The Herald under Gannett

By The Drum | Administrator

January 22, 2003 | 13 min read

In March, Melanie Johnson, the DTI Competition Minister, will give the green light for the acquisition of the Herald, the Sunday Herald and the Evening Times by Gannett UK, the parent company of Newsquest, bringing perhaps the most intriguing Scottish media auction for years to a close. The handshake between SMG’s chief executive Andrew Flanagan and Gannett’s chief executive Paul Davidson is worth £216m to SMG, a figure that will see SMG more than halve its £400m debt, at the loss of its three newspapers, eleven magazines and growing s1 internet business.

So, while the SMG board may be feeling pretty pleased about achieving more than the £200m price tag they initially put on their published products how do staff at SMG’s publishing division, and the Scottish media marketplace at large, feel about the deal?

Interestingly, according to a poll running on, 62 per cent of visitors to the site feel that the Gannett acquisition is a bad thing for the more than 280 people who currently work at the three newspapers.

However, Andrew Jaspan, editor of the Sunday Herald and the man who fought hard to ensure that the Barclay brothers did not take over the newspapers, believes that Gannett’s imminent ownership is the best outcome for the titles, their staff and continued editorial independence in Scotland.

He says: “Gannett have not said much as they cannot because of the DTI rules, but at the end of the day they have paid £216m, which is a premium price for premium products. You do not just walk and in change premium products.

“I am led to understand that they do not seek to micro manage the newspapers from a central office. Their view is that that is not the best use of experienced local management teams. I am encouraged by their hands off attitude. They are committed to these titles and developing them, but if they had fallen into the Barclays hands their plan was to merge the Herald and Scotsman, close the Sunday Herald down and strip out costs.

“The Barclays made it quite clear that they would shut our newspaper down. I did not make a big deal about that because as a manager that is the last thing I should have done as I would have had 40 demotivated and worried people to work with. Now this deal is completed we do not have those concerns. We have secured the future of the newspaper”

Indeed, in a personal letter sent from Gannett UK chairman Jim Brown to Alex Salmond MP, who campaigned to guarantee editorial independence at the Herald titles, gave further reassurances.

Brown stated: “It is the policy of our company to give editorial independence to all of our newspapers...

“Our editors are not subject to editorial interference - particularly on politics. You may also appreciate that as a company we are very familiar with the Scottish scene since our chief executive Paul Davidson is originally from Glasgow and I as non-executive Chairman originate from Ayr and we have both worked on newspapers in Scotland.

“It is perhaps worth mentioning that our American owners Gannett also give editorial independence to all their American newspapers and they certainly take no part in the political scene in the UK.”

But despite these and Jaspan’s claims that any deal made with the Scotsman Publications would have spelt the end for the Sunday Herald and certain cost cutting, Walker says that such dangers could still be lurking around the corner.

He says: “I think it is good news that the titles have been bought by another newspaper company and a newspaper company that sees efficiency as its priority. But that is a double-edged sword because that could have a negative effect on the newspapers and the staff. We will have to wait and see.

“Gannett seems to me to run a very profitable organisation and will want to ensure that the Herald newspapers live up to the profit standards of the rest of the company.”

Despite the official SMG announcement of 24 December, which stated that by concluding the deal ahead of schedule the effect on staff and readers will be minimal, it is a widely held belief amongst the industry that Gannett UK’s publishing division, Newsquest, will put its own man or woman in charge at the newspapers. Whether that means current chief executive of publishing, Des Hudson, remains with the titles is unclear.

A source close to the Gannett UK organisation said: “Usually, when deals like this take place the company taking over puts in someone who fully understands the bigger company’s philosophy, direction and aspirations.

“I would imagine that many of the senior and middle managers will be retained, as Gannett UK has up to now had no interests based in Scotland, so they will rely on the knowledge of the people who have been working on the title for years.”

However, that said, other press reports have spoken of belt-tightening measures once Gannett takes charge of a title.

An article in Scotland on Sunday, the major indigenous rival to the Sunday Herald, contained a quote from a New York analyst, who said: “As the biggest US newspaper publisher they (Gannett) have learned to squeeze the lemon dry. Expect payoffs and belt-tightening all round.”

Another article in SoS quoted a journalist from a newspaper taken over by Newsquest, the Northern Echo, who alleged that since Newsquest took control the quality of the paper has plummeted, with sales following suit from 121,000 in 1971 to 61,138 in 2003. He stated: “It (the Echo) has become a very poor paper, but it isn’t necessarily the journalists’ fault. They still have some good people, but they operate under severe restrictions.”

The article also spoke of union unrest over pay deals at Newsquest’s titles and how union staff are currently balloting to strike at three of its titles.

Jaspan counters these reports: “The first thing to note is that we operate in a very different marketplace to the Northern Echo whose only real competition is in Newcastle. We compete against 14 national newspapers every day so it is very competitive not just for readers but also for staff. If you are a journalist living in Darlington you work at the Echo. That is not the case in Glasgow. We are in a different marketplace and Gannett understand that.”

However, talk of staff unrest at Newsquest papers must be music to the ears of Scotsman boss Walker, who must feel aggrieved at not having taken control of the newspapers.

“I am pretty sure they will look at slimming down the editorial numbers,” says Walker, “but whether they will actually do that I do not know. If they want the newspapers to make more money than they are doing now, they will change it. Only the chief executive and his immediate managers have an idea what they want to do with these newspapers and only time will tell. What they do depends on their aspirations for the newspapers.”

However, Mark Hollinshead, managing director at the Daily Record, believes that Gannett will not swing the scythe quite as freely as Walker believes. He says: “Gannett have a proven track record in running regional newspapers and in my view that is good news for the staff at the SMG titles.

