Showing posts with label Circulation. Show all posts
Showing posts with label Circulation. Show all posts

Friday, February 07, 2014

CJR: 'Gannett’s print-focused paywalls flounder'

"The issue is one that will particularly affect newspapers like Gannett’s that have leaned on large print price increases as part of their paywall strategies," writes Ryan Chittum in a new Columbia Journalism Review story. "For lower-quality publishers like Gannett, which has squeezed profits out of its newspapers for decades, the paywall money has been in print, not digital."

Earlier: Fourth-quarter report hints at looming paywall problem.

Wednesday, February 05, 2014

Edmonds: Gannett's fourth-quarter earnings report hints at looming problem with newspaper paywalls

After yesterday's fourth-quarter and full-year financial report, the Poynter Institute's Rick Edmonds notes that circulation revenue was up for the year (1.1%) but down for the fourth quarter (off 1.6%) compared to the same period in 2012.

Martore
CEO Gracia Martore explained in a conference call to analysts that the company has now “cycled through” the lucrative introduction of paywalls together with bundled print plus digital subscriptions at its 80 community newspapers, Edmonds says, adding:

"This raises the concern that capturing revenue from new digital subscribers and pairing 'all access' print/digital bundles with a big price increase could be a one-time revenue event. Gannett not only failed to continue gaining circulation revenue at the end of the last year, it lost a little, as these subscriptions came up for renewal."

To Edmonds analysis, I'll add the following from a post in December where I said Gannett's overall digital strategy was in danger of hitting a wall on growth:

A forecast boom in digital-only subscriptions aimed at a key audience, younger readers, has become a stunning bust. In the third-quarter earnings teleconference with Wall Street analysts, Martore conceded Gannett had sold fewer than 100,000 nationwide vs. a forecast 250,000 to 300,000 by year's end. If sales remain tepid, the company will be saddled with three million aging subscribers and no clear path to replacing them.

In yesterday's conference call, Martore didn't mention digital subscription goals -- and analysts didn't bother asking, likely because they knew the worrisome answer.

Wednesday, December 11, 2013

GCI extending Butterfly Project to 35 newspapers

As expected, the initiative to add dozens of editorial pages plus a local edition of USA Today will be expanded to another 31 dailies vs. the current four, according to a Gannett statement this morning. The rollout will take place during the first quarter. Corporate didn't identify the 31 titles.

Further down the road, GCI plans to extend the program to all of its 81 local newspaper markets, according to The New York Times.

Asked whether subscription prices would rise for readers getting the extra USAT content, Corporate's chief spokesman, Jeremy Gaines, told the NYT: “As we introduce enhanced products, consumers tell us they are willing to pay for the added value we’re bringing them.” (Translation: yes.)

The 35 papers that will be part of the Butterfly initiative have a combined circulation of more than 1.5 million on weekdays and more than 2.5 million on Sunday, according to USAT. That shows the 35 were chosen according to a metric other than circulation, such as annual revenue, because the highest-circulating 35 have combined volume of 2.4 million weekdays and 4.3 million Sundays.

This morning's announcement follows a relatively short test of the Butterfly Project since early October at four dailies in Fort Myers, Fla.; Indianapolis; Rochester, N.Y., and Appleton, Wisc. The expansion is designed to increase advertising and circulation revenue at the local level, plus ad sales and circulation volume at USAT.

Related: Corporate's press release highlighting this morning's UBS media conference.

Sunday, December 08, 2013

Digital Divide | Along a journey to transformation, an aging publisher stumbles at a critical crossroads

Gannett's website markets newspapers and other subsidiaries as consumer brands.

In late October, when CEO Gracia Martore briefed Wall Street stock analysts on Gannett's latest quarterly report, she drew a bright line under another rise in digital revenue -- fresh evidence, she said, the company was successfully weaning itself from its legacy newspaper business.

This wasn't the first time Martore had swung the spotlight toward digital. Three months before, she said it had grown to 30% of all company-wide revenue, adding: "We are accelerating our transformation into the 'New Gannett' every day."

In fact, the nation's top newspaper publisher started aggressively retailing this new image last winter during the advertising industry's "upfront" market, where traditional print media jockeyed with TV networks for ad dollars. The chief of national sales, Mary Murcko, told the trade publication AdAge: "We are not the media company -- the 100-year-old newspaper company -- people still think we are."

This was a Madison Avenue milestone, the debut of a made-over publisher long dismissed as a relic sidelined by Internet and mobile technologies. Now it was a "media and marketing solutions company" pitching a portfolio of consumer brands. Gannett was finally running with the big dogs.

But behind the scenes, hundreds of pages of newly examined company documents tell a different story, one sharply at odds with Gannett's energetic public relations campaign to burnish its old school profile.

Although digital revenue did rise last quarter, regulatory documents show the growth rate has been retreating all year. It was 29% in the first quarter, 20% in the second, and 12% in the third. It will narrow even more in the current quarter, Gannett warned investors Nov. 6 in a U.S. Securities and Exchange Commission filing.

After jumping when Gannett started launching 78 newspaper paywalls two years ago, digital’s contribution rate to company-wide results only clung to 30% last quarter because overall revenue fell, SEC documents show.

Here's why: The paywalls are now running on fumes. They brought double-digit subscription price hikes, forcing readers to pay for digital access whether they wanted it or not. That ginned up untold millions in new digital revenue. But those more costly subscriptions are now fully in force; without another across-the-board price increase, paywall revenue growth could grind to a halt as soon as this quarter. No such increase is in the works.

Martore
A forecast boom in digital-only subscriptions aimed at a key audience, younger readers, has become a stunning bust. In the Oct. 21 quarterly earnings teleconference with Wall Street analysts, Martore conceded Gannett had sold fewer than 100,000 nationwide vs. a forecast 250,000 to 300,000 by year's end. If sales remain tepid, the company will be saddled with three million aging subscribers and no clear path to replacing them.

Revenue from Gannett's freestanding digital businesses -- chiefly, the big employment site CareerBuilder -- has been growing at only low single-digit rates after peaking at 13% in 2011. Year to date, it's up just 4% from a year ago, SEC documents show.

The digital squeeze is all the more worrisome because it comes amid an accelerating decline in the company's still-biggest source of revenue, newspaper advertising, which fell 6% in the last quarter. To be sure, revenue growth pulls back as any company's financial base fattens. Nonetheless, a plateau this soon raises concerns about Gannett's drive to become a digital powerhouse amid bruising competition from more fleet-footed publishers like Facebook and Twitter.

It also underscores the importance of Gannett’s takeover of Dallas TV company Belo. The $2.2 billion tie-up, which could close any time now, is crucial to boosting revenue and earnings -- and holding impatient investors at bay. Indeed, analysts are already asking whether Gannett should spin off its fading newspapers into a separate company after Belo is absorbed, essentially sending them to the corporate equivalent of a nursing home. That question may easily resurface Wednesday when Martore's team meets with analysts at an industry conference in New York.

