Gannett splits publishing, broadcasting in two

The separation will reportedly leave the newspaper unit debt free and let both companies pursue growth

The game of survival is on for newspapers, as USA Today owner Gannett has become the most recent major media entity to say it will divide its print and broadcast divisions into separate companies.

As consumers continue to gravitate toward online sources of news and entertainment, newspapers are increasingly being asked to fend for themselves.

Gannett yesterday said its separation will leave the newspaper unit debt free and let both companies pursue growth and acquisitions more efficiently. But some observers see the rush to split less profitable print businesses from growing TV and digital operations as an ominous sign for the newspaper industry.

"To take a draconian view, over next 10 years a lot of newspapers could disappear or be much smaller print products," said Edward Atorino, an analyst with Benchmark Co.

As part of the move, Gannett also announced yesterday that it will take full ownership of Cars.Com for $1.8 billion, another sign of the increasing importance of digital properties.

Gannett's spinoff follows similar maneuvers by major operators such as Time Warner Inc and News Corp Earlier this week, the Tribune Co completed a split with its division that publishes The Los Angeles Times and other newspapers.

The spinoff trend takes place amid a backdrop of declining newspaper revenue. As consumer tastes for digital content grow, advertisers continue to shift more of their spending online. Over the past eight years, annual print newspaper ad revenue has fallen 64% to $17.3 billion in 2013, according to the Newspaper Association of America.

Gannett's publishing arm will retain the Gannett name and include USA Today, 81 local US daily publications and Newsquest, a regional community news provider in the UK.

The company touted the publishing unit as a debt-free company and said both entities will have "increased opportunities to grow organically across all businesses," as well as pursue strategic acquisitions.

CEO Gracia Martore said the "bold actions" will help increase value for shareholders "in today's increasingly digital landscape."

Benchmark Co's Atorino said the newspaper unit was "holding back the Gannett stock." But many other analysts say the recent rush to spin off print assets paints a dark picture for newspapers.