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USA Today and The New York Times: A reversal in fortunes caused by digital revolution

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As part of our Collectif, in which we feature the work of our partners (see more here). Here Reed Phillips, CEO of Oaklins DeSilva+Phillips—an investment bank for the media, marketing, and technology industries, based in New York City—and Jack Stephen, a Duke University student working with Oaklins as a summer intern, compare how USA Today and The New York Times have fared in the digital era.

In 1982 Gannett Co. made a big splash with the launch of USA Today, a national newspaper for America. It was four-color and the articles were short and to the point. Gannett had a jump start in publishing a national newspaper and it took many years for The New York Times to catch up.

Unfortunately, the picture for Gannett is very different today, particularly when compared with The New York Times. Both companies are of similar size. Gannett is slightly larger with $2.9 billion in revenue while The New York Times Company has $2.3 billion in revenue. Gannett still publishes USA Today as a national newspaper, but also has 217 other daily newspapers, mostly in smaller cities in the US and UK. The New York Times is primarily a one-brand company.

Where the two companies diverge is in the value that has been created for shareholders. The best measure of value is the EBITDA multiple at which the companies are valued (based on enterprise value divided by EBITDA). The New York Times Company’s multiple is more than twice that of Gannett’s in 2023. Ten years ago, their multiples were reversed.

To put these multiples in context, two fast-growing media companies, Politico and Dennis Publishing, were recently sold for 15x EBITDA. What’s happened is that The New York Times has supplanted USA Today as the nation’s daily newspaper. It was already doing so with its print edition but has made even greater inroads with its digital version.

The New York Times is way ahead of Gannett in the number of digital subscriptions with 8.8 million vs. 2 million. And, The New York Times has an average annual digital subscription price of $111 vs. just $66 for Gannett.

How did The New York Times do it? They got an early start with digital subscriptions. In 2013 they already had 760,000. 

As the years wore on, they capitalized on major news events such as the Trump Administration, Me Too Movement, and COVID-19 Pandemic to increase their digital subscriber count more than 10-fold by the end of 2022. 

Meanwhile, Gannett fell behind, rapidly losing ground to The New York Times. By the time they finally implemented digital subscriptions for their flagship newspaper in 2021, Gannett had less than one-fifth the number of digital subscribers that The New York Times had. 

Gannett’s failure to create a robust digital subscription service caused massive destruction to shareholder value, made apparent by their EBITDA multiple, which has sharply declined since 2013. Conversely, The New York Times has created value, more than doubling their multiple over the same time span. 

It remains to be seen whether Gannett’s newfound push into digital subscriptions will see them recover the market share they’ve lost in the past decade. Regardless, there are a few key takeaways from this case study that are important to consider.

For one, there is something to be said for media companies digitizing the publications that already have a strong subscriber base in print. There is a clear path to creating value in retaining subscription revenue while cutting costs related to the production of printed publications.

More importantly, there is a broader lesson to be learned about adapting quickly to industry trends. With the recent advent of generative AI, media companies need to prepare for the changes this groundbreaking technology will have in the space.

The organizations that adapt the fastest will be well-positioned to gain market share over competitors. On the contrary, businesses that choose to ignore these advancements risk falling behind indefinitely. 

Di5rupt Collectif is a strategic partner community that brings together industry technology leaders and media advisors to benefit from various exclusive initiatives and to add their voices to wider industry conversations.