Gannett's Growth Spurt   

The company's newspapers will soon account for nearly 14 percent of the nation's daily circulation.

MY FIRST FULL-TIME JOB in newspapering in the early 1960s was at a Gannett daily in upstate New York then known as the Binghamton Press. Having come from the westernmost reaches of the Midwest, I had never heard of Gannett before being hired and was only dimly aware of it while working at the paper.
Staffers in Binghamton never thought much about Gannett, located in far-off Rochester. We were aware of and appreciated the company's wire service, which provided fine reporters like Bill Ringle at the Albany bureau and Jack Germond in Washington. That's what Gannett meant to us.
How times, and Gannett, have changed. The company in the early 1960s owned 16 dailies in 13 cities. It was about to embark on a flurry of acquisitions under the leadership of chief executive Paul Miller. That journey was pursued with even more vigor by Allen H. Neuharth, Miller's successor, and, for the last 10 years at an even more explosive rate by John Curley and Douglas McCorkindale.
Just this year, Gannett has spent about $4.4 billion to buy newspapers in the United Kingdom and in several U.S. states, most notably those owned by the Pulliam family's Central Newspapers in Phoenix, Arizona, Indianapolis, Indiana, and smaller cities.
Gannett now owns or soon will own 99 dailies in the United States and 15 in the United Kingdom.
And the company has changed in other ways, evolving, for instance, from silent parent to stringent manager. I recall speaking in the mid-1980s with a West Coast Gannett publisher embittered that on the day a long-planned vacation was to begin, the publisher was ordered East by company headquarters to spend the weekend counting USA Today boxes in Baltimore. By then, of course, Gannett had become a successful publicly owned company known for its tight management controls. And a large part of the company's success stemmed from buying up newspapers and making them more profitable under Gannett management.
Consider the pending acquisition of the Pulliams' Central Newspapers for $2.6 billion. Last year, Central achieved an operating profit margin of 21.2 percent. The average profit margin for all publicly reporting newspaper operations was 22.2 percent, while Gannett's margin was 24.6 percent.
Profit margins at Central's newspapers are sure to go up, if for no other reason than a layer of corporate management will be removed and Gannett, as a much larger company, can buy newsprint and everything else newspapers need for cheaper prices than Central could.
Why did the Pulliams, who controlled the company's destiny through ownership of Central's voting stock, want to sell? The company's CEO, Louis A. "Chip" Weil III, said when announcing the deal, "It is increasingly clear that size and scale are key considerations in the long-term success of a newspaper operator..."
That no doubt was part of the reason, but I suspect what was mainly at work here was the same motivation behind the Chandler family's decision to sell Times Mirror Co. to Tribune Co. If most or all of a family's assets are in newspapers, the family has to be aware that newspaper values now are as high as they have ever been. Who knows what might be the case in five or 10 years, with the Internet looming overhead? The future holds an unknown risk; the present is worth a lot of money.
With the future uncertain, why is Gannett putting up so much money to buy more newspapers? Not only is Gannett adding Central Newspapers, but it also has agreed to spend more than $1 billion to buy 19 dailies and numerous weeklies in Louisiana, Maryland, Ohio, Utah and Wisconsin from the Thomson Corp., a company that has decided to exit newspapering for the most part. And, of course, there are the Gannett acquisitions in the United Kingdom.
The short-term answer is that Gannett and other buyers know that newspapers are exceptionally profitable businesses and are likely to remain so long into the Internet future. The long-term answer is that Gannett and other buying companies expect to prosper on the Internet with their own sites, so money taken out of a newspaper pocket will go into an Internet pocket.
The trend to consolidate newspaper ownerships is not new, of course, but the stakes are getting ever larger. Instead of the single-newspaper acquisitions typical of the past, we now have sizable chains being taken over.
I never would have imagined that the company I was only dimly aware of 40 years ago would wind up owning almost 14 percent of the nation's total daily circulation.