The FINANCIAL — In the past two years, several media companies that own both print and broadcast properties have spun off their newspapers and other print products into separate publishing companies to isolate this troubled sector from their more profitable broadcast stations. And this strategy has largely paid off.
Gannett Co. Inc., Tribune Company, and E.W. Scripps Co., which together own more than 100 newspapers and more than 70 television stations, all made the decision in 2014 or 2015 to spin off their print properties into separate companies. An analysis of the spinoffs shows that the broadcasting components of the original companies (which also retained many digital properties) have mostly outperformed their publishing counterparts in terms of operating profit margins and stock prices, according to Pew Research Center.
In 2014, before spinning off its publishing properties, Gannett had an operating profit margin of 39%. Following the 2015 spinoff, Gannett’s broadcasting arm, Tegna, had a similar operating profit margin of 37% – nearly three times that of its publishing sibling (13%), which retained the “Gannett Company” name. (Operating profit, often referred to as “operating income before depreciation and amortization,” represents the portion of every dollar in sales that accrues as profits, before paying taxes and investors, and excluding figures that fall outside the company’s typical operations.)
The differences were even larger for Tribune, which had an operating profit margin of 35% in 2013, before its spinoff. After the spinoff, in 2014, their broadcasting company (Tribune Media Company) had a similar margin of 31%, which was more than four times that of its publishing sibling, Tribune Publishing (recently renamed tronc).
The E.W. Scripps Co. story is a bit more complex, in part because the broadcast successor’s merger-related costs were four times those of the publishing successor. In 2014, the company owned 14 daily newspapers and 21 television stations and had an operating profit margin of 13%. The following year, it merged with Journal Communications, which owned the Milwaukee Journal Sentinel and 14 television stations, and spun the resulting 15 daily newspapers off as Journal Media Group. In 2015, Journal Media Group had a profit margin (7%) that was lower than that of E.W. Scripps Co. before the spinoff, but higher than that of its post-spinoff broadcasting successor (4%). (In 2016, Journal Media Group was acquired by Gannett.)
Stock prices also are an important barometer in determining how tenable a company’s financial future is, since raising money from investors through the sale of shares can be used to fund future investments.
When looking at the closing stock prices, the pre- and post-spinoff patterns for Scripps follow more closely than those of Gannett and Tribune. Each newspaper company had a stock price that was much lower than those of their former parent company or their broadcast sibling. Six months after its spinoff from Tribune Company, Tribune Publishing was trading at less than half the price of Tribune Media ($21 vs. $59); Gannett Co. was trading at about two-thirds of the price of Tegna ($17 vs. $26); and Journal Media Group was trading at less than half of the price of E.W. Scripps Co. ($8 vs. $17).
Comparisons between companies are never exact, and in this case the three spinoffs were structured so that each of the new print companies has a considerably different mix of debt and equity. Still, these findings mirror broader trends in the newspaper and broadcast news industries. As detailed in the 2016 State of the News Media report, while newspaper advertising revenue is declining, broadcast revenue is increasing – some of which is tied to a surge in retransmission fees as well as steady television advertising revenue.
This declining revenue has had some impact on journalistic resources. In particular, newspaper newsroom staffing has been steadily dwindling. Between 2007 and 2014, full-time newsroom staff at daily newspapers, according to the American Society of News Editors estimates, fell from 52,600 to 32,900, a 37% decrease.
Television news, on the other hand, has grown. Staff at local TV news stations grew from 24,500 to 27,600 between 2007 and 2014, a 13% increase, according to the Radio Television Digital News Association.