A remarkable thing happened amidst the pandemic and lockdowns: people began to read again.
Specifically, newspaper circulation rose wildly in the first quarter of 2020. That’s despite most coronavirus coverage being offered for free.
From the New York Times Co.’s (NYSE: NYT) first-quarter report: “In the first quarter, we added 587,000 net new digital subscriptions, resulting in the highest number of net new subscriptions in a quarter in our history.”
USA Today, owned by Gannett Co. Inc. (NYSE: GCI) saw its digital-only subscribership grow by 29% during the quarter.
Yet, nothing ever seems to go right for newspapers anymore. Even when they get a swelling of readers for the first time in years, they still lose.
Despite overall circulation growth in the industry, advertising and marketing have plummeted.
As their customers were forced to shutter operations or at least reduce their own costs, papers’ relying on advertisements were hit the hardest.
Here truly is a tale of two newspapers:
The New York Times’ stock has been a net winner over the last year. Shares have climbed more than 30% since last summer.
For long followers of this company, this shouldn’t be a huge surprise. Political opinions aside, Trump’s presidency has been good for shareholders of the Times. Those shares have been growing steadily since the day he won in November 2016.
The story over at USA Today is the opposite. Its parent company, Gannett is down 85% over the last 12 months.
Now, there’s a lot more at play here than just how these papers handle the stories they publish. In fact, there’s a specific reason why we’re seeing this sharp divergence, especially right now.
Market Misses the Real Story
It’s almost too common of a joke to get any laughs these days. But most people only really see USA Today when they stay at a hotel. Now, that’s obviously not the reason why its stock has been trash this year, even though people aren’t staying at hotels.
Instead, USA Today is built on advertising.
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Everything from its full-color style to its headache-inducing popup ads on its site frame it more similar to Buzzfeed than to the New York Times.
When advertising drops, as it always does in recessions, Gannett’s main revenue source disappears.
And while there could always be a bounce after an 85% stock price decline, it would be more of a gamble.
Instead, USA Today is built on advertising.
Everything from its full-color style to its headache-inducing popup ads on its site frame it more similar to Buzzfeed than to the New York Times.
When advertising drops, as it always does in recessions, Gannett’s main revenue source disappears.
And while there could always be a bounce after an 85% stock price decline, it would be more of a gamble.
To your prosperity,
Joshua M. Belanger
Founder & Publisher