Gannet Q1 results capture the challenges of local media

by drm on April 19, 2009

Picture 12.pngGannet’s business gives it great visibility into the health of the local advertising market, making its first quarter earnings call a particularly good barometer of what’s going on in local advertising.

Revenue dropped from $1.7 billion a year ago to $1.4 billion. Ad revenue was down 34% to $722.8 million. Operating income was down 49% from $327.6 million to $166.2 million.

In their earnings call, management was candid and cautious. They have a plan that they are executing in the midst of terrific headwinds.

A few things stood out.

There is no visibility on the business.

Craig Huber – Barclays Capital

You usually have a pretty good sense of how U.S.A. Today is going with forward bookings. I was wondering how that paper is trending with ad revenues in the month of April. And then also could you speak about daily and Sunday circulation volume, what the percent change was in the first quarter and separating out U.S.A. Today?

Craig Dubow (CEO)

Just taking a look as I said a little earlier, the visibility in particular is extremely limited. We are seeing as I mentioned, a bit of leveling as we move forward but I would suggest at this point that April continues to have a very, very limited view as to what we’re seeing at this point.

Classified revenues are down dramatically.

In classified advertising, here too trends we highlighted through February continued into March. Declines in auto, employment and real estate were roughly 39%, 62% and 61% respectively. The exchange rate however, negatively impacted our results in the quarter. If you exclude the impact of currency that would have moderated revenue declines in each of the classified categories I mentioned by an average of about five percentage points.

While this is a cycle, building a multi-platform asset will help the company increase their benefit during the inevitable, but as-yet un-seeable, rebound.

Timothy Stabos – Stabos Asset Management

With the common stock at $3.65, the belief it seems is that you’re not going to get these ad revenues back. As a shareholder, I have my own opinion on that, but I think it’s important for management to go on the record. What percent of this decline in ad revenues in the view of management is secular versus cyclical?

Craig Dubow

We have talked a lot about the cycles that everything is going through. We are I think up front in suggesting that there has been a portion of secular change across the board here and certainly when you look at moving through that, we will then begin to cycle clearly on the real estate side at some point here in the near future or in the future. Let me not term it as near.

But we will see that cycle. And I think there is a combination. The clear message here is why we’re trying to ramp as rapidly as we can on the digital side. We know where our core is. We are trying to make certain that we are going to be on the multi platform opportunity at this point so we can take advantage then from both directions.

Our believe is that if things are leveling a bit, hopefully sometime at the end of the year and beyond, we may begin to see some advertisers poking back into this in some pretty significant ways, but all of that is to come as we look to the future.

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    [...] ViralHousingFix placed an observative post today on Gannet Q1 results capture the challenges of local mediaHere’s a quick excerptGannet’s business gives it great visibility into the health of the local advertising market, making its first quarter earnings call a particularly good barometer of what’s going on in local advertising. Revenue dropped from $1.7 billion a year ago to $1.4 billion. Ad revenue was down 34% to $722.8 million. Operating income was down 49% from $327.6 million to $166.2 million. In their earnings call, management was candid and cautious. They have a plan that they are executing in the midst of [...]

  • http://american-art.linkedz.info/2009/04/19/gannet-q1-results-capture-the-challenges-of-local-media/ Topics about American-art » Blog Archive » Gannet Q1 results capture the challenges of local media

    [...] ViralHousingFix placed an interesting blog post on Gannet Q1 results capture the challenges of local mediaHere’s a brief overviewGannet’s business gives it great visibility into the health of the local advertising market, making its first quarter earnings call a particularly good barometer of what’s going on in local advertising. Revenue dropped from $1.7 billion a year ago to $1.4 billion. Ad revenue was down 34% to $722.8 million. Operating income was down 49% from $327.6 million to $166.2 million. In their earnings call, management was candid and cautious. They have a plan that they are executing in the midst of [...]

  • Adam Japko

    Dan, this is such an interesting exchange to post at this juncture. Looking back at the way technology media executives (which I was one of) described recovery in the middle of a combined secular and cyclical 2001 advertising collapse may offer some insight. Then, it was easier for the media and advertising community to speak confidently about the tilt to less expensive and measureable digital marketing in a recovery because advertisers were already deep in the midst of abandoning print for online when the collapse hit and the media had been responding with product development for years. It seems like the local media is not as far along, and therefore the pace of change could have more of an “all of a sudden” feel. Throw in the emerging social media, and things might need to advance at warp speed not having the head start that technology media had. Even with a probable bump in local print revenue in recovery, the next down cycle after this one could cement the weakness in print performance along with the dominance of local digital marketing solutions that are now being devised . At least, that is what happened in technology. Media execs that reinvented their companies in 2001 are weathering the current downturn better than their competitors that relied on the bump in print revenue that occured coming out of the 2001 collapse. That print revenue is all but gone now.

  • Bill Pryor

    I am visibly squirming reading Dubow's response. The question is exactly the right question — and whle the answer is un-knowable precisely, it would have been nice to see a ballpark estimate or range given (though maybe not in this venue). Scary because unlike other industries that are concerned only with a cyclical economy, this one has much more to worry about.

  • http://www.viralhousingfix.com danielrmccarthy

    We've all been in the dark and had to trust our instincts and convictions to move through it. He can't really say what I think he wants to say: We have no idea when this will end, we're executing on a plan to try to develop new business sources that work for our advertisers and consumers, and we're going to keep at it as long as we're able.

  • http://www.viralhousingfix.com danielrmccarthy

    We've all been in the dark and had to trust our instincts and convictions to move through it. He can't really say what I think he wants to say: We have no idea when this will end, we're executing on a plan to try to develop new business sources that work for our advertisers and consumers, and we're going to keep at it as long as we're able.

  • http://www.viralhousingfix.com danielrmccarthy

    We've all been in the dark and had to trust our instincts and convictions to move through it. He can't really say what I think he wants to say: We have no idea when this will end, we're executing on a plan to try to develop new business sources that work for our advertisers and consumers, and we're going to keep at it as long as we're able.