Frank Gannett
How Gannett arrived at this crossroads is a story about a business Frank Gannett founded in 1906 with a single newspaper in Elmira, N.Y., battling for survival in a 21st century economy. The outcome, closely watched by other publishers, is of keen interest to a global constituency: 30,000 employees, 8,000 shareholders, and millions of others served by Gannett's 100 U.S. and U.K. dailies, 23 TV stations and more than 700 other media businesses.

The story is also about an entrenched board of directors, the opportunity they missed at a fateful moment, and two executives who led the company to a financial precipice -- only to pull it back before it tipped into oblivion.

Transforming vs. tweaking
There's little doubt Gannett has taken major strides toward its goal of becoming a more digital enterprise. Seven years ago, before digital got pushed to the fore, it was only 5% of annual revenue. Since then, it’s grown by $900 million, to last year's $1.3 billion. That came as the company reported its first annual increase in full-year revenue, $5.4 billion, since 2006.

Gannett has also reduced its reliance on newspapers; their advertising and circulation tumbled to 65% of all company-wide revenue last year vs. 83% in 2006.

The Belo takeover will almost double the number of TV stations to 43, transforming Gannett into a broadcasting company with a side business in newspapers. It will become the nation's fourth-largest owner of big network affiliates, with a bigger footprint in lucrative markets like Texas and the Pacific Northwest. Under the deal, which includes $1.5 billion in cash and assumption of $715 million in debt, broadcasting will eventually account for more than half of earnings, according to the company. Announced in June, the Belo purchase is a major reason Gannett's stock has surged during this year's second half.

From the depths of the recession, when shares fell below $2 as competitors went bust, Gannett is now trading in the mid-$20s; it closed Friday at $25.55. Year to date, it's up 42% vs. a much smaller 27% gain in the S&P 500 index. To be sure, shares were treading water all year before the Belo deal. And other publishers' stocks also have jumped during what's been a sizzling bull market.

The board of directors has boosted the dividend twice since slashing it 90% four years ago. The company has repaid billions in once-crippling debt. And Martore has pledged to return $1.3 billion to stockholders by 2015 through dividends and share repurchases.

But Gannett still faces enormous challenges.

The company remains heavily dependent on its most troubled division, newspapers. Their ad sales have fallen every year since 2006, with no end in sight. That includes digital advertising, too. Indeed, after nearly leveling off the end of 2012, losses have grown in percentage terms during each of the past three quarters.

Paton
Paywalls are on track to generate $100 million in new earnings. But that's fueled by the big subscription price increases in 2012 that aren't set to be repeated; Gannett says only that it's now selectively raising prices in some markets. The company's publishing partner in Detroit and elsewhere just announced similar paywall plans, but with little enthusiasm. "Let's be clear," John Paton, CEO of Digital First Media wrote last month. "Paid digital subscriptions are not a long-term strategy. They don't transform anything; they tweak. At best, they are a short-term tactic."

Although Gannett's TV stations contributed mightily to last year's year-over-year revenue increase, that stemmed from record political and summer Olympics ads on the core NBC affiliates. That's a revenue roller coaster only occurring every other year. Meanwhile, broadcasters are just steps behind newspapers in losing ads to rival publishers like Google and Tumblr, says media consultant Ken Doctor.

"Think about how much digital targeting could take away political broadcast money by 2016," he wrote when the Belo deal was announced. At best, "Gannett may have bought itself another three to five years of relative revenue stability."

In any case, it will be well into next year before Belo's operations are fully integrated. And it could then take as long as three years to achieve all the forecast savings by slashing overhead and negotiating more lucrative retransmission agreements to hit earnings targets, according to Gannett.

Digital weapons in Gannett's arsenal are in jeopardy, or are too new to make meaningful contributions.

USA Today's iPad app is still free.
The USA Today Sports Media Group underwent a shakeup when its founding president, Tom Beusse, resigned unexpectedly in October -- casting doubts on his promise to deliver more than $300 million in new revenue by 2015. USA Today, the company's most famous brand, has failed to attract a big enough audience willing to pay for digital access. Publisher Larry Kramer says only that paywalls are being studied.

Gannett is redesigning all its U.S. news websites and digital apps to boost readership and ads. But more than two years in, only USA Today and a handful of others have made the switch. That's despite a recent forecast they'd be installed in the top 35 markets by year's end. Indeed, at one point, Gannett said all 105 sites would be relaunched as soon as this past February.

The newly christened G/O Digital marketing services unit, which advises small businesses on using social media, is forecast to generate up to $350 million in new sales, but also not until 2015. Revenue there grew 90% in the second quarter and a smaller 70% in the third. Martore has declined to divulge dollar amounts when pressed by analysts.

To be certain, Martore has made no secret of the fact Gannett's strategy will produce uneven results. "It was never meant to be a quick or immediate fix," she said in July. "Our transformation plan is a complex and multifaceted process, and we do not expect linear growth each quarter."

Gannett's corporate communications department did not respond to my questions for this story.

Barbarians at the gate
Gannett's digital push began in earnest in 2005 when the board of directors was casting about for a new CEO to replace Doug McCorkindale. An attorney with no journalism background, McCorkindale had been a company executive 34 years. He was only the fifth CEO since Gannett's start a century before, one in an uninterrupted line of insiders at the core of an insular corporate culture.

Barron's not long before had put McCorkindale on the cover under the headline, "Gannett's Good News." Wall Street's must-read weekly gushed over his empire building. "I'm potentially interested in buying anything in the news, information, advertising and entertainment businesses," he said. "If the Pearson group wanted to sell the Financial Times, I'd look at it very closely. Dow Jones & Co. is a great franchise, and if it ever came into play, I'd be very interested."

And why not? Gannett had the requisite war chest: Annual revenue was headed for a record $8 billion. Earnings would hit $4.90 a share, just three cents shy of a record. From coast to coast, in Guam, and the U.K., Gannett employed 53,000 at hundreds of daily and weekly publications, magazines and the several dozen TV stations.

Zuckerberg
But time was running out. Publishers and broadcasters were finally facing real competition from a rising number of new, nimble start-ups. Only one year before, 2004, Google launched its IPO, and Mark Zuckerberg started Facebook from a Harvard dorm room. YouTube was brand new.

In 2006, Twitter fired off the first tweet; its recent initial public offering values the microblogging service at $24.5 billion vs. Gannett's $5.8 billion. Instagram would not start until 2010, only to be bought by Facebook two years later for $1 billion cash. (And it had only 13 employees.)

