News Corporation's (Nasdaq:NWS) MarketWatch site announced July 10 that its top editor, David Callaway, was leaving the company after 13 years to go work with Larry Kramer, his old boss at MarketWatch and now USA Today Publisher. Callaway becomes editor-in-chief and will be responsible for all news content across all platforms. The national daily newspaper appears to be signaling a serious move towards more business coverage. I'll look at what it means for Gannett (NYSE:GCI) investors.
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Callaway's entire career has been spent covering business and the markets. Kramer said this about Callaway in USA Today's press release announcing the hiring: "His expertise in both new and traditional media will be a tremendous asset as we transform our iconic brand into one that delivers unique content in new and creative ways." It would seem that Kramer is looking to recreate the magic they had working together when MarketWatch was still in its infancy. Since then, of course, CBS (NYSE:CBS) sold it to Dow Jones in 2005 for over $500 million and then Rupert Murdoch acquired Dow Jones in 2007 for $5.6 billion. After working in a more entrepreneurial environment for the first few years of his time at MarketWatch, it's amazing that Callaway stuck around for almost five years. Joining USA Today as it struggles for readership, is probably his biggest challenge to date.
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Kramer's background in journalism goes back to 1974 when he was a reporter with the San Francisco Examiner. Moving up the ranks over the years, he ran CBS' digital media properties after selling MarketWatch, which he founded with CBS and Data Broadcasting in 1995. When hired by Gannett in May, it was clear business as usual went out the window. Kramer wants writers who can do more than fill a page; he's looking for people who can provide a coherent opinion on the news that's taking place locally, nationally or globally and not just a synopsis. That means if you want to work for USA Today, you better be able to use social media, do on-the-ground investigative reporting and have a personality. I can remember loving USA Today when I was attending university back in the mid-1980s. No one provided the kind of broad coverage they did in such an attractive format. Unfortunately, in hindsight, we found out that formats change. USA Today didn't and that's why Callaway is following closely behind Kramer. The newsroom needs a serious upgrade.
Gannett shareholders have to be holding their breath on these hires. On the one hand, they've seen so many come and go it's hard to imagine anyone being able to create a winning culture at USA Today. However, both of these men have accomplished much in their careers and wouldn't be doing this without a strong belief in the brand itself. Ultimately, Kramer sees the paper's role not so much as pushing information to the end-user reader but rather to meet the reader's informational needs wherever and whatever they are. Callaway's job will be to put the pieces in place to be able to run a customer-oriented digital enterprise that also happens to have a print edition. Currently, digital revenues at Gannett account for approximately 22% of its overall operating revenue. In the first quarter, its digital revenues increased 8% to $273 million while USA Today's digital revenues rose 25% year over year. Gannett's U.S. Community Publishing segment has a paid content model which subscribers can access from multiple platforms that will generate as much as $100 million in earnings in 2013. USA Today will obviously look to introduce something similar but with Kramer less than two months into the job, it's not something on the immediate horizon.
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The Bottom Line
Gannett's digital and broadcasting segments are very profitable and thus its business isn't in imminent danger of a financial collapse. Kramer's hiring sounds like an admission by Gannett management that its publishing business, including USA Today, needs a more entrepreneurial approach in order to be successful. Frankly, the board should make Kramer CEO and Callaway publisher. Of course, Gannett's never been accused of forward thinking. At the end of the day, it's a smart move only if Kramer's given the freedom to operate. Callaway's hiring seems to be a green light.