Newspaper companies are transforming their business models to better position themselves in the current multi-platform media environment. These companies are focusing on mobile devices, online advertising based on user experience and personalized content to lower their dependence on traditional advertising revenues.
The companies are also streamlining their cost structures, strengthening their balance sheets and restructuring their portfolios to offset declining revenues and shrinking market shares. This has compelled many newspaper companies to undertake cost-cutting measures such as headcount trimming, pay cuts, furloughs, voluntary retirement programs and closure of printing facilities. Publishing companies have been offloading assets that bear no direct relation to core operations.
Let’s take a look at what’s happening in the publishing industry and how newspaper companies are adapting to the changing face of media in the race for survival.
Industry Game Plan
Newspaper publishing companies are diversifying their revenue base. They are striving to expand their presence in broadcasting and digital products with the aim of lowering dependency on soft print media business and traditional advertising, thereby reducing susceptibility to economic conditions. In line with this, Gannett Co., Inc. (GCI - Free Report) , The McClatchy Company (MNI - Free Report) , Tribune Publishing Company, now known as tronc, Inc. TRNC and Hearst newspaper group joined forces to form a new national advertising network – Nucleus Marketing Solutions – with the goal to assist advertisers in reaching out to a mass audience.
On the restructuring front, companies are even separating their broadcasting and digital properties from the sluggish print business as a means to ‘unlock value.’ TEGNA Inc. (TGNA - Free Report) was formed after the parent company, Gannett spun off its Broadcasting and Digital and Publishing units into two separate entities. The publishing division retained the name of the parent company, Gannett Co., Inc.
This is not the first time that any media company has spun off its publishing unit. Earlier, News Corporation (NWSA - Free Report) and Time Warner also separated their broadcasting and digital properties from their sluggish print business.
Not every company is ‘shrinking to grow,’ with many companies taking the consolidation route to create scale economies. Gannett is an example of this trend when it acquired Journal Media Group, Inc., the owner of the Milwaukee Journal Sentinel and other newspapers. The acquisition of Journal Media Group added 15 dailies and 18 weeklies in 14 local markets under Gannett’s portfolio, increasing the daily and Sunday circulation. Gannett has made other acquisitions since then as well.
Pay As You Access
“To read further please subscribe” has steadily emerged as a viable option for many industry players. Many smaller players would like to go this route, but find it hard to pull it off. Only operators with a reputation for quality and unique content have been successful in this way. The online subscription model provides consistent revenues and helps offset some of the weakness on the advertising revenue side.
With a strategic and steady newspaper budget, we could see fewer layoffs, increased focus on web and local content, improved subscription and concentration on profitable circulation. We observe that newspapers are turning more subscriber-oriented, offering reports in line with readers’ choice. We expect paywall strategies, new pricing techniques and product innovation to generate more revenues for the newspaper companies.
We further believe that separating the publishing division will help to better exploit the potential of broadcasting and digital businesses. Once the companies are spun off, they have separate management teams and a much more defined capital structure that provide ample room for strategic decisions related to any investment, acquisition or a new endeavor that can benefit that particular business, and in no way affect the other.
Consolidation too has its benefits of a stronger base and wider reach. No wonder, publishing companies are boosting their strength to optimize business profits.
As you can see, there are plenty of reasons to be optimistic about the newspaper publishing industry over the long term. But what about investing in the space right now?