Against that backdrop, Gannett's board might have ignored precedent and hired an outsider with real digital chops as the sixth chief executive. But under McCorkindale, who also chaired the board, directors played it safe. They promoted Craig Dubow, 50, from broadcasting president to lead a company still dominated by newspapers. A University of Texas graduate, Dubow had been an employee 24 years, starting at Denver station KUSA.

Years later, after Gannett's battered stock had plunged to less than five bucks a share, an anonymous Gannett Blog reader recalled Dubow's ascension memorably:

"A myopic board of directors placed a man, a great, very likable man, with a brilliant broadcasting career, but a man that had not spent a minute of his professional life inside a newspaper, in charge of a company with 100 or so newspapers at the worst time in the history for print newspapers. It is like putting at the helm of Titanic a great producer of wheat from Indiana, who had never been at sea before. He could sink the ship even without icebergs."

But McCorkindale, announcing Dubow's promotion in spring 2005, thought otherwise: "Craig has all the skills a 21st century media CEO should have, from highly successful management experience and broad-based knowledge of the digital world to the vision and energy of a top-notch leader."

Dubow got a big raise: His first year's pay soared to $2.4 million from $1 million as head of broadcasting, according to SEC documents. Martore, chief financial officer at the time, became Gannett's No. 2 executive. They would work in lockstep when the company entered free fall.

That Wednesday afternoon, Gannett's stock closed at $75 a share.

Charting digital's new course
Dubow immediately set a new strategic plan focused on digital. Newsrooms were now "Information Centers," reorganized to favor websites over print in a bid to ratchet up traffic and ad revenue. Digital ventures would be nurtured within, starting with a "moms" site aimed at female consumers.

Dubow in 2006
Dubow launched the company's first R&D lab and a Gannett Digital division with this goal, according to his 2006 annual letter to shareholders:

"To move Gannett from a newspaper and television company with affiliated websites to a digital powerhouse, capable of capturing a growing share of what pundits believe will be a pool of Internet advertising dollars in excess of $20 billion by 2008."

Of course, Dubow hadn't inherited an analog dinosaur. The company already had that $400 million in digital revenue -- 5% of all. He closed his letter with a prediction: "With our employees, our discipline and our plan, I am confident 2007 will be as transformative as 2006."

He was right, although surely not as he'd imagined.

Financial panic erupts
The housing bubble floating the economy burst. Gannett was badly exposed in four states among the first to be hit hard: Arizona, California, Florida and Nevada. Combined, they accounted for 40% of the decline in the company's U.S. ad revenue.

The real estate bust spawned a global credit crisis and the Great Recession, slamming Gannett. Complicating matters, the company had accumulated $3.8 billion in long-term debt just as the recession deepened, sapping revenue needed to service it. Some of the debt stemmed from $1.8 billion in Gannett stock buybacks during 2005-2008 at prices averaging $64 a share, according to SEC documents. Most of those buybacks -- $1.3 billion -- were in 2005 alone, the year Dubow took over as CEO and Martore entered her third year as chief financial officer. (Based on Friday's $25.55 closing price, those shares are now worth well less than half as much: $726 million, excluding dividend savings.)

Certainly, other publishers -- the New York Times Co., McClatchy, Lee Enterprises -- had made similar blunders during an industry-wide spending orgy.

In the recession years 2007-2009, Gannett's annual revenue plunged 25%, to $5.6 billion. Dubow and Martore, by now his heir apparent, responded with draconian cost-cutting to stave off creditors: Massive layoffs. Furloughs. Wage cuts. A frozen pension plan. A tattered dividend. With newspaper values collapsing everywhere, Gannett wrote off $8.4 billion worth of its assets in 2008 alone.

To be sure, management took big hits, too. Dubow's annual pay fell to $4.7 million in 2009 vs. $7.5 million in 2007. Still, infuriating employees, the board of directors continued awarding large cash bonuses. In SEC documents covering those years, they cited a long list of accomplishments that specifically included whacking 11,000 jobs.

Dubow doubled down on his digital plan, hiring Gannett's first chief digital officer, Chris Saridakis. Gannett expanded the Moms Like Me network, entertainment site Metromix, and other non-print ventures.

Zell
But perhaps most important, that fall Dubow wrested razor-thin majority control of employment classifieds site CareerBuilder from Tribune Co.'s pugnacious CEO, Sam Zell. Dubow had an edge over Zell because Tribune was headed for bankruptcy.

With the $135 million CareerBuilder deal, Gannett made a big change in financial reports to Wall Street. It created a digital-only line consolidating all revenues from CareerBuilder and other standalone businesses.

Significantly, CareerBuilder meant Martore could book 100% of its revenue even though Gannett barely owned 51%. The very next quarter, the digital-only line surged to $170 million from $24 million a year before. In the years that followed, the accounting shift helped Gannett sell itself as more of a digital company, and less about paper and ink.

But it wasn't enough.

Just as the recession eased, some of the most high-profile digital efforts started fraying. In spring 2010, Saridakis quit as chief digital officer after only two years, complaining about the Dubow team's indecisiveness. In a prescient parting letter, he ripped paywall plans. Dubow took a full year to replace him with David Payne.

Payne shuttered the once-celebrated Moms Like Me consumer network after concluding further investment would be a waste. Entertainment site Metromix slumped. Other digital ventures collapsed. The ad services subsidiary PointRoll started churning through CEOs, threatening its hugely profitable pipeline. More recently, an online coupons site, DealChicken, has been retrenching.

A new Crystal Palace chief
In October 2011, with revenue still falling and plagued by back problems, Dubow quit. Reviled for the slash-and-burn tactics that ultimately cost 20,000 jobs on his watch, he retired with an estimated $32 million payout. The board promoted Martore, then 60 years old, to become Gannett's first female CEO.

Like Dubow, she also was an insider, always working at the corporate offices now housed in a glittering complex outside Washington that employees call the Crystal Palace. Martore arrived in 1985 as assistant treasurer, later rising to chief financial officer in 2003. Her bio reads like a classic American bootstrapper story, according to The Washington Post.

"Granddaughter of Italian immigrants," wrote Post correspondent Paul Farhi. "Father died when she was a kid. Held down three jobs to get through Wellesley College. Learned a skill and worked like the dickens."

The much-hated "Blue Ball" sculpture.
Martore quickly sought a less imperious image before employees traumatized by waves of layoffs. She ended reserved parking for top executives. And she ditched an executive suite sculpture dubbed the Blue Ball of Death for its role in the infamous firing of three USA Today employees in 2001. A big Red Sox fan, Martore soon enlivened dry analyst meetings with sports metaphors and even jokes.

One of her first, most important jobs was shepherding eagerly awaited newspaper paywalls into 2012. With newspaper ad sales still falling, milking circulation was a must. Management forecast those $100 million in additional annual earnings by 2013 with the paywalls and new apps. With relatively little investment in hiring and marketing, it was like found money.

