Gannett’s fourth-quarter results show that most of its businesses are feeling the effects of the shaky economy

Using the numbers:

• Gannett’s total revenue for the full year was $2.95 billion, down 7% year over year.

Advertising

• Just over a third of that nearly $3 billion came from digital revenue (i.e., digital subscriptions, advertising, and other online businesses), totaling just over $1 billion. For this division, this is an increase of 1.8% compared to the previous year.
• Total revenue for the fourth quarter was $730.7 million, down 11.6% year over year.
• Digital ad revenue fell 20.5% year over year in the fourth quarter.

Advertising

• Gannett surpassed 2 million digital-only subscribers in 2022, one-third of its goal of having 6 million digital-only subscribers by 2025.
• The number of registered users increased by 60% in 2022, from 3.7 million at the end of 2021 to 5.9 million at the end of 2022.

Advertising takes another dive

Advertising

Digital advertising revenue declined 20.8% year over year in the fourth quarter to $75.9 million from $95.8 million. Much of Gannett’s fourth-quarter and full-year 2022 revenue declines were largely due to declines in both its print and digital advertising businesses, Gannett CFO Doug Horne said during the earnings call.

The company’s total revenue for the third quarter fell 9% year over year, followed by an 11.6% decline in the fourth quarter due to “a weaker market where we continue to see lower monetization rates year over year,” Horne added . Those declines are expected to continue into the first half of 2023, he said.

Digital subscriptions have increased, but growth is slowing

Advertising

In the fourth quarter of 2022, Gannett added 47,000 net new digital subscribers, compared to a three-quarter streak of 115,000 to 118,000 net new digital subscribers per quarter. The digital subscription business made $35.5 million in the fourth quarter of 2022, up 28.6% year over year, but only a 3% increase from third-quarter revenue of $34.5 million 2022 and a 9% increase over revenue of $32.5 million in the second quarter of 2022, according to the earnings report.

Despite the slowdown, the company will move away from paid acquisition strategies, including cutting its marketing spend, in favor of organic (free) acquisition strategies like signup walls and retaining existing subscribers, the company’s CEO and chairman said. Mike Reed, during the last conference call.

Gannett’s acclaimed national news publication, USA Today, launched its paywall in July 2021 and was initially slated to be a key driver of the company’s burgeoning digital subscription business. And yet more than 90% of Gannett’s subscribers come from its portfolio of over 200 local news outlets, Reed said.

“Local markets are expected to continue to drive most of our subscription growth,” Reed said, adding that only 3% of Gannett’s total digital readership is currently subscribed to local publications.

Advertising

In 2023, revenue from digital-only subscriptions is expected to grow, but at a slightly slower rate than in 2022, Horne said.

Registration takes the reins

Gannett’s signup wall strategy has successfully converted millions of non-subscribing readers into known users over the past year, setting them on a path that is 45 times more likely to convert them into a paying subscriber, according to Piano’s latest Subscription Benchmark report.

In 2022, according to the earnings presentation, Gannett increased its total registered user base from 3.7 million to 5.9 million, a 60% increase from the previous year.

Registered readers are categorized as users who have created a free account with Gannett’s publications and in return receive certain benefits that anonymous users do not receive. These benefits include additional free or paid content on its sites, as well as the ability to post comments and have unlimited views of photo galleries, but they don’t get access to content marked as premium, which is still meant to serve as an incentive for users to achieve the most coveted status of paid subscriber.

USA Today’s path to profitability

Since the launch of USA Today’s digital subscription business in July 2021, Reed said, increasing subscriber volume has taken precedence over monetizing advertising, resulting in a decline in revenue for the newspaper. But in 2023, greater efforts will be made to balance revenue streams and hopefully put USA Today back on the path to profitability.

“As a result, at USA Today we expect reduced subscription acquisition but an overall increase in revenue and profitability,” Reed said.

looking ahead

In 2023, total sales are expected to fall between $2.75 billion and $2.8 billion, Horne said, down 5% to 6.7% from 2022.

However, adjusted EBITA revenue is expected to increase between 10% and 15% in 2023 from 2022, as well as “significant free cash flow growth,” according to Reed, due in part to efforts undertaken in the second half of 2022 The $147 million in debt that was repaid last year is attributed to cost-cutting efforts. An additional $120 million is expected to be paid on the company’s total debt of nearly $1.3 billion in 2023.