Thursday, February 23, 2012

No coincidence: Gannett announces stock buyback program on same day it announces local paywalls

Gannett's new CEO Gracia Martore is clearly no dummy. The media giant's chief executive yesterday outlined the company's new paywall strategy and at the same time announced a 1.3 billion stock buyback program.

Not surprisingly investors cheered and Gannett's stock rose in trading.

Martore made the dual announcements at an “investor day” conference in New York. Martore rolled out plans to put its local newspapers behind paywalls, and effort Martore says will generate $100 million for the company.

“News in printed form is in secular decline,” the NYT reported Martore as saying. “However, news delivered the way consumers want it is growing and thriving.”

“While Gannett isn’t particularly well known as a ‘digital powerhouse,’ I’m here to tell you we generate over $1 billion in digital revenues and have double-digit growth and double-digit margins,” Martore pronounced.
I have been pretty clear about my own views on paywalls – I'm not totally against them, but I see only two scenarios where they can succeed.

The first is where the reader feels they have a financial interest in receiving the news behind the paywall. Financial newspapers such as the WSJ or FT fits this description. Also, certain B2B websites would fit this model, as well. McGraw-Hill's construction news websites, if they offered bid news, would be a "must buy" for contractors wishing to bid on new projects, for example. Some B2B websites might also fit this model, though to be honest, far too many B2B websites are where press releases simply go to die.

The second scenario is where the news is clearly superior to that offered on free websites. The NYT might fit this description, as would local news sites that offer vastly superior coverage of local news. One could argue that this second scenario is simply extension of the first in that the reader again feels that the value of the information demands the investment in spanning the paywall.

Based on these two scenarios Gannett would have to argue that its local news is of such value that readers will be happy to pay to access the news found on the other side of the paywall. Based on Gannett's editorial cutbacks over the years it would be hard to argue that Gannett is committed to putting out a quality editorial product and that their readers see their local papers as head and shoulders ahead of any local web based news products.

In other words, putting Gannett's papers behind paywalls is good news for Patch and other local news sites.

But investors loved the news, no? Well, some media outlets saw it that way. The editor who wrote the headline for Variety clearly did, though it should be said that Jill Goldsmith's article clearly mentions the stock buyback announcement right in the lede.

It was a smart move on Gannett's part to pair these two announcements. Otherwise the news would have simply been that Gannett was building paywalls and, well, what really are the chances that this strategy is going to work? If they really thought that why isn't USA Today, the company's flagship, also going behind a paywall? (Because it is the one news site with decent traffic numbers and the company doesn't want to risk losing its digital ad dollars.)