By then, Gannett had been testing paywalls for two years. Dubow had said early data showed "very interesting results," although he was never more specific. Based on how the company eventually marketed them, however, the pilot tests didn't uncover much demand among the company's bread-and-butter customers: predominantly older, less technology-driven print subscribers.

Gannett gave its paywalls an ungainly name, all-access content subscription model, and sold them in just two flavors: a print subscription including Web and app access for up to around $25 a month. Or digital-only for $12-$15 monthly. Using a "metered" approach, non-subscribers could read a limited number of articles for free before getting prompted to pay.

But the paywalls arrived with an unpleasant surprise: those double-digit subscription price hikes at renewal. Trying to spin the bad news, Gannett said the substantially higher prices included digital access, ignoring the obvious: until then, digital had always been free anyway.

'Free is better than not free'
The roll out revealed a sobering truth. The only way Gannett could really ramp up digital circulation revenue was to force it on three million legacy readers as an embedded cost in their print subscriptions. The vaunted paywalls boiled down to an old-fashioned price increase with a digital veneer. No surprise to Paton, the Digital First CEO, who wrote early this year: "Most paywalls in the U.S. are simply initiatives in subscription price hikes -- bundling digital with print with no clear path for sustainable growth."

Yesterday's Register, Newseum.
Whatever their future, Gannett's jacked-up subscriptions didn't sit well with readers at papers like The Des Moines Register.

In June 2012, they groused during an online chat when Publisher Laura Hollingsworth tried to justify them. "My team and I are prepared to stand by our value and ask our communities to invest in the best news and information and reporting that can be offered," she said.

One reader's quick comeback: "Actually, free is a better value than not free."

Then another: "While I support the paper's move to a paywall for digital content, I calculated my increase at over 40%. It seems that the paper is punishing its print subscribers. Will the Register offer a print-only subscription?"

Hollingsworth said no.

To be sure, paywalls created a second, especially attractive revenue stream: digital-only subscribers. They skewed younger, the very market advertisers covet because they spend lots on electronics, dining, entertainment and home furnishings. Plus, digital subscribers were nearly Gannett's only hope to replace those millions of aging print customers.

At first, Gannett relied almost entirely on word-of-mouth sales. Early results were promising. "The good news," said Bob Dickey, the newspaper division's president, "is our new digital subscribers index younger, male, married with children and more affluent than we first realized, filling an important audience gap for us."

Crawling out on a limb
At the start of this year, Gannett had sold 46,000 digital subscribers across 78 markets. Then in early February, Martore made a strategic mistake: She forecast 250,000 to 300,000 by the end of this year, once Gannett started spending a "not inconsequential" amount on promotion. To be sure, it was a modest goal, averaging fewer than 4,000 per market. Plus, the company already had that running start.

Martore said: "Our focus is to take on new digital-only subscribers, and that's where our focus is going to be in 2013."

The campaign has bombed. By the end of September, the company had netted only 80,000, after some upgraded to print -- leaving Gannett far short of the forecast. All but abandoning the year-end goal, Martore tried moving the goal posts to the number of print readers who had activated digital accounts included with their print subscriptions: 1.5 million, about half of all.

She has called them "paying digital subscribers," comparable to The New York Times' 730,000 digital-only subscriptions sold after erecting its paywall in 2011. Inexplicably, Martore calls that an "apples-to-apples" comparison. (The number of Times digital subscribers has yet to plateau, soaring 28% in this year's third quarter alone.)

Pivoting 180 degrees, Martore dismissed young digital subscribers as barely consequential to measuring paywall success. "Frankly," she told the stock analysts Oct. 21, "that's probably one of the least significant and important metrics that we have used."

But analyst Craig Huber of Huber Research Partners pressed her to confirm Gannett had sold so few. Martore's reply: "If you're just specifically looking at that one small metric, yes, that's exactly what I'm saying."

As these typically deferential meetings go, this was close to taking off the gloves. And it may not be the last time.

Pushing for Gannett's breakup
Wall Street has started nudging Martore to spin off the newspaper business from broadcasting post-Belo. This would create two publicly traded companies, freeing the more nimble TV business plus the CareerBuilder stake and other purely digital businesses from the sluggish publishing division. USA Today and the U.K. Newsquest division, with 17 dailies plus hundreds of weeklies, could be sold separately.

Current shareholders would get stock in the new standalone newspaper company, allowing them to better gauge the relative worth of one business over the other. (In the argot of Wall Street, it's called unlocking shareholder value.) In an alternate scenario, Gannett could sell the papers piecemeal, but that would be a more drawn-out process subject to the vagaries of regional and local markets. In any case, the newspapers, unmoored from the financial resources but also the bureaucracy of a larger enterprise, would need to provide for themselves.

This has been done before. Belo itself split newspapers and TV stations in 2008. News Corp. did the same last July with The Wall Street Journal and dozens of other papers. Tribune Co., also bulking up on TV, has similar plans for the Los Angeles Times and seven others.

Martore isn't sold on the idea. Gannett's U.S. dailies and TV stations occupy a combined 111 markets, offering economies of scale no one else can match, she says. Still, if newspapers become an even bigger drag on growth, analysts will surely push harder for a breakup. Their next scheduled meeting with Martore's team is Wednesday morning at the annual UBS media conference in New York.

Even as she demurs, Martore leaves herself wiggle room, as she always does when analysts ask about future strategy. She and her fellow board members will never say never, she said in October: "We're always looking at different alternatives. . . . What we're in this business to do is to create additional shareholder value. And that's what we're focused on doing."

This much is certain: Martore now has fewer than three years to see her strategy to fruition; she faces mandatory retirement age when she turns 65 in September 2016. The president of the broadcasting division, Dave Lougee, is a logical successor. He's 54 and came to Gannett six years ago from Belo after a long TV career, a professional pedigree that doesn't show tremendous interest in newspapers.

Martore's October analyst teleconference ended, the meeting's mood far less ebullient than the one last March when Gannett mounted its spirited push to sell Madison Avenue on the "New Gannett."

Marketing chief Banikarim, right, with Kennedy at the "upfront."
The public relations campaign unfolded in midtown Manhattan with an elaborately orchestrated presentation to ad agencies and marketers during Gannett's first-ever upfront sales meeting. The venue was an auditorium at the AXA Equitable Center where Gannett staged a mock TV talk show it videotaped before an audience of 400.

The company's chief marketing officer, Maryam Banikarim, kicked off the meeting, where Gannett introduced itself as a company not just about newspaper brands, but also social media, video and leading-edge "rich media" ad services. At 44 years old, Banikarim is the more youthful face of the refashioned company, a job she got in 2011 as the first-ever marketing chief. (Martore, scheduled to be there, was home with the flu.)

