gannett Communicopia

GANNETT CO., INC.
GOLDMAN SACHS COMMUNICOPIA
SEPTEMBER 21, 2005

PRESENTATION

PARTICIPANTS:
Gannett – President and CEO Craig Dubow
Gannett – CFO Gracia Martore
Goldman Sachs Analyst Peter Appert

Peter Appert - Goldman Sachs - Analyst

I am Peter Appert. I cover the publishing and the information services companies for
Goldman Sachs. A pleasure to have with us this afternoon: Gannett, which is
representing two firsts for us today. It's Gannett's debut appearance at Goldman's
Communicopia Conference, and I think this is Craig Dubow's debut appearance at an
investor conference in his new role as Gannett's CEO. Craig joined Gannett 24 years
ago, serving a variety of positions in the Company's broadcasting units, eventually
becoming the President of this unit in 2000.

Under Craig's leadership, Gannett has consistently been among the most profitable of
the broadcasters as measured in terms of operating margin. Effective July 15th this year,
Craig became CEO of Gannett, succeeding the long-time CEO known to many of you,
Doug McCorkindale. Also lucky to have with us today on the podium, Gracia Martore,
known to many of you as the Company's CFO, a role she's served in for the last several
years.

Same format we have been using all day. If you have questions you would like me to
ask the management team, write them down on a card; somebody will collect them
from you.

Welcome. I am supposed to shake your hand; it is part of the program. Welcome. That's
part of the formal process we do here at Goldman Sachs.

So, first question -- most importantly, how is the Dubow era going to be different from
the McCorkindale era?

Craig Dubow - Gannett - CEO, President

Well, first of all, thank you. It is great to be here, Peter. As we take a look at things from
the outset, we believe we have a number of key pieces in place as we progress into the
future, certainly with our core assets on our publishing side. As we look to the future,
we're going to want to be very, very focused towards the demographic and
psychographic profiles of our customers. And we will become a more customer-centric
company.

But I would say from the beginning here, we will be very focused on the strategies that
have been in place, and we will be looking very clearly at moving in a direction of
evolution towards a greater involvement with the Internet at each of our properties.


And historically, Gannett more so I think than many of the newspaper publishers has
been acquisition oriented. It has had quite a successful track record from an acquisition
standpoint. So does this continue to be part of the strategy? You mentioned the Internet
specifically?


Absolutely. We will continue to take a look at everything that makes sense to us in this
space. If there are opportunities on the publishing side that we think will make good
economic sense, we will pursue that. Same thing on the television side. But our real
focus is in making sure that all the assets are creating greater value for us as we move
into the future and how we can tie to the Internet from a total perspective.


A couple of publishers have done fairly expensive acquisitions recently in the Internet
space. I'm thinking of MarketWatch, About.com. Were those properties that you folks
looked at that would have been relevant for you?


Yes, we did take a look at it. Obviously, the prices ultimately paid were something that
we elected not to pursue. But of course, we had an interest in taking a look at it. I think
the bigger picture here is really having the strategic vision as to where these pieces
would sit as we all move forward.

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And that's really what our team is working on. As you mentioned, I just moved into this
position. I think this is 65 days now. And we have been pretty active in moving about
the entire company, assessing and looking at exactly what we have in the field, sitting
with the employees and hearing a lot of great ideas and what employees’ thoughts are.

The key here, however, is local. We do a great job at being local, and it's all about local
and community. That's been a real high point of success for this company, and that will
continue as we all move into the future here.


One of the interesting aspects of the newspaper industry relative to other components
of the local media business is - in some regards – it's relatively less consolidated than,
say, television and radio are. Gannett has been an important consolidator. So you
mentioned this is in passing, but is your expectation that there is going to be some
significant further opportunities -- I don't know what the timeframe is -- for acquisition
activity in the core newspaper business?


Absolutely. We will certainly take a look. You know what we have been able to do in
the past. Our strategy has been very consistent under Doug's leadership. What we have
been able to do is acquire assets and bring them into an operating environment that fits
within the Gannett company. I expect that to continue as well. But if there are things
that truly would make some sense, we will want to pursue them and take a look at
them.


Maybe we should dig in a little bit into the different operating segments, particularly
for the newspaper business. Ad revenue growth clearly has been disappointing this
past year -- actually for the broadcasting industry as well. What makes it better? What's
the catalyst that we can look for…?


