Martore Boosts Tegna With Focus, Vision

Gracia Martore wasn’t exactly rarin’ to take the top job at Gannett four years ago when then-CEO Craig Dubow retired because of health issues.

You could even call her reluctant. Gannett stock was in the tank, the newspaper business was flailing and the country was just beginning to limp its way out of the Great Recession.

Shareholders have to be glad that Gannett’s board, led by Chairman Marjorie Magner, unleashed their full powers of persuasion. Since Martore took the helm in December 2011, she’s doubled the size of the television group, bolstered digital operations into an industry leader and cut the cords to the drag chute of the newspapers.

As a result, shares in Tegna — as the broadcast-digital company sans newspapers was renamed earlier this year — trade around $25 compared to the bargain basement $10 Gannett shares fetched when Dubow departed. (Gannett, publisher of USA Today and many local newspapers, currently trades around $15.)

“She clearly has a focused strategy,” says Dan Kurnos of Benchmark Capital. “I like the way they have positioned themselves to be a stronger digital company with an excellent footprint through Cars.com and are leveraging that with broadcast.”

Barry Lucas, of Gabelli & Co., seconds that. “Along the way she’s demonstrated that she’s a capable, disciplined individual. She’s done a good job on the operating front, on the M&A front, and the whole separation.”

TOUGH LESSONS

Martore, 64, and a 30-year Gannett/Tegna veteran, likes where the company is now, too, of course, but says that it is the product of hard lessons learned.

Looking back, Martore acknowledges that Gannett, and the overall newspaper sector, was in denial about the impact of the Internet.

“I think that rather than seeing the possibilities and opportunities, too much time was spent in talking about how we’re the 800-pound gorilla, we’re going to do well, this is just a small piece of the action,” she says. “Unfortunately, as the first part of the media industry impacted by digital transformation, I think that folks were too slow to respond and instead just sort of brushed it away.”

In the old model, the provider was in control. Now, the consumer is, Martore says.

“They want to get their news and information and content whenever they want it and on whatever platform they want it on.”

The move to “a mobile-centric society,” as Martore puts it, is “something we’re very focused on and spending a lot of investment dollars and time and energy on.

“We see there’s OTT out there, there’s a variety of video platforms that we need to be very focused on and not see them as threats but as opportunities, providers of content, creators of content.”

DIGITAL SCALE

Taking the lessons to heart, Martore has built a formidable digital division, which contributed 43% of Tegna’s total revenue in the third quarter. The segments includes Cars.com, which was launched in 1998 and today ranks second only to Autotrader.com among auto sites, and a part interest in CareerBuilder.com, a leading jobs site.

Martore’s deal to acquire complete control of Cars.com in August 2014 for $1.8 billion was particularly opportunistic. Other members of the Classified Ventures partnership that encompassed Cars.com — McClatchy Co., Tribune Media, AH Belo Corp. and Graham Holdings — all had suffered from the newspaper meltdown and were as happy for the much-needed cash infusions as Tegna was to accommodate them.

During Tegna’s first-ever investor day earlier this year, Martore projected that by expanding Cars.com into maintenance and repairs, it’s tapping a market that is “virtually limitless.”

CareerBuilder.com, jointly owned with Tribune Media and McClatchy, gives Tegna a substantial international presence in the digital arena. Now, Tegna is seeking to expand CareerBuilder’s revenue by offering software as a service.

Additional components of the digital division include G/O Digital, a marketing solutions company, and Sightline Media Group, which provides online coverage of the different branches of the U.S. military.

KING BROADCAST

Still, it’s broadcasting that mostly defines Tegna. With 46 stations in 38 markets, Tegna Media accounts for more than half the company’s revenue and is run by Dave Lougee, the face of the company in broadcast circles. (That may be changing. Two weeks ago in New York, she stepped into the broadcasting spotlight, accepting the Giants of Broadcasting & Electronics Arts Award from the Library of American Broadcasting.)

Martore nearly doubled the TV footprint in 2013 by engineering the acquisition of Belo for $2.2 billion in cash and assumption of debt. And that was followed the next year by the purchase of six London Broadcasting stations for $215 million. The stations were in small markets, but they cemented the company’s dominant position in Texas TV.