On stage, the host-for-hire, comedian Andrew Kennedy, threw one of many scripted softball questions: "I thought Gannett was a newspaper company?"

Banikarim feigned a gasp. "Well," she said, "a lot of people think that. There's lots of interesting things about Gannett people don't know."

The Oracle of Omaha
Soon, she told the audience about Warren Buffett's just-published annual letter to Berkshire Hathaway shareholders, where the Nebraska industrialist talked up newspapers in the digital age.

There are good reasons to quote him. As one of the world's top investors, the "Oracle of Omaha" has snapped up more than 65 dailies and weeklies. In his letter, Buffett painted a rosy portrait of the industry's future. (This was before Berkshire dumped all its Gannett stock five months later.)

"My favorite line," Banikarim told the audience, "is where he says, 'wherever there's a pervasive sense of community, a paper with a viable Internet strategy . . . serves the special informational interests of that community and will be indispensable."

She added: "It's like I wrote it myself."

Buffett
Not quite. Here's a key passage Banikarim left aside:

"We do not believe," Buffett wrote, "that success will come from cutting either the news content or frequency of publication. Indeed, skimpy news coverage will almost certainly lead to skimpy readership. And the less-than-daily publication that is now being tried in some large towns or cities -- while it may improve profits in the short term -- seems certain to diminish the papers’ relevance over time."

And: "Our goal is to keep our papers loaded with content of interest to our readers and to be paid appropriately by those who find us useful, whether the product they view is in their hands or on the Internet."

*  *  *

A postscript
Two months ago, Gannett tore a page from Buffett's playbook, starting a closely watched pilot test of the Butterfly Project. It has restored hundreds of pages of weekly news drained in recent years from four newspapers in New York, Florida, Indiana and Wisconsin. The test includes a new daily local edition of USA Today.

Gannett hopes it will shore up advertising and print circulation when digital subscriptions have failed to gain traction. In the months ahead, it appears likely the initiative will extend to about three dozen of the company's biggest U.S. newspapers. Their combined circulation exceeds 2.3 million weekdays and 3.5 million Sundays.

USA Today, still recovering from a steep dive in ads and circulation, could claim an enormous increase in circulation as well.

It is a huge, surprising bet on print, a sharp turn even as Gannett continues its journey to a digital future that's anything but assured.

Thursday, November 07, 2013

Salisbury | An extra $1.74 for Thanksgiving edition

I suspect this is going on at other newspapers as well.

The Daily Times of Salisbury, Md., is charging readers an extra $1.74 for the Thanksgiving edition because it's a much larger paper, so delivery by carriers will cost the paper more.

One reader on the EZ Pay plan might have missed the extra charge if they hadn't read their bill closely, according to SBY News. (Under EZ Pay, the monthly subscription cost is automatically deducted from a bank account or credit card.)

How much more is your site charging for the Thanksgiving edition? Please post your replies in the comments section, below. To e-mail confidentially, write jimhopkins[at]gmail[dot.com]; see Tipsters Anonymous Policy in the green rail, upper right.

Saturday, November 02, 2013

The truth about USAT's big new circulation pitch

USA Today just made a dramatic change in the way it reports circulation, adding free digital app users to paid sales so it could once more claim the No. 1 circulation spot among U.S. newspapers. The move boosted USAT's total as of Sept. 30 to a record 2.9 million from 1.7 million a year ago -- a 68% increase.

USAT's free iPad app
The two other national newspapers left their formulas unchanged. That resulted in a smaller 14% annual gain for The New York Times, to 2.1 million. The Wall Street Journal saw a 1% decline to 2.3 million. (See this spreadsheet for a complete breakdown.)

But comparing the three papers' figures is hardly apples-to-apples. The NYT's iPad app lets users read only three articles daily for free; after that, they must pay for a digital subscription. The WSJ app also gives readers limited access for free before requiring a paid account.

Not so with USAT, which gives readers free access without any limits. That means more than half the paper's circulation is now unpaid digital. And that doesn't begin to count all those copies provided gratis by hotels, airlines and other bulk buyers.

Why this matters 
Historically, the industry told advertisers paid circulation was more valuable than free because readers were more engaged with something they'd spent money on. Indeed, when USAT lost the top circulation spot in 2009, it downplayed the shift by emphasizing that it remained the top selling print paper, partly as a result of its big single-copy sales.

"Single copy newsstand sales," the paper said in a press release, "reflect customers who actively seek out the newspaper each day and pay full newsstand price, which is widely considered the most valuable circulation by advertisers."

Starting next spring, USAT plans to change its strategy again under the Butterfly Project. It will start including potentially millions of circulation when it likely expands distribution of its new daily local edition to about three dozen of Gannett's community dailies.

In announcing that change last week in a memo to staff, Publisher Larry Kramer didn't say whether those editions would be counted as paid.

But to do so, Gannett effectively would be counting each of those dailies twice. For example, The Indianapolis Star would count as one. And the USAT edition -- which is now the Star's second section -- would also get counted as one.

Related: Poynter Institute says USAT's news coverage is "misleading."

Earlier: Find your newspaper's newest circulation figures.

Here's the latest circulation data for your paper

U.S. newspapers across Gannett just revealed their latest circulation numbers in a report from the industry's Alliance for Audited Media, formerly the Audit Bureau of Circulations. The report went to AAM members. But a thoughtful Gannett Blog reader has given me a copy. I've uploaded the 140-page .pdf report to Google Documents, were you can read and download a copy for free.

Thursday, October 31, 2013

USA Today will count Butterfly edition circulation; move comes as it once more claims No. 1 circ rank

With print circulation tumbling again, USA Today Publisher Larry Kramer confirmed in a memo today that the struggling paper plans to include in its future circulation reports the new daily section inserted in four community dailies in the Butterfly Project trial that began this month.

USAT's honor box
That would add 360,000 in print weekday circulation and 579,000 on Sundays, for the first time giving the 31-year-old paper weekend circulation data to pitch to advertisers.

Until today, the paper had not said publicly whether it would include the standalone news section published at those papers in Indianapolis; Fort Myers, Fla.; Appleton, Wisc., and Rochester, N.Y.

The decision means USAT could expand circulation even more if the Butterfly Project is extended to perhaps three dozen of the largest 81 community dailies. They have a combined print circulation of 2.3 million on weekdays and more than 3.5 million Sundays. Corporate hasn't said how long the Butterfly test will be run.

Kramer's memo came as the paper disclosed it is once more claiming the No. 1 spot in newspaper circulation by counting free tablet and mobile phone use data on top of print edition sales. In doing so, the paper would overtake the current leader, The Wall Street Journal, and the second-ranked New York Times.

