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Wednesday, August 6,2014

Gannett split

For newspapers like the Lansing State Journal this divorce makes sense

by Mickey Hirten
Gannett Co. Inc. on Tuesday succumbed to the pressure to offload its newspapers, including the Lansing State Journal, USA TODAY, the Detroit Free Press and others.

For LSJ customers — readers and advertisers — the divorce suggests two paths.

Ideally, the liberated newspaper company will focus on, well, its newspapers. The old Gannett had become a broadcast business and operator of digital properties like Cars.com and CareerBuilder. Its newspapers provided a steady, though declining, river of cash, very little of it reinvested in operations like the State Journal.

The other path is less welcoming. Gannettīs broadcast business is where the profits are, and without them it could be bleak.

“Gannettīs newspapers are a drag on its earnings,” Ken Doctor, wrote last week in an article for the Nieman Journalism Lab. “Its Q2 publishing results affirm that things arenīt betting much better - down 3.7 percent year-over-year overall, 5.1 percent in print ad revenue.

“Newspapers now produce 70 percent of Gannett revenues, but broadcast produces 60 percent of the profits,” Doctor wrote. “Those lines continue to diverge.”

In the Gannett newspaper empire, the Lansing State Journal is a mid-sized player. Itīs possible that the new company will view it as a stable, sustainable, even a growth property rather than a cash cow. In announcing the print/broadcast split, the company hinted that investment might be possible.

“The transaction will create two focused companies with increased opportunities to grow organically across all businesses as well as pursue strategic acquisitions,” Gannett said in its spin-off announcement. But the publishing company, which will retain the Gannett name, will be publicly traded and will face pressure to produce “shareholder value” for its stockholders. It will have a healthy balance sheet; Gannettīs existing debt will be held by the broadcast company.

When the split is completed next year, stockholders will know what they are getting — a company constructed of newspapers and their websites. They will have to suppress their desire for immediate returns that drives the current corporate management.

Gannett was the last large media company to divide itself. Last Wednesday, two large newspaper companies, E.W. Scripps Co. and Journal Communications Inc. announced that they would merge, combin ing broadcast operations and spinning off their newspaper properties into a single stand along company, called Journal Media Group. This has been a busy week for restructuring the newspaper industry. On Monday, the Tribune Co. rolled its eight newspapers, among them the Los Angeles Times, the Chicago Tribune and The Baltimore Sun, into a separate company called Tribune Publishing.

For Scripps and the Journal, both were rewarded by Wall Street. Shares of Journal Communications jumped 24 percent on Thursday; Scripps shares were up 8 percent. There was no stock bump for Gannett yesterday. It shares lost value, down from Mondayīs close. It is likely that the market anticipated the move and pushed the stock higher. Also, the stock prices declined broadly on.

* * *

Our own soon-to-be radio host Congressman Mike Rogers offered a tepid response over the weekend to the embarrassing acknowledgment by CIA Director John Brennan that his agency had hacked into Senate computers.

Based on earlier cautionary statements by Rogers in March, it seemed that the chairman of the House Intelligence Committee might actually be outraged that congressional oversight — that is, by him and his colleagues — was subject to CIA dirty tricks. In March, he told CNN that “if someone broke the law, theyīre going to have to pay the penalty.”

But speaking on CNNīs “State of the Nation” program Sunday, Rogers characterized the breach as technical. Referring to the preliminary investigation, Rogers said, “This says that somebody overstepped their bounds by trying to figure out what the coding was on who had access to CIA computers and CIA spaces, thatīs a little bit different than spying on congress, in my mind. Still a serious breach.”

It was, of course, the CIA that required the Senate to use its computers in its “secure” location. Apparently, not that secure.

Rogers is waiting for what he called a “thorough review” of the episode, which for an organization like the CIA ought to be simple as calling in the people responsible and asking what happened. But either the CIA staff is duplicitous enough to hang the boss out to dry — or the boss, Brennan, knows the truth and hopes to bluff his way past a compliant Congress.

There was no call for accountability from Brennan – a contrast to the congressional Republican stampede for dismissal of senior Internal Revenue Service officials.

Rogers deflected questions about the CIAīs actions with praise for the legions of loyal, hardworking CIA employees, which raises the question: Could it be that he is simply worn out trying to tame the CIA, NSA and other wings of the nationīs security apparatus that clearly do as they please, regardless of law and consequences?

Email Mickey Hirten at mickey@lansingcitypulse.com.

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