We have had, on the classified side, the employment and real estate have been working
very well for us. When you take a look at a little broader view of all of it, frankly, auto
has really been a struggle for us. So to make it better, we are going to have to see some
opportunities in the auto segment. I say that because consistently across all operating
units with the exception of USA TODAY that has been a concern for us this year. On the

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other hand, with USA TODAY, we have had some significant progress with the auto
launches, etc., that we have seen page after page of that in USA TODAY.

But as we look forward in what will make some differences, the demographic
opportunities that we have. What we are trying to do is make sure that we can fill
appropriate voids from a demographic standpoint. From the newspapers on a daily
basis, where we have done a good job expanding our non-daily. We have over 900 non-
dailies now. I think the exact count is 909 today. To be specific, for example, we have 14
young reader publications.

What we're trying to do is identify very specifically within any given market where a
new opportunity will be. We have found scores and scores of those across the country,
and that has really developed for us. So that is a huge opportunity.

Switching over to the broadcasting side, this has been a very, very tough year. I think
you all are aware we had approximately $120 million net in Olympics and political in
2004 and it's a very, very tough comparison. Last year, it propped things up, and we
had a wonderful year.

On the underlying side to it, again, automotive has been very difficult. Retail certainly
with the consolidations has become a bigger concern. And then, frankly, the restaurant
business, our number three category on that side.

Turning to the UK, what we have seen specifically, again, the automotive side – over
there, they call it quot;motorsquot; – has taken a very sharp decline. This is the first time since
the acquisition approximately 5 years ago of Newsquest that we've really had any kind
of downturn. It's just been a wonderful opportunity for us over the years. But
predominately, we are faced with some very tough economics over in the UK, and it
has had a big impact on us.

Back up for one second to the broadcast side: What we are seeing at this point, we have
the NBC Olympics in Torino coming up in February. That, tied with a number of
gubernatorial elections and issue opportunities within our markets, will play to our
advantage. Again, the key in what we are after is to be number one or number two in
each of the television markets. And from a July ratings Nielsen standpoint, we did an
excellent job. We are where we want to be with the late and with the early morning
news.

We need some more help at this point from NBC, where that’s the largest part of our
portfolio, being the largest NBC non-owned operator. CBS, on the other hand, has had
some nice increases for us. Les Moonves has done a great job with prime time. Our

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portfolio there is six stations. We are the second largest CBS operator, and we've had
some nice uptick there. And as well from ABC – we have three properties. With the
programming they added in this past year, they have been a real lever for us in the
positive direction.

So we are seeing these things tied together most positively. Frankly from USA TODAY,
we've had a pretty darn good year. A couple of the big categories, as I mentioned,
automotive has done very well; technology has done very well. We anticipate this will
continue. We are pleased with what has taken place from a price adjustment from 50
cents to 75 cents. That has worked very well for us. So that gives you a little bit of a
sense of what we're looking at. That is where we are.


Thank you, that was very comprehensive. You brought up the issue of the price
increase at USA TODAY, which is an interesting topic because I think there is a
perception in the investment community that pricing power in the local media business
has been diminished. It could be both on the circulation side for the newspapers or just
as broadly on the advertising side. Do you think that is the case? Do you think there's
much room for price increases to drive revenue growth over the next couple years,
again, circulation or advertising?


From the USA TODAY standpoint, from the price increase I just mentioned, we have
had success. On a single copy basis, we have had a decline but when you take a look at
the overall circulation revenue, it is up. In subscription as well as in our hotel business,
it has created a nice offset. We are right on target. We’re very pleased with what we are
seeing, and it has worked well for us.

Gracia Martore - Gannett - CFO

Yes, USA TODAY expected to have single copy sale losses with the increase in pricing
from 50 cents to 75 cents on about 800,000 copies. But they also anticipated that they
would be able to offset that with more home delivery and others. The numbers are
coming in as we had hoped in that arena. Also, USA TODAY has been successful over
the last couple of years in raising pricing on the advertising side. The last 2 years, they
have raised pricing 8% each year and they have not had significant push back in any
way on that. We've seen the yield on that in their numbers. So that's been a terrific
success story for us and certainly an anecdote on the pricing side. You may want to talk
about local.

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Sure. In the mid- and smaller markets, price has just not been a problem for us, and we
don't see that in the near-term being an issue. Overall, we are pleased with the results
that we've seen from this.