Muddying circulation waters
But the move makes it even harder to do an apples-to-apples comparison among papers, because the tablet and mobile phone users aren't paying readers. The WSJ and NYT figures are for their more valuable paid print and digital circulation.

Overall, this means circulation data will become even less meaningful to advertisers. USAT has long been dogged by critics who questioned the integrity of the paper's print circulation data because so much of it was to business travelers who got free copies given to them by hotels, airlines and other institutional buyers who bought in bulk at a steep discount.

With its new formula, USAT now says it has 2.9 million in circulation vs. 1.7 million in its March 31 report to the Alliance for Audited Media. That compares with 2.3 million for the WSJ and 1.9 million for the NYT, according to a report today in Capital New York.

However, USAT's new count masks another stunning loss of print circulation for the six months ended Sept. 30. It plunged 19% from a year ago, according to a Poynter Institute report today.

USAT's decision to count tablet and mobile data will help soften the blow of steep circulation losses the paper has forecast as a result of doubling its single-copy price to $2 on Sept. 30.

Digital age challenges
Kramer's memo arrives as the AAM (formerly the Audit Bureau of Circulations) released its Sept. 30 report to members this morning. Effective today, the AAM is no longer making public its top-25 circulation reports, however.

The industry has been wrestling with how to count circulation in the digital age, where papers have gained millions of readers who access websites for free. Historically, the industry had always counted paid circulation as most valuable. The shifting accounting has been a particular challenge for USAT, which doesn't charge readers for digital access to its website and digital apps -- unlike the WSJ and NYT.

AAM Executive Vice President Neal Lulofs told Poynter that the group's traditional method of counting circulation is no longer a meaningful metric for advertisers in today’s "complex multichannel, print/digital, paid/free, branded edition, bundled/paywalled, you-name-it environment."

The Butterfly Project, which has been in the works for more than a year, was seen as another way for USAT to regain traction in circulation and advertising while also giving an editorial boost to Gannett's community dailies. The standalone USAT section provides another platform to sell national advertising and adds dozens of pages of additional foreign and national news to the smaller community papers every week. The section is produced by USAT at its main office in McLean, Va.

USAT first lost the No. 1 spot in the September 2009 when the WSJ started included paid digital subscribers. USAT then fell to No. 3 when the NYT launched its paywall and also counted digital subscribers.

Kramer
Kramer's new tactic
Counting tablet and phone app usage is a new marketing strategy for the paper under Kramer, the paper's first publisher with a deep digital background. He founded the widely read financial news site MarketWatch before coming to USAT in May 2012. His mandate: to turn around the paper, which had been losing multimillion dollars in advertising amid steep circulation declines as the paper's bread-and-butter customers, business travelers and hotels, abandoned print newspapers.

Four years ago, USAT had downplayed its drop in the rankings by emphasizing that it remained the top selling print paper, partly as a result of its big single-copy sales.

"Single copy newsstand sales," the paper said in a press release, "reflect customers who actively seek out the newspaper each day and pay full newsstand price, which is widely considered the most valuable circulation by advertisers."

Monday, October 21, 2013

I'm now live-blogging the Q3 analyst conference

CEO Gracia Martore and other top executives are discussing the just-released third-quarter financial statement with stock analysts this morning. The 10 a.m. ET conference, lasting about an hour, is being webcast in listen-only mode for the general public. How to participate.

11:05 We're done. GCI's stock is still down. It recently traded for $25.78, down $1.71, or 6.2%.

11:03 Among last questions, what's status of Belo takeover given the federal government shutdown's delaying regulatory approval? "We are moving as expeditiously as we can," Martore says.

10:49 Martore and CFO Victoria Harker sound just a tiny bit rattled in answering some of these questions, and none of them are especially tough.

10:42 Digital-only subscriptions sales update? (Was 65,000 sold, the questioner says.) After much dancing around, Martore says 75,000 to 80,000 sold, when not including those who have since upgraded to add print. She says this is one of the "least significant "metrics they've used to gauge success of the paywall. What no one mentions is that Martore has been forecasting 250,000 to 300,000 digital-only subs by the end of the year. Clearly, the company will not come close to hitting that target.

10:29 Is there another subscription rate increase in the works? Newspaper division president Bob Dickey says "at this point in time we have not announced any.'' But he says they are experimenting with some in select markets.

10:28 The Q&A portion has begun. Martore is talking about impact of the federal government shutdown.

10:16 GCI's stock is now trading for $25.86, down $1.61, or 5.9%.

10:12 Big news is that overall revenue fell to $1.25 billion, down 4.3%. Wall Street had forecast $1.27 billion. But adjusted earnings per share were 43 cents, better than the 41 cents' forecast.

10:06 Among the highlights from the press release, newspaper and other print ad revenue fell 5.9%, steeper than the 5.4% in the second quarter. This is the third consecutive quarter of widening declines. But Digital Segment revenue rose 5%, a better performance than during Q2.

10:02 a.m. Martore has started with her overview, where she adds additional color to the press release issued earlier this morning.

Saturday, October 12, 2013

Newspapers' revenue dive enters 8th straight year; for Gannett, analysts forecast a bleak second half

As digital advertising sales soared 18% to a record high in the first six months of this year, publishing revenues of the publicly traded newspaper companies slipped an average of 5.5% to enter an eighth year of unabated decline, according to industry blogger Alan Mutter.

In the absence of information formerly reported by the industry's trade association, Mutter said yesterday, the 5.5% decline is based on an analysis of the financial statements of the 10 publicly traded companies that own domestic newspapers. Those include Gannett.

In fact, Gannett's revenue decline was much smaller than the average for the 10 companies. During the first half, combined advertising and circulation revenues fell just 1.1% to $1.7 billion. Although advertising fell 5%, circulation jumped 7.3% after Corporate jacked up subscription rates an average 25%.

Gannett doesn't break out digital advertising revenues, lumping them in with overall digital results, so it's impossible to know how GCI's digital ad sales compare to the 18% figure cited by Mutter.

We'll see how the third quarter fared a week from Monday, when Corporate reports financial results. Analysts are already braced for bad news. They forecast overall revenue will dive 2.9% to $1.27 billion. For the current, fourth quarter, they expect the situation to only worsen: Revenue will plunge 7.5% to $1.4 billion, according to consensus estimates in a Thomson Financial survey.

Missing: TV results
Those quarterly declines are because the company doesn't have last year's political and Olympics advertising in the broadcasting division to prop up results. Also, the big newspaper subscription rate hikes have now fully cycled through. And growth in the Digital Segment is threatening to flat line.

Finally, GCI's takeover of TV company Belo isn't expected to close before the New Year -- and that's assuming the federal government reopens in time for regulators to sign off on the deal. Any revenue gains from Belo won't occur into sometime next year.

