What a Gannett-GateHouse merger would mean

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“(W)ere it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter.

                                                                                                     Thomas Jefferson 

The state of newspapers is making news, and once again that news is not good. A Pew Research Center analysis published this month found that employment in newsrooms overall is shrinking, and it is nearly all due to a decline in newspaper employment.    

TV news is holding its own, and employment at “digital native” (i.e., online only) publications has seen some growth. Yet newspaper employment has seen a 47 percent drop—in just a 10-year period.

And, of course, the shrinking of newspapers did not begin in 2008, but rather years earlier. According to a report by the Bureau of Labor Statistics, newspaper employment had already shrunk by 25 percent from January 2001 to December 2008.  

What’s more, with the shedding of about 3,000 news industry jobs from January to May, this year is on pace to be the worst year for employment losses in the industry since 2009 (when the wake of the Great Recession was decimating all sectors of the economy). 

Despite the relentless shrinking of their payrolls, newspapers have continued to struggle financially as they have tried to adjust their traditional business models to today’s evolving realities. That dynamic has given rise to a wave of consolidations and acquisitions, making many local newspapers vulnerable to the financial expectations of public markets or private equity investors.

In January, the Beacon reported on the increasing financial struggles of Gannett (owner of the Democrat and Chronicle), which included a 97 percent drop in net income from 2014 (before the split into two separate public companies, separating its newspapers from its TV and key digital assets) to 2017. At that time, Gannett (NYSE: GCI) had just become the target of a hostile takeover bid powered by Alden Global Capital—a hedge fund and newspaper chain owner sometimes nicknamed the “destroyer of newspapers.” On the day of the takeover bid, Jan. 14, Gannett’s stock reached its 2019 high, valuing the company at about $1.36 billion. 

Gannett was ultimately able to thwart the hostile bid from Alden Global Capital, but in the ensuing four-month period its valuation dropped to $881 million (a 35 percent decrease). Yet, over the last two weeks, multiple reports (including one from Gannett-owned USA Today) indicate that Gannett is likely to merge with GateHouse Media, and that the merger could be finalized as early as this summer. 

The merger would have consequences both nationally and locally. On the national front, the merger would bring together the chain that owns the largest number of individual papers (GateHouse) with the chain that has the largest national circulation (Gannett). And as the chart below from Axios demonstrates, the combined company would dwarf other newspaper chains. It would own one out of every six newspapers in the country, and would control more than four times more papers than its next largest competitor.    

If it happens, the merger is also likely to be impactful locally. First, while GateHouse keeps a rather low profile around here, this large national newspaper chain is headquartered in Pittsford. And—as reported in the Columbia Journalism Review—it appears that GateHouse will be the acquirer of Gannett and therefore control the combined assets. (GateHouse Media is the operational arm of New York City-based New Media Investment Group (NYSE: NEWM)). Further, it’s speculated that Mike Reed, CEO of New Media Investment Group—who is listed on LinkedIn as being Rochester-based—may become the CEO of the merged company.

If this is the way things play out, Rochester will be home to the nation’s most powerful newspaper chain. Not since 1986—when Gannett moved its headquarters from Rochester to Virginia—has a Rochester company been in such a position to exert influence over national conversations. 

Yet the more grim reality of this merger is that it will lead to one company owning nearly all local papers (the D&C, the Rochester Business Journal, the Daily Record, the Greece Post, the Brighton-Pittsford Post and 15 other local publications). Further, given that both GateHouse and Gannett have not been shy in recent years about consolidating operations and driving layoffs, it is not hard to guess what will come next for local publications.              

4 thoughts on “What a Gannett-GateHouse merger would mean

  1. Pingback: Journalism’s profound decline at the local level - Rochester BeaconRochester Beacon

  2. It’s good for stock prices and my 401k. The system is working exactly as it’s designed to do, so why worry? Just remember, “there is no such thing as society”. (Margaret Thatcher)

  3. Not sure I agree, Bob Volpe. Gatehouse bought our local paper, the Austin Statesman, last year. After layoffs and consolidations, the paper is much smaller, with no in depth coverage of much of anything. Austin is the Texas capital. It should have a paper that reflects that, with plenty of state as well as local coverage.

    The D&C is already a bare bones publication. I am curious to see just how much more money Gatehouse can possibly squeeze out of it. And what that company has done to the RBJ is sad.

  4. The speculation that Rochester might wind up with a one-voice newspaper front is probably true but this is not so terrible since The D&C along with it’s previous partner, the Times-Union were very close to one voice for years.

    The rapid decline of the D&C the last few years has been gut-wrenching. There’s no in-depth local reporting, pages full of articles from other NY State communities that have no relevance here, a slant toward articles/photos looking back to Rochester’s history, and a visual explosion of the obituary pages. This seems to give the paper a senior citizen slant which makes sense since us old folks are the few people who read newspapers these days.

    Now a resident of Sarasota FL where Gatehouse owns the very excellent Sarasota Herald Tribune, we enjoy the full reflection of what a paper should be like, The Publisher is engaged and very visible in the community, the balance among local, state and national news is terrific and key columnists make a difference as lonely Dave Andretta does in the D&C. The Sarasota County and area’s citizenry’s average age is also very advanced

    Gatehouse bought the Sarasota paper several years ago and it’s held it’s own in terms of quality and the traditional impact that Jefferson implied in his quote as a vehicle for making government transparent and informing citizens of what’s really happening.

    Maybe the merger will help Rochester in the same way.

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