Gannett Co., Inc. (GCI), Belo Corp (BLC): Has This Media Company Bitten off More Than it Can Chew?

Gannett Co., Inc. (NYSE:GCI), the largest U.S. newspaper in terms of daily circulation, recently made a huge splash in the local television industry after its $2.2 billion acquisition of Belo Corp (NYSE:BLC), the owner of 21 local television stations across the United States. The acquisition, which more than doubles Gannett Co., Inc. (NYSE:GCI)’s portfolio of television stations to 43, will make it the largest operator of local affiliates in the country. Is this newfound dominance of both print media and television in the United States a positive catalyst for Gannett Co., Inc. (NYSE:GCI)’s further growth, or has the company bitten off more than it can chew?

Avoiding the fate of its peers

Gannett Co., Inc. (NYSE:GCI)’s most well-known property is its national newspaper, USA Today. The company also owns local newspapers, including The Arizona Republic, The Indianapolis Star, The Cincinnati Enquirer, and the Tennessean, among others. It is also invested in several Internet properties, such as PointRoll, BNQT Media Group, ShopLocal and a joint stake in CareerBuilder.

Gannett Co., Inc. (NYSE:GCI)’s expansion over the past few years has been in stark contrast to the gradual shrinkage of The New York Times Company (NYSE:NYT). In 2007, The New York Times Company (NYSE:NYT) sold its Broadcast Media Group, which included nine local affiliates, to private equity firm Oak Hill Partners, for $575 million. At the time of the sale, the segment was a profitable one for the company, generating 4% of its annual top line. The New York Times also sold its Regional Media Group, which consisted of 16 regional newspapers, to Halifax Media Holdings in 2011. Unlike the more profitable Broadcast Media Group, its Regional Media Group reported an 8.2% year-on-year decline in revenue in 2010. The segment accounted for 11% of the company’s top line at the time of the sale.

Meanwhile, The Washington Post Company (NYSE:WPO) has suffered less than The New York Times, thanks to its Kaplan educational division, its six local television affiliates and its Cable ONE network. Last quarter, the Post’s television network and cable business were its only profitable business segments, helping offset some of the losses at its print media division.

Therefore, Gannett Co., Inc. (NYSE:GCI) appears to be taking a hint from the fate of these two former print media heavyweights by making an all-in bet that local television will remain a profitable long-term investment.