Lee Enterprises issued a quarterly financial report Thursday, continuing to boast of a rapid pace of digital transformation at its 77 daily newspapers. Statistics in the report, however, suggest that that 59% year-to-year growth in digital-only subscriptions appears to have been achieved only with deep discounting.
Lee said it had 450,000 digital subscribers by the end of 2021. However, its income summary for the last quarter showed digital subscription revenue up just 26%. Moving the revenue needle higher will probably take both a lot of effort and time.
Lee executives acknowledged as much in one slide of their presentation to analysts, saying the company expects to drive revenue-per-customer “expansion as introductory pricing becomes a smaller piece of the subscriber base.” Lee expects to introduce higher priced niche products, it said, which would also up the return.
CEO Kevin Mowbray described the overall results, with total print and digital revenues down slightly and operating profit up year to year, as “another strong quarter of progress.”
Alden Global Capital, the company’s antagonist in an ongoing hostile takeover fight, didn’t see it that way. In a press release, Alden characterized the results as “disappointing.”
More specifically, Alden said that Lee has been “inept” in integrating its operations with Warren Buffett’s BH Media, which it acquired in March 2020, roughly doubling the company’s size.
Alden’s two-paragraph statement also said that the company has let profitability slide and has missed income targets it set two years ago. “They are distracting shareholders and spinning their awful operating performance as compared to how they operated and performed pre-(BH) acquisition,” the statement said.
A Lee spokesperson fired back, “Alden’s comments, which misrepresent our performance, including ignoring Lee’s continued market-leading digital growth, are clearly another attempt to mislead investors and advance its grossly undervalued hostile offer for the company.”
Alden bid $24 a share for Lee in November. Even after losing 13% of their value by midday Thursday, Lee shares were trading much higher than that at $34.
Alden is seeking to replace two of the eight members of Lee’s board with its own nominees. Lee rejected the nominations as invalid. A hearing in Delaware Chancery Court on Alden’s legal challenge to that action is scheduled for Monday.
The war of words Thursday suggests that the fight is likely to continue whatever the resolution of the board nominations issue.
Elsewhere in the quarterly report, Lee said that its digital revenues, including those from a digital ad agency, will surpass those of print sometime later this year.
It also intends to spend $15 million hiring an assortment of digital specialists to improve content and tech capacity.
Lee’s outlets include the St. Louis Post Dispatch, the Omaha World-Herald and The Buffalo News. While Lee has a reputation for running a tight operation with high profit margins, Alden would likely cut its newsrooms deeply and accelerate the sale of real estate assets.
Earlier this week, Gilbert Bailon, longtime editor of the flagship Post-Dispatch, announced that he is leaving to lead the newsroom of KERA, the public radio station in Dallas (where he spent the early part of his career).
Bailon, a former president of the American Society of News Editors, was one of the first Hispanic editors of a U.S. metro. At The Dallas Morning News, he was executive editor and before that, founding editor and publisher of Al Día, the company’s Spanish-language paper.
