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When Gannett, GateHouse is merged, newspaper cost savings remain

NEW YORK (AP) – Just one week after announcing its $ 1.4 billion acquisition of Gannett, GateHouse Media is reposting journalists and others workers at their newspapers, possibly preventing the future that awaits employees in what will become the largest US newspaper company.

GateHouse and Gannett say that the merger will enable GateHouse to accelerate their magazines' transition to digital while paying down huge sums that GateHouse borrowed to fund the acquisition. But it is unclear exactly how it will make it happen.

Last week, more than two dozen newsroom employees and other workers were laid off at ten newspapers, from Providence, Rhode Island, to Brockton, Massachusetts, to Oklahoma City. The Associated Press confirmed several of these layoffs with the affected employees, others in their newsrooms or union representatives. GateHouse did not announce the reduction of the workforce, and neither the company nor its owner, New Media, had any comment on this story.

Gannett also declined to comment, but pointed to earlier public statements by New Media CEO Mike Reed where he said the merged company "would not only preserve but actually improve quality journalism."

The latest layoffs may not be directly related to the merger. GateHouse is also said to have said dozens of employees in May and winter. The earnings reports show that revenue decreases when the impact of acquisitions is abolished.

Further cuts in newsrooms show that "GateHouse does not have a vision to increase revenue, only reduce costs," debuted Andrew Pantazi, a Florida Times-Union reporter, a paper from GateHouse in Jacksonville, Florida and the head of a union chapter where. "Eventually, they will run out of costs to cut."

Many in the newsrooms and communities that depend on these magazines mourn the changes made by previous GateHouse cuts and support for more. Others, noting that both readers and advertisers have abandoned newspapers for more than a decade, argue that being part of a larger chain is the only way of survival for smaller newspapers that often still struggle to migrate their publications online.

For 15 years, GateHouse has closed five newspapers and closed or merged dozens of weekly magazines, according to "The Expanding News Desert," a University of North Carolina study on the state of local news coverage.

GateHouse, whose leadership includes current and past members of the Associated Press, seeks to calm employees and investors. It says merging the two companies will lead to about $ 300 million in annual cost savings, and promises several sources of digital revenue to maintain the combined business and continue its commitment to quality journalism.

Some argue that such consolidation is the key to saving local journalism, which also competes for people's attention with TV and Facebook. "They ultimately support hundreds of individual publications that wouldn't stand a chance of standing on their own," said David Chavern, CEO of the news publisher's trade group News Media Alliance.

But first, GateHouse needs to pay down debt, including $ 1.8 billion borrowed from private equity firm Apollo at a high interest rate to get the Gannett deal done. It has also promised to continue a shareholder dividend and said it expects to rise.

GateHouse has released competitors as they adapt to an emphatic world. Digital companies account for just 12% of their revenue, compared to 36% for Gannett. Such digital revenues include online subscriptions and newspaper site ads, as well as revenue from separate companies such as online marketing and productivity tools for small businesses.

While the company says it will invest in digital, such investments will probably be in the new Reed Phillips, managing partner of the investment bank Oaklin's DeSilva + Phillips.

"The trend line for newspapers continues erosion of revenue," he said, which will probably lead to further news cuts.

Newsroom staffing in US newspapers has dropped 47% to 38,000 in 2018 from 72,000 in 2004, according to Pew Research. Circulation has fallen in tandem. Pew estimates weekday circulation fell nearly 48% over the same period to 28.6 million.

While some national publications such as Jeff Bezos-owned Washington Post, New York Times and Wall Street Journal have successful online activities, the situation is very different in smaller local newspapers across the country.

After GateHouse buys a magazine, there are usually cost savings. Features such as page design and copy editing are moved to remote nodes that handle the work of several magazines. (Other newspaper chains also have hubs for editing and site design.) Critics say media companies supported by finance companies, such as GateHouse, are particularly aggressive in closing or selling newspapers during a downturn.

The Worcester Telegram & Gazette, which has been publishing in Massachusetts the second largest city since 1866, has gone through four owners over the past decade, including GateHouse, which purchased it in early 2015.

Overall, the newsroom has declined to 25 reporters, copy editors and photographers from 47 during their four years at GateHouse, said Rick Eggleston, a copy editor and head of the local union. "The mantra at GateHouse does more with less."

Having fewer reporters outside Boston asking questions to government officials "hurts the rest of the state," said Tim Murray, chairman of the Worcester Chamber of Commerce and a former lieutenant state governor. "It's hard to hold people accountable."

Despite cost savings, GateHouse magazines strive to engage readers who increasingly receive news on their phones. The Cape Cod Times in Hyannis, Massachusetts and Columbus Dispatch in Ohio were cited among "10 magazines that do it right" by the media trade publication Editor & Publisher, which cited innovative digital projects that have increased readership.

For example, The Cape Cod Paper launched a program that invited readers to submit draft investigative stories. Similarly, The Fayetteville Observer in North Carolina started a new feature that invites readers to answer a current question it asks every Sunday.

But Observer, which was acquired by GateHouse in 2016, has struggled. Purchases followed the acquisition, and last week, GateHouse eliminated the magazine as the newspaper's publisher and assigned that responsibility to an executive who already oversees four other North Carolina newspapers.

Cape Cod newspaper currently dismissed the reporter at the Wheeler Cowperthwaite court last week. Cowperthwaite said GateHouse offered him only $ 400 in severance pay – which, if he accepted, would have prevented him from applying for work in GateHouse magazines for two years.

He rejected it.

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