Why Gannett is separating publishing and digital

US media group Gannett, which owns USA Today and the UK local publisher Newsquest, says splitting its publishing and digital operations into two separate businesses will "drive innovation" – and could lead to more media acquisitions.

The group hopes the move will create "an emerging digital powerhouse" on the one side, while remaining committed to "award-winning journalism" across multiple platforms on the other, according to Gracia Martore, chief executive of Gannett, speaking during a conference call to investors today.

[pull quote (style 2): We'll continue to be focused on all the strong progress we've made on the digital side of our publishing business:::Gracia Martore, Gannett ]The split, which could be completed by the end of this year, will see the company's newspaper titles and their associated websites continue to operate under the Gannett name. Its television and digital-only ventures will be spun off under a name yet to be decided.

It follows a similar move by News Corp, which separated its publishing and television businesses last year.

Martore said the change would allow management at each company to "devote resources to the areas of their business with the most promising growth potential".

She added: "The time is now right to create two separate companies that we believe will both exceed the growth they achieved under one umbrella."

The publishing division will include USA Today, 81 local American publications and the UK's Newsquest, which has 17 daily and more than 200 weekly brands.

Martore said the standalone publishing business will be "virtually debt-free" and "will be able to drive innovation and further our tradition of award-winning journalism", stressing a continued commitment to digital development.

"We'll continue to be focused on all the strong progress we've made on the digital side of our publishing business – being across every platform," she said. "We see great opportunities to continue to expand with very focused investment and we will continue with those cross-platform efforts."

"We have made huge strides in stabilising and revitalising our publishing business," she added.

USA Today, one of Gannett's biggest titles, recently launched local editions in 35 US markets, which Martore said had "exceeded our expectations" – and the group intends to extend the USA Today brand to other local areas shortly.

Meanwhile, the group says its Newsquest division in the UK has "stabilised", with advertising revenue flat in the second quarter of 2014.

Martore also told investors the split could pave the way for Gannett to buy more titles or websites: "It has been difficult for us to be able to look at some acquisition opportunities because of the cross-ownership rules.

"We will now have two companies that are unfettered in their ability to look at acquisitions. That's a great strategy for our publishing business.

"Clearly there have been attractive newspaper properties and local media properties that have been on the marketplace. We've been constrained by regulatory obstacles of cross-ownership rules which, given the size of our portfolio, we bump into more often than you might imagine.

"Now that we will have a separate publishing business they'll be able, in a disciplined way, to look at those opportunities."

The broadcasting and digital part of the spin-off includes the US car-buying site Cars.com - in which Gannett is buying full control for $1.8bn, having already held a 27% stake.

Martore said the Cars.com buyout - which is subject to regulatory approval - would "propel our digital business forward", adding: "This transaction alone doubles the size of our already rapidly growing digital business."

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