Martore retains an appetite for size and scale in broadcasting. The station group now covers about one third of U.S. TV households, leaving room for a little more growth.

“If we see opportunities that meet our criteria and meet the financial discipline that we bring to looking at every allocation of capital that we do, then we have a strong appetite for M&A,” she says.

Martore is well versed on broadcasting issues — the challenges and opportunities. Here’s what she thinks about five of the most topical ones.

Regulation: “I think what concerns all of us is that we have a marketplace that is working perfectly fine with respect to retransmission [consent]. I’m one of those people who believes that when something isn’t broken you don’t want a regulatory agency to come in and help fix it.”

She’s concerned that if the FCC injects itself into retrans talks, “it probably tilts the scale more toward the MVPDs using blackouts as political leverage against broadcasters …. I think this is a situation where we have a regulatory body in search of a problem.”

She would also like to see the FCC update its ownership rules to reflect the increased competition of 2015 instead of the 1950s marketplace.

ATSC 3.0: She’s guarded, acknowledging potential benefits — improved picture quality, better mobility and maintaining broadcasters’ leadership in TV technology — but is wary of the unknowns. “Broadcasters don’t know with absolute certainty what the revenue stream we might generate as a result of the new standard would be. I also think there are still questions about what the cost would be.”

OTT: “When you look at a Sony and an Apple, what we’ve heard from all of them is that, yes, network content is important, but local content is very important to them, too. People want their local news and information and we continue to be an integral part of the skinny bundle.” Cord-cutting, which can reduce retrans revenues, so far is a non-issue, she believes.

Original programming: “We’ve signed a venture with Debmar-Mercury where we’re doing some original programming with them. We’re not going to get all of our content from our network partners, and conversely they’re not necessarily going to get all of their content from us. I think it’s an ecosystem big enough to encompass all of us and give all of us opportunities.”

Incentive auction: Tegna has few stations in spectrum high-demand areas, so Martore thinks there may be some channel-sharing opportunities. “We’re obviously looking at it …, but we don’t think it’s a potential huge windfall for our company.”

BOSTON BRED

Martore, the daughter of first-generation U.S. citizens, grew up in Belmont, a Boston suburb.

It was the 1950s and the country was just entering a long period of peacetime economic growth and prosperity.

But while a new world was emerging, the focus in the Martore household was on old-world values: hard work, personal responsibility and education as the tickets to success.

And it wasn’t just values her parents were imparting. Martore got her first taste for news and financial markets from her father.

“I can remember as a really little kid that he and I would sit down and we would review the stock tables in the newspaper,” she recalls. “It was a great bonding moment for me with my dad.”

Martore’s grades got her into Wellesley, where she worked three jobs to pay her way. She was understandably interested in finding a path to the prosperity she saw around her.

With Massachusetts’ economy limping, a bank was among the few companies recruiting at Wellesley. She told the recruiter she figured he would have little interest in her as a potential employee as she was majoring in history and political science.

“He said I can get all the accounting and econ majors that I want; what I want is people who have critical thinking skills to understand how to analyze information and make decisions.”

The recruiter also pointed out that banking presented an opportunity to sample a variety of industries without committing to a specific one until she was ready.

“It was a tough time and this was a great opportunity and I didn’t want to go to law school so this seemed like a great way to get my feet in the world.”

After 12 years in banking, Martore found a home at Gannett, starting as assistant treasurer in 1985. What she learned from her parents was key: “They believed that if you worked hard and did what you needed to do in your job you would succeed,” she says.

Her trajectory to the top was steady. She became vice president of the treasury group in 1993, adding investor relations responsibility in 1995. She was named senior vice president of finance in 2001 and in 2003, CFO. She added executive vice president to the CFO title in 2005, and in 2010 became president-COO.

She managed her career along with raising two children. Her husband, Joseph, is CEO of Calibre, a management and IT consulting company.  “She’s passionate about family, passionate about people caring about family,” says Tegna Chairman Magner.

Although Martore lives in Washington, where Tegna is based, a strand of the Boston DNA runs deep: Red Sox, Patriots, Bruins or Celtics — doesn’t matter, she’s for ’em all. A propensity for numbers doesn’t hurt when it comes to trotting out stats, either.

