- Associated Press - Monday, April 18, 2011

A prolonged slide in Gannett Co.’s newspaper business overshadowed improvements in the company’s broadcast and online operations as the publisher of USA Today reported a sharp drop in first-quarter earnings.

The results released Monday marked the 17th straight quarter in which Gannett’s publishing division has brought in less revenue than the previous year.

Most other major newspaper publishers also have been struggling during the same stretch, which included the longest U.S. recession since World War II. With the economy slowly recovering, newspapers are still trying to adapt to a marketing shift that has driven advertisers from print to less expensive and more abundant alternatives on the Internet.

Digital revenue from newspaper websites and other businesses grew 12 percent, but that wasn’t enough to offset a 7 percent drop in newspaper advertising revenue, the bulk of which still comes from print. Net income fell 23 percent.

Gannett, which publishes more than 80 daily newspapers including USA Today, is the first major newspaper publisher to detail its performance for the first three months of the year. The New York Times Co. is scheduled to release its results Thursday. McClatchy Co., publisher of The Miami Herald and The Sacramento Bee in California, is set to report next week.

To cope with its downturn, Gannett has eliminated thousands of newspaper jobs in the past few years and imposed other cost-cutting measures such as requiring employees to take unpaid furloughs.

Gracia Martore, Gannett’s chief operating officer, told analysts Monday that about 1,000 workers at the company’s smaller newspapers will take furloughs in the current quarter, which ends in June. That’s 3 percent of the company’s work force of 32,600.

Gannett imposed more drastic furloughs in the first quarter, when most workers at all its U.S. newspapers except USA Today and the Detroit Free Press had to take one week of unpaid leave. The company did not say how many workers took the leave.

The cost-cutting has enabled Gannett to remain profitable and earned the company’s top executives larger bonuses. Gannett CEO Craig Dubow, for instance, received a $1.75 million bonus last year, a 21 percent increase from $1.45 million in 2009.

Shareholders also stand to benefit from the savings. During Monday’s conference call, Martore said that with the belt-tightening and an economy that is gradually improving, the company may be able to use its cash to buy back stock or restore part of the quarterly dividend. The dividend had been cut to 4 cents, from 40 cents, two years ago.

That prospect seemed to please investors. After initially falling on the first-quarter earnings news, Gannett shares gained 59 cents, or 4 percent, to close Monday at $15.39. The stock has dropped 75 percent since Gannett’s publishing revenue began falling in 2007.

Gannett earned $90.5 million, or 37 cents per share, in the three months ended March 27. Net income was $117 million, or 49 cents per share, a year earlier.

If not for charges to account for staff cuts and facility closures, Gannett said it would have earned 41 cents per share. That figure was a penny below the average estimate among analysts polled by FactSet.

Revenue fell 4 percent to $1.25 billion from $1.3 billion.

Gannett’s broadcast division saw revenue decline 2 percent to $164 million, in line with what the company indicated last month.

But the company said television revenue increased 7 percent after excluding about $24 million in revenue it got last year from political campaigns, the Winter Olympics and the Super Bowl. The Super Bowl was on Fox this year, and Gannett doesn’t have any Fox affiliates among its 23 TV stations.

Gannett also saw gains from its investments aimed at selling more online advertising and connecting with the growing number of readers on smartphones and other mobile devices such as Apple’s iPad.

The company said it had $251 million in digital revenue _ online ads sold by its newspapers and TV stations, plus $158 million in revenue from standalone businesses such as online help-wanted service CareerBuilder. That was up 12 percent from about $224 million a year ago.

Gannett, which is based in McLean, Va., will try to spur more digital ad growth with a service called dealchicken.com, a clone of such popular online coupon services as Groupon and LivingSocial. Such services offer different discounts from merchants each day. After testing dealchicken.com at The Arizona Republic, Gannett is linking it to its newspapers and TV stations in 57 other U.S. markets.

Despite the expansion, Gannett’s digital operations still aren’t making enough money to compensate for the deterioration in print advertising and circulation.

The company’s publishing revenue, which includes ad revenue from the newspapers’ websites, was down 6 percent, or $61 million, to $930 million. By contrast, digital revenue for the entire company grew about $27 million; Gannett would not break down the portion from newspapers’ websites. The comparisons exclude revenue from The Honolulu Advertiser, which Gannett sold after last year’s first quarter.

The falloff in publishing revenue mirrored a management forecast made last month.

Gannett executives didn’t forecast when publishing revenue might increase. Dubow and Martore said the biggest problem facing newspapers is the fragile state of the economy in many U.S. markets, particularly in real estate. Automobile and employment advertising were among the bright spots for newspapers.

In a change underscoring the demise of print advertising, Gannett stopped disclosing the number of ad pages sold by USA Today, the nation’s second largest newspaper.

Dubow and Martore said showing the volume of USA Today’s print advertising no longer is a good way of tracking the newspaper’s success because it is pouring more resources into its website and mobile apps. Gannett said USA Today’s digital revenue rose 19 percent in the first quarter, although the company would not provide the dollar amount.


AP Business Writer Barbara Ortutay contributed to this report.

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