Gannett Gets More Digital Subscriptions But Circulation Revenue Is Down

From a post on by Rick Edmonds headlined “Gannett shows robust digital subscription growth but circulation revenues are slipping”:

Gannett reported Friday digital subscription growth of 145,000 in the second quarter—roughly the same as The New York Times earlier in the week.

However, the nation’s largest newspaper company—with 250 dailies including USA Today—saw circulation revenue fall 9.4% compared to the same quarter in 2020.

The obvious explanation is that print circulation and the revenue it generates are falling fast, with new revenue from its digital transition strategy not yet making up the difference.

CEO Mike Reed said in an earnings conference call with investors that the digital subscription push at the regionals is still “in very early stages.” A paywall on premium articles at USA Today only moved out of beta a month ago. So low-cost introductory subscriptions likely make up a good share of the 145,000.

The gains brought the total number of paid digital subscriptions systemwide to 1.4 million. Reed has set a goal of growing to 10 million by 2025. The New York Times also has a 10 million print and digital-only goal for 2022 and now has passed 8 million.

A second Gannett strategy is to diversify its revenue beyond traditional news. It took a big step in that direction with a five-year sports betting deal with the new U.S. operation of Tipico, a German firm.

Tipico has agreed to spend $90 million promoting the service to Gannett’s customer base, and Gannett can earn an added commission as Tipico adds regular users.

Reed said that the company’s events business, centered on high school sports, has been slowed by the COVID-19 pandemic and its resurgence, but he sees growth resuming later this year and next….

Gannett still carries a lot of debt—$1.4 billion—as a result of the GateHouse/Gannett merger in November 2019. The loans are being gradually paid down but required $35 million in interest payments for the quarter.

The market responded positively to the news (as it had earlier in the week to The New York Times’ second-quarter report) with shares trading up 10% midday.

The two smaller publicly traded newspaper companies—Lee Enterprises and Dallas News Corporation (formerly A. H. Belo)—had earlier reported roughly break-even operations for the quarter. They too are emphasizing digital transformation and growing paid digital subscription growth.

The results highlight that, except at the Times, digital has a potential future payoff but is not generating net increases in revenue yet….

Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years.

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