No split interest at Gannett


CEO Craig Dubow made it clear in his quarterly conference call that Gannett has looked at various options, such as splitting off the company’s TV operations, but that any such move has been rejected. Comparing Gannett’s situation to Belo, Dubow noted that Belo’s TV operations generate two-thirds of its cash flow, so it makes sense to separate the TV group from the newspaper business. "When you look at our portfolio, we’re virtually the opposite," he noted. And Dubow said the splitting of Scripps, which will keep newspaper and TV together, while splitting off cable and interactive, is creating something very much like Gannett in one of the two companies. So, he said, while Gannett’s management has discussed possibilities, "our position has not changed."

Broadcasting was one of the strong points for Gannett in Q3, with revenues down only 3.4% to 189.5 million, despite the loss of over 19 million in political advertising from a year earlier. TV revenues would have been down 5.1% on a same station basis, since two stations were acquired in 2006. Results from Gannett’s newspapers in the UK also helped counter a drop in US newspaper ad sales. Newspaper ad revenues were down 5.6% to 1.19 billion. In all, Gannett’s Q3 revenues were down 3.8% to 1.81 billion and net income fell 10.5% to 234 million, or one dollar and a penny per share. That still beat the Thomson/First Call analysts’ consensus by one cent.

TVBR observation: Gannett’s broadcasting operations would be a fairly substantial company on their own, at least by TV sector standards, but broadcasting is only about a tenth of Gannett’s total revenues. So, splitting off the TV group would still leave the much larger company weighed down by the valuations that investors ascribe to the struggling newspaper business. We note that Craig Dubow came from the TV side, so he understands the role that video is playing for newspapers in the growing broadband world online and the in-house expertise of 23 television stations is a valuable resource for the 85 daily newspapers to tap into.