I think to some extent, it comes down to this overly simplified issue. Are the problems
we are seeing in the local media marketplace now cyclical issues? Are they exacerbated
to some extent by secular changes in the media market. Maybe you could just touch on
that. But let me ask you a specific question related to that. Part of your response has
been to create these newer products that you mentioned earlier.


Absolutely.


Maybe you could also weave into the discussion a little bit about the economics of
those products. Certainly, can they be meaningfully profitable? Can they move the
needle for Gannett?


Well, the non-dailies, as I said, are really filling a void within the market. We’re seeing
high teens, low 20s on a margin basis on those products that we have in the marketplace
right now. And yes, it has made a very, very big difference for us. But there are changes
in the marketplace, specifically, as I had mentioned earlier, with the 25 and under. We
are seeing less opportunity to brand directly with those individuals. That's really where
our Internet strategy is playing into this and how we can bridge that as we move from
traditional into the electronic side with the known brands that we have.

The real key is creating the opportunity for brand experience with that set. When you
take a look at the buying opportunity that we have with the 25 and under, it's probably
around a 9% factor in the marketplace. When you add 10 years of age to these
individuals, they're going to be right in the Gannett sweet spot: the 35-year-old range is
absolutely the best opportunity we have and --

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Let me interrupt. What gives you confidence that you can capture that reader, right,
since you're not getting the 25 year olds?


Well, we have had tremendous success online. This year, we are running probably $255
million – $275 million business online between all of our properties. We're seeing a mid-
to high 40s growth rate, and we see that continuing. The volume on a uniques basis is
significant on a monthly basis, approximately 24 million uniques. I think we are what
around 15% http://gannett.gci/corpdir/of the country at this point. We anticipate --
and certainly this ties back to the strategic planning that we're doing -- how we will
bridge this audience through online as we move into the digital future. In a tethered
and untethered environment, it makes no difference, we’ll be ubiquitous to whatever
the platform may be and create the opportunity of being customer-centric. For us, it is
all about anyplace, anytime, anywhere. The personalization, the customization
opportunities that are being demanded and certainly required by the younger users
today are very important to us.

We also are seeing the divides from an advertising standpoint to support this. To date,
we are profitable with our online operations in a significant way, and it's important that
that continues. The strategies we are looking at in a forward view will be very
consistent with that, in tying to the overall core assets that we have from the past. We
are excited about it.


Just sticking on the Internet topic for a second, you certainly developed an interesting
collection of interactive and new media assets. Maybe you've touched on some of this,
but is it possible to give us kind of the big picture view of how you're trying to position
yourself? And most importantly, how big and how profitable you think these
businesses can be as a component of Gannett? Because at the moment, while you are
getting great revenue traction, it doesn't really move the needle a whole lot.

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That's correct. As I said, this is an area we are focusing on. I can tell you straight up we
don't have the complete answer. That's really the focus of what we are working toward
right now from a strategic standpoint with the senior management. All of our travels to
date have been focused specifically on -- how do we create this kind of attraction for our
Web opportunities? Our belief overall is that we can continue the kind of traction we
have, and it will become significant in time.

At this point, the real key is: How do we develop and continue with our core on the
traditional side? How do we bridge that with our non-daily opportunities? How do we
continue with our broadcast operations in a manner that will be beyond the even/odd
cycles we are faced with? And how do we evolve this directly on the Internet side? That
is where we're headed.


One of the investors in the audience asks if your Internet strategy will continue to be
tied as tightly as it is currently, or seems to be currently, with Tribune and Knight
Ridder?


We have a number of opportunities with CareerBuilder and so on that we have as
partners, and we look at things together. More importantly, we look at things that are
going to be of greatest value ultimately to the Gannett company. As I said earlier, there
really isn't anything that we would not consider if it fits strategically with where we
want to go. Of course, we're going to look first for what it might mean to Gannett and if
it fits under the portfolio.


I'm going to keep asking about the business for sure. But every one of the questions I'm
getting from our studio audience is about capital structure, free cash flow. So I have to
move the topic here to accelerate that.

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And we will get Gracia into the discussion here too.

The recurring theme is: You have got a lot of cash flow. You have got an under-
leveraged balance sheet. Why don't you use a little more leverage, be a little less
conservative, be more aggressive in buying back stocks, pay a higher dividend? We’ll
start with that.