“The folks we have in Chicago, I take great comfort in commiserating with them  because at  least we were able to ride out the curse of the Bambino,” Martore says. “This goat thing is continuing to ride them. But I told them hope should spring eternal because if it can happen to the Red Sox in 2004 it can happen to anybody.”

MACRO-MANAGER

Of the many changes Lougee has seen since he joined Gannett from Belo in 2007, Martore’s ascension may be the most welcome, he says.

“The Gannett I came to…is not the same Gannett that split this summer and turned into Tegna,” he says. “The culture really changed under Gracia’s leadership.”

She was a critical player during the recession, he says. “With her financial acumen, she helped steer us through those incredibly turbulent waters and we came through it, thanks to her leadership, much stronger than we went in.”

Although he brought considerable knowledge of Belo, Lougee says, Martore gets full credit for the acquisition.

“She was the financial mastermind and strategist,” he says. “What I helped do behind the scenes was model it out. Having worked [at Belo] before, I had knowledge of individuals and culture so I think I was helpful, but my role can be overstated. She really drove it.”

Lougee says Martore is better at multitasking than any executive he’s ever worked with, or for. That said, she’s not a micromanager.

“She lets her operators run their businesses and does not get involved in the day-to-day activities of the businesses,” he says. “She has the great ability to be able to look at data and have meaningful conversations with the operator about current performance as well as being very focused on the future. … There’s nobody I’ve ever known who works harder.”

Martore is readily accessible, he says. While much of their regular daily communications may be electronic, there’s ample direct contact. “The most face-to-face time I spend with her is around strategy … the future,” Lougee says.

Martore has put her signature on Gannett, then Tegna, and she’s done it not just by leading by example but also by imparting her hard-won knowledge, Lougee says. “I’ve learned from her about being relentless on staying on top of things.In a fast-moving business like this if you wait too long to adjust your strategy, your tactics, you can miss the boat. I think she’s second to none in terms of staying on top of businesses and where they are heading.

“I’ve also learned a tremendous amount about the financial side of the business, and how it correlates to operations and people and culture, through her. The lessons are almost too numerous to mention. It’s been like getting a Harvard MBA while working for her.”

SOME BAD OPTICS

When Dubow stepped down in 2011, he generated widespread criticism on Wall Street and in the media for failing to buffer Gannett during the secular downturn, then taking a $37 million golden parachute as thousands lost their jobs at the company.

Martore, too, has taken heat for raking in hefty checks while axing jobs.

Martore, apparently sensitive to the disconnect, took a 10% salary cut in 2012 — from $1 million to $900,000, according to Gannett’s proxy statement. Still, her overall compensation that year was $8.5 million. Her overall compensation dropped to just under $8 million in 2013, then jumped more than 50% in 2014 to $12.4 million, largely the result of a bump up in pension value.

Her termination package in the event of a change of control is a robust $47 million. Earlier this year, she purchased a 4,447-square-foot condo in Arlington, Va., for $3.65 million, according to the Washington Business Journal.

Susan Ness, former FCC commissioner and Tegna board member, defends Martore’s pay.  “Historically, compared with her peers, she has been on the lower side of pay,” Ness says. “For years at Gannett … she refused to take full salary. We always had to push her to take full salary. Basically, because the publishing area was hurting, she was setting an example for her compatriots.”

Martore and her management team also earned raspberries last spring for a lip-sync version of Everything is Awesome from the Lego movie. It was intended as a team-building exercise for employees at the then-combined Gannett but it came across as tone-deaf.

As one wag on the now-defunct blog that tracked the goings on inside Gannett put it: “Well, when you rake in millions of dollars each year at the expense of current and previous employees who were laid off, everything is awesome.”

THE FIDUCIARY

Martore believes strongly in Tegna’s current broadcasting and digital strategies, but she acknowledges the reality of running a public company.

“At the end of the day, as we’ve always said, we’re here to create shareholder value, and if at the end of the day someone came along and made us an offer for any asset we would have to take a look at it in the context of what creates the most shareholder value. As a public company you have a fiduciary responsibility to do that.”

But until that day comes, she’s applying the lessons she learned long ago: Work hard; do what it takes to get the job done.