Bottom line: CEO Gracia Martore and her team have their backs to the wall. Unless they can pull a revenue rabbit out of their hat, the outlook is grim.

Saturday, October 05, 2013

Butterfly Project formally launches tomorrow

That's when The Indianapolis Star and The Post-Crescent in Appleton, Wisc., start adding dozens of pages per week, including new daily, standalone USA Today national and foreign news sections. Some of the added pages will include more local news, although publishers haven't been specific about how much and what kind.

The two dailies will be joined by two more in Fort Myers, Fla., and Rochester, N.Y., on Monday as Corporate starts a pilot test of what's called the Butterfly Project. The initiative, under discussion at least since summer 2012, hopes to boost advertising sales, especially for national ads through the new USAT section.

Indy is adding 70 pages a week; Appleton, more than 48; Fort Myers, 70, and Rochester, about 60.

With tomorrow's debut, USAT will be publishing its first regularly scheduled print Sunday edition since the paper was launched in September 1982. Next weekend would bring the first Saturday edition.

If Butterfly is successful, it could be extended to about three dozen other U.S. community dailies from coast to coast with combined circulation exceeding 2.3 million weekdays and 3.5 million Sundays.

Depending on how it counts those abbreviated national editions, USAT could add millions in daily plus first-ever Saturday and Sunday circulation when it reports to the Alliance for Audited Media for the March 31 period. That would help the paper blunt losses after it doubled its single copy price to $2 last Monday.

Monday, September 30, 2013

USAT | Here's the first issue with $2 cover price

USA Today doubled its cover price to $2 starting today, the first such increase in five years. The price hike is expected to reduce newsstand sales 35% and decimate vending machine sales, according to an internal company documents.

I don't see an editor's note or any other such acknowledgement of the increase on Page One.

[Image: Newseum]

Friday, September 27, 2013

Louisiana | Memo hints at creating regional dailies

This morning, the president of the five-newspaper Louisiana group offered the latest sign Corporate may be leaning toward creating single regional newspapers in place of individual ones serving specific markets.

Terzotis
In a memo, Judi Terzotis announced she'd hired Cindy McCurry-Ross from Corporate's News Department for the new position of regional editor.

"Cindy will work directly with the editors at each site to strengthen the news operations in the individual markets as well as build out a regional news network for the state," Terzotis wrote. (Full memo text, below.)

Costs should be substantially lower in a regional approach, where current newsrooms could be treated more like slimmed-down community-based news bureaus with fewer layers of highly paid editors and executive editors. 

Fewer reporters, too. For example, a reporter could be encouraged to write back-to-school features that touch on all five Louisiana markets rather than just one. Overnight, one reporter is doing the work of five. Bye-bye, four features writers. 

McCurry-Ross
In less dramatic fashion, this has already started under regional editors at three Central New York newspapers, another six in New Jersey, and 10 small dailies in Ohio. There, however, individual papers are still published under their historic flags. Other areas ripe for regionalizing are the 10 Wisconsin papers.

Gannett's most high-profile and longest-running regional is The Journal News in Westchester, N.Y. That experiment has been one of the company's messiest, however.

Westchester ranked No. 10 in weekday circulation losses among the company's 81 community dailies between 2005-2012. Sales fell 46% during the period, to barely 72,000 from 133,000.

Text of Terzotis memo
Good Morning,

I’m thrilled to announce the appointment of Cindy McCurry-Ross to Gannett Louisiana regional editor. Cindy will work directly with the editors at each site to strengthen the news operations in the individual markets as well as build out a regional news network for the state.

Cindy comes to us with a wealth of experience. For the past two years she has been on the corporate news staff working with Kate Marymont on key projects across USCP. Prior to her corporate stint, she was the assistant managing editor and senior managing editor in Fort Meyers. She’s a seasoned journalist that understands audiences and cares deeply about improving the communities we serve.

Cindy reports directly to me and will be based in Lafayette.

Please extend a warm Louisiana welcome to her! Please share this announcement with your staffs.

Judi

Judi Terzotis
President and publisher, The Times, The Daily Advertiser, The Daily World

Thursday, September 26, 2013

USAT | Kramer: paper 'studying' paywall possibility

USA Today Publisher Larry Kramer said at a panel discussion in New York yesterday that the paper is "exploring" a paywall, according to Keith Kelly of the New York Post. Reached by e-mail, Kramer told Poynter Online: "No plan exists. We’re studying it."

Virtually all of Gannett's U.S. community papers erected paywalls starting in early 2012. They're among about 400 U.S. dailies now charging for online access.

It's unclear whether USAT's study of a paywall is new, or part of what I expect has been a long-standing examination.

In a significant advertising development, Kramer said print advertising was up in this year's first half vs. the same period a year ago -- the first such bump in five years. Kelly didn't say whether the increase is in dollars or lineage, however.

Kramer also said the paper will remove its trademark white boxes from some locations, Kelly reports. It expects sales from such boxes to decline by about one-third after a planned price hike from $1 to $2 next Monday. Kramer's remarks followed a Gannett Blog report about the forecast drop last week.

"Most people are not going to have eight quarters in their pocket,” Kramer told the Advertising Week panel.

With print in decline, USA Today Editor-in-chief David Callaway said he's already moved to a digital-first sensibility with the first story meeting of the day starting at 8:30 in the morning.

“The biggest thing now is the growth of the mobile business,” he said, according to Kelly. “Sixty percent of our digital traffic, as measured by page views, is from mobile platforms — either tablets or smart phones.”

Monday, September 23, 2013

USAT | New lawsuit adds to Hilton deal drama

The legal complaint filed last week against USA Today over its Hilton hotels digital portal is the latest chapter in a drama that extends back to the retirement of Publisher Dave Hunke last year, and the never-explained departure of his young technology lieutenant, Rudd Davis.

Hunke
On Friday, UrbanDaddy accused USAT of breaching an agreement to pay the New York City company to develop the site for the hotel chain two years ago. In its New York Supreme Court lawsuit, UrbanDaddy accused USAT of misappropriation of trade secrets, and asked the court for monetary damages plus an injunction against the paper's continued use of the technology it says it created.

Hilton installed the portal, called The Point, at 3,000 hotels toward the end of 2011, according to a press release announcing the suit. The site, which guests use to access Wi-Fi, now draws about 130,000 daily visitors, helping the struggling newspaper recover lost print circulation as guests switch to smart phones and tablet apps.

But for a time in February 2012, USAT battled a published report that Hilton was canceling its business entirely. Leading industry blogger Jim Romenesko quoted an unidentified source saying the hotel chain was "about to cancel their contract,” and that “serious panic and scrambling [are] going on inside Gannett as we speak."

Asked for comment, USAT spokeswoman Heidi Zimmerman only fanned the rumor mill. “We don’t comment on or confirm the status of any customer or partner relationship,'' he quoted her saying. ("Really?" an evidently frustrated Romenesko wrote. "That’s the best you can do?")

