Welcome to the first day of New Gannett, Nashville. Pay no attention to the machinations behind the curtain.
Yesterday Gatehouse and Gannett consummated their shotgun marriage, closing on a $1.2 billion merger to create the largest local-news publisher in the U.S. Gannett was put in play at the beginning of this year when hedge fund Alden Capital made an overture to Gannett that was ultimately rejected. But with the company hemorrhaging revenue and needing to provide a new narrative to stockholders, Gannett began exploring an acquisition or merger. The deal with Gatehouse, which owns more than 140 newspapers, means that one in five U.S. newspapers will be under the Gannett name.
But it doesn’t come easily or cheaply.
Gatehouse is under the management of private equity firm Fortress Investment Group for the next two years, and Gatehouse’s CEO will lead the new Gannett. The financing for the deal comes via private equity firm Apollo Global Management, and the terms include an 11.5 percent interest rate on the loan. In the run-up to the merger, company executives floated that $300 million in savings in the first year will be required to make the deal work.
Where will the cuts come from to pay for the deal? CEO Michael Reed says that he doesn’t believe that there will need to be deep cuts in the company’s newsrooms, but that would belie recent history. Gannett has a history of fourth-quarter layoffs, including here in Nashville.
Gannett daily The Tennessean is still running with a number of open positions, including the investigative slot vacated by Dave Boucher a year ago and the general assignment/Metro slot vacated by Nate Rau last month. Some inside the daily’s newsroom think those openings may be enough to stave off local cuts, but plans are being made around the company.
Michael Anastasi is in charge of the Gannett papers in Tennessee and Florida, and one of the people responsible for making those plans. In an email to Tennessean staff today, Anastasi inadvertently pasted in copy meant for someone else, detailing why one Florida journalist would be cut over another one. “Additional information has come to light that indicates that of the two people in the same/similar position, [name redacted] is a more effective editor and works the publications and community with the highest audience potential,” he wrote.
Those likely aren’t the only conversations being had around Gannett today. In places like Florida and Ohio, where there is significant overlap between the two companies, expect them to — in the parlance of private equity ownership — “eliminate redundancies.” And more than ever, cuts in newsrooms may depend on digital metrics — clicks, to be blunt. Reed told The New York Times that “the ability to measure production at the reporter level allows us to get stronger and healthier and do more quality local journalism with the same amount of resources, potentially.” Translation: Don’t expect Gannett to be rushing to add resources to their newsrooms; The Tennessean is as big as it will ever be.
We’ve seen evidence of that digital strategy — and quest for clicks — for the past few years, with The Tennessean flooding the zone with stories found on social media. The death of Christian hip-hop artist TobyMac’s child resulted in a total of eight stories; a viral Instagram post from a hiker became a story about how a snake was found inside a Metro park on a recent weekend.
The new company, meanwhile, is pinning its revenue hopes on being a lead generator, or providing customers to businesses similar to sites like Angie’s List. With print revenues continuing to decline and digital advertising failing to replace it — and the company unable to effectively increase circulation revenue the way The Washington Post and The New York Times have — a change in strategy is needed. "This is really us beginning this pivot toward more of what I would call a software-based business model," Gannett’s Paul Bascobert told USA Today.
That pivot better work fast — the new Gannett has $1.8 billion in debt to pay off.