First of all, on the share repurchase side, as you know, we have been very active. Last
year, we did about $1.7 billion in share repurchases. This year through the first 6
months, we've bought back about 10.6 million shares. We still have additional
authorization and, given where the stock price is right at the moment, I think you can
assume we will continue to be active on the share repurchase front.

I think that we can accomplish a couple of things. One is, we can grow the company
through acquisition, and we have been doing a great job. Doug has been a great capital
allocater in terms of buying under-managed properties, adjusting the returns, getting
great returns for shareholders and increasing those values. To the extent that there are
those opportunities out there, we certainly will avail ourselves of them, as Craig
mentioned.

But those opportunities come up as they will. There can be periods when they don't
come up. Or periods when they do come up, but from a pricing perspective they don't
meet the disciplined criteria we have for acquisitions. We always look at acquisitions in
the context of share repurchase versus acquisitions. We will do both, or we will do one
more than the other because of either the opportunity set or we perceive that the
ultimate value we can bring to the company, to shareholders, is better from one or the
other.

Right now, we believe that, given the dirth of large acquisitions, but as importantly,
even some of the acquisition opportunities we've seen have not been priced in a way we
would find attractive. We look at our own stock; we feel as though that is a very
significant opportunity.

We like, however, to have a solid credit rating, investment-grade rating because you
can never tell when those acquisition opportunities are going to come up. We have been
levering up the Company. We're at about $5.4 billion of debt. That is up considerably

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over the last couple of years. We will continue to use our free cash flow and perhaps
more for either share repurchases or acquisitions or both.


And I think you have an A rating currently?


Yes, we do.


And is maintaining that rating particularly important? Is that a strategic focus?


It is important. But for the right opportunities, we would stretch the balance sheet.
Then we would be disciplined in bringing that back into order. Certainly for the right
opportunity, either on the acquisition front particularly or on the share repurchase
front, we would stretch the balance sheet a little bit more.


How about stretching the balance sheet to pay a higher dividend?


Frankly, we think that share repurchases return value to our shareholders just as well
as dividends would. We have increased our dividend every year. We are getting no
strong indication that folks want us to significantly raise our dividend. We are fully
capable of doing that. But we do like the flexibility of share repurchases and the ability
to ramp them up or ramp them down opportunistically a little bit more than we like the
dividend side of things, particularly when we think that there may be acquisition
opportunities down the road.

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Back to the business for a second. The national ad market in particular has been
challenging for Gannett, for the whole industry, in 2005. Do you think this reflects some
sort of structural change in the national ad categories that are important to you guys in
particular?


You know, on the USA TODAY side, we have been very fortunate. It is working very
well for us. However, when we look at some of the larger metros and certainly in the
broadcast division, we're seeing some pressure. What we are really focusing on is the
local side at this point and further development as we move forward. We have been
very successful. We can even talk about a couple on the newspapers side of programs
we have done.

Just briefly on the broadcast side, I will take that one for the moment. We have
developed a new business development program; I guess this is about 4.5 years into it
now. It has created some significant results. It has helped us offset some of the changes
that we have seen.

Some of the effects of what has happened to the national side, certainly in spot
television, have had a big impact. But you may want to talk on the newspaper side as
well.


On the national side in our local newspapers, national advertising is only about 7% or
8% of the pie. It's not as significant as at a USA TODAY, where it's most of the action.
They have benefited from some categories over the past year on the telecom side with
the various wars that are going on there. So that's been a good category for them.

Financial, depending on the market, has been up or down. They're very focused on
looking at that category and putting things together where they can sell more
effectively a number of our sites on a one-stop shopping basis through various
initiatives. We will be looking at those kinds of things more diligently.

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I forgot to ask you one critical item on the capital structure issue. Is there -- I guess this
relates to the rating issue -- but is there a limit in terms of the debt-to-EBITDA ratio you
would be willing to go to?


We don't have any pre-specified limit, as I said earlier. We like being an investment-
grade company because that gives us flexibility as acquisitions arise. We can address
those acquisition opportunities and still maintain a strong balance sheet. While the
rating agencies perhaps are more focused on specific ratios, we are more focused on
what is the opportunity, and is that opportunity worth stretching the balance sheet
more because we ultimately believe that it can add to shareholder value.