On Hunke's watch
Later, Hilton spokesman Scott Carman told Romenesko his source was wrong.

Davis
The Hilton portal was developed while Hunke was relying heavily on Davis for tech help. Davis had joined USAT in 2008 when the paper bought his action sports site, BNQT. He rose rapidly when Hunke restructured the paper, eventually getting promoted to president of the new USA Today Travel Media Group.

But only weeks after that promotion, Davis left the company without any public explanation in early 2012. Three months later, in April, Hunke unexpectedly announced his retirement. Corporate hired Larry Kramer to replace him that May.

The UrbanDaddy suit can't help relations between USAT and one of its most important clients, Hilton. The chain doesn't need the negative public relations while getting snared between the newspaper and an angry vendor.

Plus, if Corporate doesn't settle the suit, the pretrial discovery process could be very interesting, should UrbanDaddy's attorneys at the Susman Godfrey firm depose Hunke and Davis.

Sunday, September 22, 2013

Butterfly | 80% of Fort Myers' new pages for USAT; Florida paper is third to outline role in a pilot test

That's according to a Page One note to readers this morning, where Publisher Mei-Mei Chan offered fresh details about how The News-Press will be revamped starting Oct. 7 as one of four test sites for the big new Butterfly Project across the community newspaper division.

Chan
Chan said the Florida paper will add 70 pages a week, including a daily eight-page standalone USA Today news section, a major focus of the Butterfly experiment.

Chan is the first publisher to reveal the size of the USAT section. That detail wasn't included in stories last week about the project's launch at two of the other test sites: The Indianapolis Star and the Rochester Democrat and Chronicle in New York.

As I post this, the fourth site, The Post-Crescent in Appleton, Wisc., still hasn't told readers about the changes in store even after the paper was first identified as a pilot site three days ago. (The paper is leading with a story and video about the appearance of a live chicken during a handgun control event downtown.) In a memo, staff was told the paper would gain more than 48 pages a week, including the USAT section.

Chan says the redesign will make room "for more coverage about local, regional and statewide issues."

Details still missing
But she doesn't offer any details on the type of coverage, including subject matter. She also didn't say how the additional news would be produced after the paper reportedly laid off six staffers in the newsroom in August during another round of Gannett-wide newspaper layoffs that claimed more than 400 jobs.

Gannett papers have been using more reader-generated blogs, photos and videos to fill space as managers chopped away at journalism resources. While that's free, it doesn't come near the quality of professionally-produced government watchdog and other such reporting.

In Indianapolis, Rochester and at USAT, publishers were equally vague about the subject matter and source of any local content to be added. The Star said only that it would add more than 70 pages weekly, and the Democrat and Chronicle will add around 60.

With Appleton adding at least 48 a week, the four papers would be adding a combined 13,000 pages a year -- a lot of costly newsprint when Corporate has recently been cutting back. Newsprint vies with labor costs as the company's biggest operational expense. In the second quarter, CFO Victoria Harker told Wall Street analysts newsprint consumption fell 15%.

Harker and CEO Gracia Martore will likely face many questions when they release the third-quarter earnings report in about three weeks. What's the Butterfly business model? How much advertising, including especially national, will it generate?

And is there another, parallel double-digit subscription rate increase in the works? Will it be a tiered model, where prices for the same delivery frequency will be set higher or lower according to data on average Zip Code household income? (You're seeing that possibility mentioned here for the first time.)

Publisher Chan's note on the bottom of Page One this morning.





Fort Myers incubator
Readers seldom like abrupt change. In Fort Myers, very early reaction was limited to just three comments -- all unhappy.

Mike Myers, who didn't provide his residence, wrote in a comment on Chan's note: "You've learned to spell in recent months; I'll give you that. But your content is lacking. Let's see how you improve on that."

Ken Franklin of Cape Coral agreed: "Along with what Mike Myers said, you should hire a competent copy editor to deal with frequent typos, grammatical errors, and other gaffes. And more staff photographers so you don't have to run file photos with important stories."

Corporate hasn't said how it chose the four test sites, which represent markets in the Northeast, South and Midwest, but not western states such as California.

But Fort Myers was an incubator for an earlier Gannett initiative that tested using mobile journalists who reported with smartphones, video cameras and other contemporary tech tools seven years ago. The paper's editor, Kate Marymont, later was promoted to editorial director for the entire 81-title community newspaper division.

Whatever the selection process, Butterfly adds even more pressure on the publishers and staff at the four papers to prove why the initiative shouldn't proceed to a wider rollout. Corporate has been considering Butterfly since at least summer 2012.

If the tests are successful, the USAT section would be added to about three dozen of Gannett's other biggest papers, according to my readers. Those dailies have combined circulation of more than 2.3 million on weekdays and more than 3.5 million Sundays. In total, Gannett publishes 82 newspapers and owns 23 TV stations, making it one of the world's biggest news groups.

An historic project
Weekday circulation at Fort Myers is 66,385, and Sunday is 91,150, according to the March 31 AAM report. (Find your site's circulation.)

Butterfly would be one of the biggest new initiatives in Gannett's recent history. But it's a risky bet on print's future amid declining circulation and advertising.

For USAT, Butterfly could help Gannett's struggling flagship recover hundreds of thousands in circulation volume that's likely to be lost when it doubles the single-copy price to $2 on Sept. 30. The paper has forecast a 35% plunge in newsstand sales and the near total disappearance of vending machine sales after the price hike, according to an internal company document.

It's unclear whether USAT will try to count the new daily section as paid circulation in its AAM reports. Rochester Publisher Michael Kane hinted at the possibility in his column last week: "We will effectively publish a national newspaper inside the D&C."

Earlier: Here's the Butterfly Project at a glance.

Related: spreadsheet shows circulation of 81 U.S. community papers 2005-2012.

Butterfly | Here's the new project at a glance

Early next month, Gannett will launch a pilot test of the Butterfly Project, a major bet on the future of print newspapers. It's one of the company's biggest initiatives in recent history.

What
The company will add a combined 13,000 pages annually to four of its 81 U.S. community dailies in New York, Florida, Indiana and Wisconsin. Most of that will be in the form of a new, abbreviated standalone edition of USAT inserted in the papers.

If tests are successful, the project would be extended to about three dozen other dailies from coast to coast with combined daily circulation exceeding 2.3 million weekdays and 3.5 million Sundays. Corporate hasn't provided a test timetable.

Why
Butterfly could generate millions of dollars in new national advertising revenue. It may also stem large circulation volume losses forecast by USAT when the struggling paper doubles its single copy price to $2 on Sept. 30.

Where
Related: spreadsheet shows circulation of 81 papers 2005-2012.