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Gannett’s Digital Revenues Still Rising; UK Decline Drags Print Down

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Gannett’s ability to reach and retain profitability over the past year rested on two main things: the growth of digital revenues and its dedication to holding down expenses. While the McLean, Va.-based media company was able to hold the line on costs in general, and digital revenues were still up by double digits, it wasn’t enough to offset a decline in ad spending that ate into Gannett’s profits and total revenues, both of which declined in Q1.

Digital: Revenues were up 12.1 percent to $156.7 million. Costs were up a bit to 3.1 percent. While digital has generally tended to provide the most positive news for the company, jobs site Careerbuilder was often a laggard. But not for the last few quarters. Careerbuilder has gotten stronger along with the other major Gannett (NYSE: GCI) digital property, rich media provider PointRoll.

Despite the uptick in expenses, operating cash flow in the segment doubled from Q110, as the amount of dollars coming in from all digital activities, such as its 80 community newspapers’ websites and flagship USA Today, rose 12.4 percent. Overall, digital now provides 20 percent of Gannett’s total revenues.

Publishing: The newspaper segment fell 6.2 percent to $929.8 million. The ad market was softer in Q1, which is typical coming off the holiday season. But it should be noted that Q110 represented a substantial rebound after a particularly dismal and painful Q109. Nevertheless, despite the industry-wide weakness in newspaper advertising, which continued to suffer historic losses last year in the U.S., Gannett’s publishing segment was also pushed down further by declines at its UK property, Newsquest, which posted a 12 percent drop in revenues (classified ads -15.8 percent, national ads -5.1 percent, retail ads -8.2 percent).

For the most part, the real pain appeared to be in national U.S. advertising, which was down 11 percent during the quarter.

While advertisers may be reluctant to spend on print, within the publishing segment, digital is another story. Specifically, U.S. Community Publishing digital revenues jumped 13.3 percent, while online dollars at USAT were 19.2 percent higher.

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