“I think they will look at it as they would any acquisition. They have their own definition of what best practice is. They run a high margin business but I am sure they will respect the market position of the titles they have acquired and the need for continued investment in the products.”

One interesting aspect of the deal between the two parties is the allocation of £9m worth of advertising for the Herald, Sunday Herald and Evening Times on SMG’s television stations during Gannett’s first year of ownership.

The level to which SMG has promoted its newspaper titles on its TV stations in recent years has been a bone of contention, particularly for the Scotsman Publications, which is in no position to match it pound for pound.

Richard Bogie, advertising director at The Scotsman Publications, says: “I do not think the first year will be the most interesting. It will be even more interesting to watch what the titles do when they are not being heavily backed up by television advertising. We know that newspaper circulations rise when they are advertised heavily on television, so when the Herald and Sunday Herald are not being heavily promoted it will give us a more accurate picture of where the titles are at.”

It is widely expected that SMG’s national sales team in London will be rolled into Newsquest Media Sales, the sales arm for Newsquest’s titles.

Walker says: “It would be reasonable to assume that they will roll SMG’s national sales operation into Newsquest Media Sales. Newsquest doesn’t have anyone experienced in Scotland, so it is likely they will be rolled into that, as they will want everyone currently selling Scotland to keep selling Scotland. If I had one worry it would be whether they are going to use their size in the UK marketplace to influence people placing advertising with them and not with us. I suppose we have to trust them to behave.”

Hollinshead agrees: “Common sense will be to leave the sales teams in place, as they know the Scottish marketplace, but if they have national sales operations it would be sensible to subsume the national sales into that.”

Whatever happens nothing will until the deal is green lighted by the Competition Commission in March. Only in April when chairman Jim Brown and CEO Paul Davidson, both Scots, take up residence at Renfield Street will we see any changes.

So until then ... it’s business as usual.

A Brief History of Gannett Co

Gannett Co was founded in 1906 by Frank E. Gannett and Associates when they acquired interests in the Elmira Gazette in Elmira, NY, with just $3,000 in savings, $7,000 in loans and $10,000 in notes.

Shortly after, they acquired another newspaper in Elmira and merged them to form the Star Gazette, and in 1912 they acquired the Ithaca Journal, also in New York State. Six years later they moved the company to Rochester, NY, purchased two newspapers, which they merged into the Rochester Times-Union and consolidated their holdings under the name Empire State Group.

In 1923 Frank E. Gannett acquired the holdings of his associates and formed Gannett Co. During the following 25 years Gannett expanded throughout the northeast of the USA and in 1947 the company owned 21 newspapers and seven radio stations.

Shortly before the death of Frank E. Gannett in 1957, Paul Miller became chief executive of Gannett and it was during the 1960s that Gannett moved onto the national media stage.

Gannett closed out the decade with 33 daily newspaper titles, 12 weekly titles, six radio stations and two television stations. Shortly before the end of the decade Gannett was floated on the New York Stock Exchange.

After a number of mergers during the 70s, Gannett saw its portfolio grow to 78 dailies in 33 states and Guam, 21 weekly newspaper titles, seven television stations, 14 radio stations, outdoor advertising plants in the USA and Canada and a national news service based in Washington. In September 1982 Gannett launched USA Today, which now sells 2.3 million copies a day in the USA and is also available in 60 countries around the world.

During the 90s Gannett increased its interests in digital media, launching, which has become one of the biggest news sites on the internet, and also sold off its outdoor advertising interests and radio interests.

In mid-1999 Gannett acquired Newsquest in the UK and shortly after acquired Newsco and merged it into the Newsquest operation to form the second largest regional publisher in the UK.

In 2001 the company relocated to its headquarters in McLean, Virginia, and current chairman, president and CEO Douglas McCorkindale took over the company. By the end of his first summer in charge McCorkindale had spent £4.5 billion on acquisitions.

By the end of the financial year of 2001 Gannett’s revenue had grown to $6.3 billion with profits of $831m from 109 dailies, 600 non-daily titles and 22 television stations.

A Brief History of Newsquest

Newsquest was born in 1995 as the Newsquest Media Group after an MBO of Reed Regional Newspapers, part of Reed Elsevier, for £210m.

The following year saw Newsquest sell its newspapers in Yorkshire to Johnston Press for £15m, while it acquired titles in Bury, Lancashire, from Johnston Press for £5.75m. The company also sold its titles in the Midlands to Midland Independent Newspapers for £12.3m.

However, the major deal in December 1996 saw Newsquest acquire Westminster Press from the Pearson Group for £298m, a move that almost doubled the size of Newsquest overnight.

In 1997 Newsquest was floated on the Stock Exchange, realising a market capitalisation of £500m and the following year saw it continue to acquire regional titles.

In 1999 Newsquest became part of the Gannett organisation, when the company was purchased for £1.03 billion in cash and assumed debts heralding the formation of Gannet UK.

The following two years has seen Gannett UK and Newsquest acquire publishing interests such as Newsco for £525m, Surrey & Sussex Publishing and the Dimbleby Newspaper Group.

Now, following the acquisition of Scottish Media Newspapers, Newsquest publishes more than 300 newspaper titles, including 17 dailies, with a weekly circulation of more than 11m copies.

Publishing titles such as the Northern Echo in Darlington, the Telegraph & Argus in Bradford, the Southern Daily Echo in Southampton and the Argus in Brighton, Newsquest is now the UK’s second largest regional newspaper publisher.

The company employs 9,000 people, has eleven newspaper printing sites, a number of related websites, a business and consumer magazine publishing division and direct marketing and door-to-door delivery.


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