The combined company will owe $1.8 billion to private-equity firm Apollo Global Management, a tall order for a business with about $4.2 billion in annual revenue. Before the merger, Gannett had been on track to realize about $2.6 billion in revenue for 2019, a 6.8% decline from last year, while New Media had forecast sales of $1.61 billion.
In public disclosures for the deal, Gannett and New Media each predicted ongoing declines in revenue through 2023. If their predictions are correct, the combined company will post $3.7 billion in sales that year. A long overdue recession may derail those plans and really test the company's finances.
The new company, which will be named Gannett and operate out of the company's headquarters in Mclean, Virginia, is looking to cut $275 million to $300 million a year within 18 to 24 months of the merger date. That will mean job cuts in back-office operations, along with newsrooms.
Boosting online subscriptions will be a key source of growth for Gannett, which will own more than 260 daily publications and hundreds of weeklies. By reaching 145 million visitors on its websites each month, Gannett also aims to appeal to national advertisers while targeting localized audiences.
Both Gannett and New Media have seen strong growth in digital subscriptions, with Gannett reporting a 27% gain to 607,000 in the third quarter from a year earlier, while New Media saw a 65% jump to 217,000 for the same period.
That means the new company has 824,000 total digital subscribers, or about 3,000 each among its more than 250 titles, as Rick Edmonds of the Poynter Institute notes. Bigger metro dailies have more subscriptions, such as 40,000 at the Milwaukee Journal-Sentinel, Edmonds writes.
While Gannett is looking to cut costs, the company should be mindful that its network of local journalists are a key differentiator from other news organizations. The news industry really doesn't need more people in media centers like Washington, New York and Los Angeles, which already are swarming with reporters.
Unfortunately, media outlets miss out on major stories when journalists all huddle around the same news buffet -- and we all know how much reporters love a free buffet. And an open bar.
The most notable example of recent media failures was the unanticipated election of Donald Trump, which would have been more apparent had news organizations improved their coverage of key battleground states. That mistake is unlikely to be repeated, with many news organizations putting teams in place to provide a more comprehensive look at what's happening beyond the confines of major media capitals.
Gannett has a chance to shine by pooling its newsroom resources, assuming it's not too depleted by job cuts.