Gannett Co., Inc. (GCI), The New York Times Company (NYT): Reshaping the Media Giants

The big benefit for Gannett and Tribune will be expansion in a still desirable entertainment medium. The moves will give both companies more clout to negotiate higher advertising rates and reduced content costs. Both will be key factors going forward. And, although television is shifting toward the Internet, broadcasting hasn’t been devastated in the same way that newspapers have.

In fact, for now, it appears that broadcast TV is relatively safe. The business is very profitable for both the distributors and content creators, and neither wants to rock the boat by getting in bed with an Internet TV “station.” That should give these companies time to create their own online distribution platforms. Although the current dynamics will change eventually, the power that television players have is still material and should continue to provide protection from outsiders unwilling to work within older business models.

Similar stories, different risks

Gannett Co., Inc. (NYSE:GCI) has done something that most other paper companies haven’t been able to do, it has remained profitable in nine out of the last ten years. In fact, the company earned an impressive $1.80 or so a share in 2012. While its paper business is clearly in decline, Gannett is making the right moves to keep itself viable and, in fact, growing.

A price to earnings ratio of about 14 and share price that is still well off its highs makes this a good option for turnaround investors. The fact that it still makes plenty of money adds a notable level of safety. An around 3% dividend yield backed by a disbursement that’s been increasing again is another nice sign.

Tribune, meanwhile, is a more risky turnaround story. Although a trip through bankruptcy has cleaned up its balance sheet and given it a new lease on life, it still had $10 billion in debt and negative shareholders equity at the end of the first quarter. The TV deal will just add more debt. It looks like management is making the right moves, but only aggressive investors should consider the shares as Tribune continues its renewal process outside the protection of the bankruptcy courts.

The article Reshaping the Media Giants originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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