Media General, Gannett Resist Split, See Value In Synergy

Not every media company with a lagging newspaper fleet is capitulating to investor demands to split the increasingly slow-growth sector off from other operations. Both Media General and Gannett--each with newspapers and 23 local TV stations--said this week they have no plans for a spinoff or other tactic.

While Gannett was less definitive, in a hard-line statement Thursday, Media General's CEO Marshall Morton told investors it would "not make sense for our customers or our shareholders." Instead, he said, the company is committed to local media, and its operations in "strong growth markets," principally in the Southeast, are poised to serve it well in the long-term. Still, a head-in-the-sand approach won't do--and "adapting and evolving in a digital world, leveraging the strength of our traditional platforms for the benefit of our online operations" is critical.

Morton also cited benefits from synergies where the company's 25 daily papers are directly in, or nearby, its TV stations' markets. News and video can be shared to create a 24/7 local info portal online. (The company also owns gaming operations it offers on the sites to strengthen their appeal.) The principal is the Tampa market, where Media General owns both the Tribune and the NBC affiliate and operates a joint newsroom. Other areas where papers and stations are linked online: Virginia, South Carolina and Alabama.

"Our integrated presence in print, broadcast and on the Web allows us to produce better content, deliver a higher-quality product, draw more audience, and improve our market position better than we otherwise could," Morton said. "It enhances our value to advertisers by enabling them to reach their target customers whenever and however they like."

Recently, Belo said it would split its newspaper and local TV stations into two separate companies. This week, E.W. Scripps--looking to unlock the value of its high-growth cable networks--said it would create two publicly traded entities that would allow it to split off its newspaper operations. But the new company--with newspapers in 18 markets--would also have 10 TV stations in an attempt to succeed through a hyper-local focus.

The CEO of the Gannett Co., with its 85 dailies, including USA Today, and collection of large-market stations, said Wednesday the company would follow the Scripps model. CEO Craig Dubow said "with newspaper and TV staying together, I think it really suggests the position that we're in--and staying with, at least at this particular time." He added, "Our position has not changed," but the company will continue to engage in discussions from time to time.

Media General's Morton made his comments on a call to announce third-quarter results, where revenues declined 4.5% to $230.3 million. One area that contributed to the decline: softness in the Tampa market, where the company has launched what it believes will be the multimedia, synergistic newsroom of the future. Newspaper ad revenues dropped 8.3%, while broadcast revenues fell 3.5% to $91 million, hurt by the cyclical decline in political dollars.

At Gannett, newspaper ad dollars were down 5.6% to $1.19 billion--and broadcasting revenues, which include the out-of-home Captivate network, dropped 3.4%.

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