Early on in his fourth quarter earnings call for investors, New Media Investment Group CEO Michael Reed singled out the Sarasota Herald-Tribune for its award-winning investigative reporting.
“We are so proud of the role our publications play within the communities they serve as the dominant sources of comprehensive high quality local news and information,” Reed read from his script. “These local brands are the cornerstone to our organic growth strategy allowing us to leverage our strong community standing in ties, our highly recognized brands, and our large in market local sales force, which is helping us further expand our digital and service offerings for small businesses.”
Of course, Reed didn’t mention the round after round of cuts the Herald-Tribune newsroom has suffered under New Media ownership and GateHouse Media management. Nor did he mention that the Herald-Tribune was an award-winning newspaper long before New Media bought it and began the wholesale bloodletting of journalists.
Reed addressed that payroll slashing with typical CEOSpeak: “Subsequent to the quarter close, we have implemented a cost reduction program that is expected to reduce expenses over $3 million in the first quarter of 2017 and over $27 million for the full year of 2017.”
In other words, expect the layoffs to just keep coming at its newspaper like the State Journal-Register, Peoria Journal Star, Rockford Register Star and Pekin Daily Times. Expect to see fewer and fewer reporters working in the communities and less and less reporting on topics vital to the residents.
Here are some other highlights:
- For a change, Reed didn’t claim that New Media stock is undervalued by Wall Street. Its share price has been hovering in the $15 to $16 range, a far cry from the $40 or more some experts predicted for the stock when it was first issued.
- Reed talked up the increased New Media dividend ($0.35 this time around), which is funded by the cash flow from local newspaper properties. Rather than reinvest in its news-gathering operations and reader retention, the company bleeds profits from these properties through round after round of cost reduction.
- The company is still banking heavily on circulation revenue. While print circulation continues to plummet across the chain, the company offsets that with price increases and paid digital subscriptions. That is not a sustainable model, particularly given the dramatic newsroom reductions across the chain. People won’t keep paying more for less. They just won’t. Also, newspaper reader demographics skew old. Younger people are getting the information in other places.
- Reed noted the company suffered massive declines in print advertising, led by the industry-wide decline in “pre-print” advertising from major retailers and classified advertising. While that decline may slow in the years ahead, Reed admitted that it won’t reverse.
- He once against talked up “organic growth” in the company, but this time he didn’t put a timeline on it. Instead Reed stressed the diversification of revenues, including growth in digital ad sales, Propel Marketing, commercial printing and event presentation.
- Reed also talked up the company’s expanding BridgeTower Media group of business publications. Those properties aren’t subject to the steep retail advertising declines that imperil the newspaper business.
- Some of the company’s healthy cash flow will continue flowing into acquisitions. One by one, New Media/GateHouse is picking off family-owned operations and stripping them down for cash flow. That “inorganic growth” will feed the revenue bottom line for years to come as the grand consolidation of newspapers continues.
Fortress Investment Group, now owned by Japan’s Softbank, will continue reaping huge external management fees from New Media/GateHouse for as long as company lasts. Such is the reward for raising capital for expansion. Fortress earned $19.4 million in compensation last year from New Media after raking in $39.7 million the year before.
Fortress owns about 1 percent stake of the New Media stock, so it is not overly concerned about the stock price tanking. And yet Fortress employs Reed as the New Media CEO, raising reasonable questions about his commitment to producing shareholder value. (Although it should be noted that Reed has bought 60,000 shares of the stock the past few months at a cost of nearly $800,000)