Gannett’s Q3 earnings were bleak, but CEO Mike Reed expects the worst is behind the publisher

By Kayleigh Barber

Gannett is optimistic the worst is behind it in terms of the economic downturn’s adverse effects on the company, a unique perspective in the industry considering several other publishers have stated that the fourth quarter has been off to as difficult a start as Q2 and Q3.

“We believe that peak decline… from a year-over-year perspective, is now behind us,” said Michael Reed, CEO and chairman of Gannett during the company’s third quarter earnings call on Thursday. Nonetheless, the company’s fourth-quarter forecast signals it expects a 4% to 10% drop in total revenue year over year.

The key numbers:

Total revenue hit $717.9 million, a 10.3% decrease from Q3 2021.
Total digital revenue was $256.4 million, 35.7% of the company’s total revenue, down 2.3% year-over-year.

Digital-only paid subscribers grew by 28.5% year-over-year to 1.98 million, representing $34.5 million, a 34.5% increase from Q3 2021.
Digital marketing solutions core platform revenues reached $118.7 million.

To no one’s surprise, advertising is down

About 36% of Gannett’s total revenue in Q3 – representing $256.4 million – came from its digital businesses, including advertising, subscriptions, affiliate, licensing and the company’s Digital Marketing Solutions platform. But that number was down 2.3% from Q3 2021, largely due to declines in digital media (AKA advertising), which was down 24.8% year-over-year. The scapegoat was “a softer programmatic advertising market” this quarter, according to Doug Horne, Gannett’s chief financial officer.

“That [digital ad revenue decline] was pretty significant,” said Justin Eisenband, managing director of the Telecom, Media & Technology industry group at FTI Consulting, even compared to other news publisher clients that his team works with. “I had seen it being not as exacerbated [by the current economic downturn] and not quite as deep as their declines.”

A unique struggle of news publishers has historically been the brand safety issues of running ads next to controversial or emotional topics. So while programmatic advertising has been a benefactor of many advertisers shifting their advertising budgets away from CTV during this midterm election period, according to Seth Hargrave, CEO of media buying agency Media Two Interactive, news publishers have not been included with the media companies that are on the receiving end of that influx.

“There seems to be no positive news. It’s all negative news. So brands are extremely tentative to be in that spectrum right now,” Hargrave said.

Meanwhile, Gannett’s Digital Marketing Solutions platform — a major focus for the company since June — earned $119 million in Q3, up 5.3% year-over-year. A majority of the business’s revenue is “recurring and structured on evergreen contracts, with monthly customer budget retention rates of 95%,” according to Reed, as it acts as a digital marketing agency for advertisers looking to reach local audiences.

Digital subscriptions: marginal but mighty

In October, the company surpassed 2 million digital-only subscribers, marking a third of its way to its goal of having 6 million digital-only subscribers by 2025.

Despite USA Today’s audience representing 126 million of Gannett’s 178 million average unique monthly visitors, …read more

Source:: Digiday