At Gannett, Olympics Growth Could Top 50%

Ad sales for the London Olympics are so strong for Gannett Broadcasting that beating the 2008 Summer Olympics revenue mark is already in the bag. That’s just one of the revenue drivers that have company executives telling Wall Street that third quarter TV revenues will be up even more than the 11.2% gain reported for the second quarter, likely into the low 30s.

“We will have a very strong third quarter,” Dave Lougee, president, Gannett Broadcasting, promised analysts in Gannett Company’s quarterly conference call. “We already have significantly more dollars on the books for the London Olympics than we finished with for the Beijing Olympics in 2008 — and we still have inventory left to sell.”

Lougee explained that the company decided over a year ago to transform its sales processes for the Olympics broadcast on its NBC stations and the changes are achieving results even better than what had been expected. “Specifically, we’ve had a significant increase in local businesses who are advertising on the games on our stations. National Olympics sales are strong as well,” he said.

“When the closing ceremonies are complete, we will end up $10 million-$12 million ahead of 2008,” Lougee said of Olympics ad sales, which, he added, could push the percentage gain as high as the low 50s.

And while the Olympics on NBC are the big non-political driver for the third quarter, Lougee was asked how Gannett’s other stations are doing for the quarter. “Obviously it’s better to be an NBC station in the third quarter this year, but our large market CBS affiliates are doing well and, I think, adding some share,” he said.

Excluding the impact of political advertising, Gannett reported that second quarter broadcasting revenues were up 6.2%. Looking only at core ad sales, Lougee said the gain was about 5%, but would have been more like 6.5%-7% after accounting for displacement of regular advertising by political as election-related spending accelerated in June for some key markets.

Auto, up almost 30%, led growth for the quarter. Other strong categories in 2Q included medical, retail, local services, home improvement and financial services.

“Where third quarter will end is difficult to say for us,” he told the analysts, because the Olympics and political advertising will have such a big impact. “It is pacing very good right now. And that’s industry-wide, as core advertisers placed their business early in advance of the political demand. So it’s very difficult to say where it will finish. But the fundamentals appear to be strong. Specifically, auto remains very strong and frankly it is tracing along with the good sales data that we’re all seeing for car sales,” Lougee said.

“As we get toward September when the political is really ramping up, that displacement factor becomes a much more important issue,” added Gannett CEO Gracia Martore. Because of that, she said, core advertising will be “artificially lower” because of displacement in key swing states where the company has stations, such as Florida, Colorado, Ohio and Missouri.  

While newspaper ad revenues were down 8.3% in the US in 2Q, Martore proudly noted that circulation revenues for the U.S. Community Publishing group (not including the national USA Today) gained 1.3%. That’s credited to the ongoing roll-out of Gannett’s “all access” digital subscription model. The program is up and running in 38 markets. And while it has only snared 16,500 digital-only subscribers thus far, the CEO said they “are a younger, very affluent demographic – new advertising and marketing targets that have been elusive for us in the past.”

A new marketing campaign for digital subscriptions is ramping up and Gannett management is sticking with its projection that newspaper revenues will return to positive growth territory in 2015.

Martore is also bullish on Gannett’s Digital Marketing Services (DMS), now being offered in all of the company’s TV markets and its top 35 publishing markets. She said demand is strong and is attracting “significant new client relationships.” The CEO is expecting the operation to generate $75 million-$100 million in revenues for 2012 “and much more to come” in future years.

Lougee said the scale of Gannett gives his Broadcasting division an advantage because a standalone TV group of the same size probably wouldn’t be able to afford the fulfillment infrastructure that DMS provides.

“We are already seeing a sweet spot in the marketplace,” he said. “Simply put, we have thousands and thousands of local clients and businesses that are getting 20-35 calls a month from search and social and SEO [search engine optimization], different marketing vendors. We come in as a one-stop shop offering and they love it. We’re getting tremendous early success,” Lougee told analysts.