is hurting both platforms. It has also created a kind of numbness that is not healthy for any individual or business. But as many people on here have said in the past, feedback from staffers and midmanagers has not been welcomed throughout this merger. Therefore, the train continues to fall off the tracks, the products continue to worsen, morale continues to sink, passive aggressive behaviors are beginning to bloom and lack of confidence in the people making these so-called plans is sinking. Again, it’s not the goal or objective that is off base, it’s the way in which we’ve gone about pursuing it that is absolutely horrendous. Just throw people together and hope it works out. Great planning!

  10. Anonymous Says:

    I'm not a writer, but as a newpaper employee, friends (and people who know I work in the business) constantly tell me their complaints about our product…to which I say " I'm just a flunky trying to get the paper out the door and on the street."

    However, yesterday my friend's 75 year old Mother & a 50+ YEAR SUBSCRIBER, said something to me while we were watching the Jets game that gave me a chill.

    She said -in her thick Irish accent- that she was considering canceling her 7-Day Subscription because "there is nothing in the paper anymore." She told me she might keep the Sunday Only subscription to get the coupons…..that's what we've come to…..buy us for the coupons. Then she told me she could print most of her coupons on the computer.

    If we're losing this type of FOUNDATION READER…who is using our ADVERTISER'S ONLINE COUPONS….and we're selling our used single copy delivery truck on Craigslist……We're F*CKED!!!

  11. Mr. Yesterday Says:

    Most interesting analysis, Jim.
    But here some follow-up questions: Why did Gannett wait until 2007 to roll out its digital/Internet plan?
    That was pretty late in the digital information game. And why does Gannett, which says the Internet is the future, continue to scrimp and save on applications? Why for instance, do some papers still have people on blogger? Why is there inadequate training for “mojos?”
    Gannett has half-assed its way into the Digital Age from Day one. Wasn’t this business model doomed from the start?

  12. Anonymous Says:

    The “how” of delivery isn’t nearly as important as the “what.”

    Without meaningful content, no news delivery system is going to attract readers and advertisers. That’s why the cost-cutting actions of Gannett and others in the industry (including TV networks) is back-asswards. They are gutting the corps of content-providers.

    So it’s no wonder audiences are dwindling, no matter the method of delivery.

  13. Anonymous Says:

    When Gannett bought CNI, they bought into two of the most profitable newspaper digital departments in the country. What’s happened since then? Instead of allowing those sites to influence Gannett, the process has been in reverse. Gannett dreams of having a national network of sites that entices national advertisers to buy space in bulk. Those sites are almost foreign to local advertisers, who’ve either been priced out of smaller buys or have been ignored because of Gannett initiatives on the process.

    From my perspective, this is clearly an issue of Gannett trying to fix something (over and over again) that was not broken.

  14. Anonymous Says:

    GCI does NOT have a strategic plan.

    We’re a sailboat in irons, sail pointed directly into the wind, and the deckhands all wonder why the boat doesn’t move.

    I don’t care what Dubow says.

    There is no plan. We don’t know who we are, what we’re trying to accomplish and what path we’ll take to get to our version of The Promised Land.

    To me, that’s the most frustrating part of working for GCI. I don’t really care about Dubow’s golden parachute or Gracia’s bad attitude or even a colossal drop in revenue.

    We desperately need a plan. We need a vision. Without that, we’re doomed.

    If we’re going to go out like this, at least fight against the problems. Good lord.

  15. Anonymous Says:

    Jim,
    This is a really good insight. Thanks for doing what you do. I wonder what the Chief Digital guru Saradakis must be thinking as he is the freshest face on the executive management team. You should try and get an interview with him and ask him for his thoughts. People in our office like him and he seems really candid. I am almost certain he would be able to shed some light on the future of Gannett, Digital and media consumption.

    Will the higher ups at Gannett offer him up for a one-on-one with Hopkins?

  16. Anonymous Says:

    GCI had a plan, throw everything into the web and ignore the print. It failed!

  17. Anonymous Says:

    The trouble with digital is that revenue has collapsed for Internet ads. It cannot survive without contributions from those working for the dead-tree products or TV.
    So what does corporate do? Does it cut digital at a moment when it is a bridge to the future, or does it cut those who provide the content? These sites really suck up content and I don’t see they are used. The best bet to get dollars corporate wants still comes from the dead-tree product, in spite of all the cutbacks.

  18. Anonymous Says:

    I don’t think “content” will get digital or print anywhere. The news sites need real news, not content.

  19. Anonymous Says:

    It made me laugh so I need to respond to 9:21am’s AM “And they even cut the Christmas party”.
    We haven’t had a company party of any kind at Wilmington in over 12 years and at this point the cafeteria is a joke. Now with the layoffs we no longer have personnel to stock back issues so try finding a actual paper in your own office! No perks are norm in most papers.

  20. Anonymous Says:

    We don’t have a cafeteria, we never had a Christmas party and the only things I’ve received from this company in 10 years is a clock (in 2000) and a t-shirt.

    I’m not complaining. As long as I get my paycheck, I’m fine.

  21. Anonymous Says:

    I read somewhere on here that the IC at one location thinks 245 viewers of a video stream was a great number. Is this the same video that took 14 man hours to produce?

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