Retail sector accounts for still a disproportionately large share of revenues for Gannett
and for the newspaper industry. Retail consolidation is a great concern in retail. Retail
ad revenue numbers have looked particularly weak recently. What is your take on what
is happening in that market?


As you take a look at the consolidation, number one, we are going be impacted in 12 of
our markets. So, yes, it will have an impact. Overall, however, we don't think that it's
going to have to a substantive impact. In particular, what we are doing is paying
attention in the mid- and small size markets, where we have a bit more control over
how we can respond to this. Although there is no denying it, there will be impact once
we understand how the individual pieces will fall.

But at the same time, I think, we've been very good and diligent in the planning of how
we are going to maneuver around this to a great extent. But it's taking place. It's
something we have been paying very close attention to for a long time.

On the broadcast side, different than print. We're seeing a number of opportunities that
have come up on the network side because of the consolidation, which does not bode
particularly well for us. In broadcast, as I had mentioned earlier, retail is our number
two category. We have felt quite a bit of pressure in that. As we go forward, it's going to
be a huge area of concentration for us.

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Would your expectation be that it will be a declining percentage of the total business on
a go-forward basis? And if so, what replaces it?


Well, it's interesting. On the retail or local side, if you looked at us in the late '80s, you
would have seen that those large retailers, the top – what we call the top 15 retailers in
each market – would have represented probably two-thirds of our local revenue. At that
time, we realized we could not depend on or have our fate determined by some of these
large retailers, who would one year be in ROP, one year be in pre-prints, one year be on
TV in a variety of different media.

So we have been focused for the last decade on the small to medium-sized advertisers
in our local communities. Today, when you look at our split, it's about two-thirds the
small to medium-sized advertiser and about a third those top 15. Some of those non-
daily publications that we have been talking about very specifically are looking at and
bringing in many more advertisers that are small to medium sized, where we can have
a greater impact than we can on a large advertiser that has an ad agency, that is going to
be doing whatever it is they want to do in any given year. I think our focus on the small
to medium-sized advertiser has paid off well for us.


Definitely. And that is reflected in the fact that you have had industry-leading revenue
growth, I think. That was the positive. Now, I will give you the tough questions.

We have seen yesterday, our friends at New York Times and Knight Ridder both doing
very significant staff reductions and surprisingly focused on the newsroom. Basically
really cutting in the core operation, where a lot of the headcount reductions up to now
have been more of back office functions. I take this maybe as an indication of
capitulation on their part that things are not getting better in the media business
anytime soon. How would you react to that?


Number one, you're not seeing that type of thing happening at Gannett. For one
reason: we are continuously monitoring that. It's not that we wake up tomorrow and
find out that we've got an issue in certain areas. We run a very lean operation. I think
you probably know that from our past history, and certainly that will continue. We are

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going to do what we need to do appropriately within the marketplace. There will be an
ebb and flow with the numbers ultimately from a headcount perspective, but it won't be
a big surprise to us where we are. We are very, very particular with any additions that
we're going to put in. So I don't see that there will be any huge changes within that right
away.


How about related to that -- Gannett enjoys operating margins. I mentioned in the intro
that broadcast margins certainly are among the highest in the industry. Likewise on the
print side, operating margins among the highest in the industry. The irony of course is
then we wonder if there is any upside to that level or perhaps greater downside because
you have already cut costs so effectively. So the question is: Are there upsides to
operating margins? Or should we anticipate modest declines over time?


Well, by a few things we have done, in particular with Detroit -- with that transaction:
We think that despite the fact we are going to be in a very difficult market, we are going
to have an opportunity there from a large market perspective to make a very big
difference. We will be making the decisions in a way we think will grow the topside
despite the health of the marketplace. For us, it will fit right into the way we have
managed Gannett for a long time. You may want to expand just a bit on that.


I was just going to say, Peter, that on the one hand we anticipate we will continue to
have the best margins in both of our industries. But at the same time, understand that
we really don't manage the company for margin. We have added some pieces to the
mix. Clipper Magazine, which is basically a glossy coupon magazine, is a direct-mail
piece. That's a business that is growing at 20%-plus rates a year. It's going to be
probably a 15% to 20% margin business for a very long time. But its growth rate is very
strong. So we are delighted to have that in the family and would love to do more of
those kinds of acquisitions.

On the non-daily side, those products may never quite reach the margins that our core
newspapers enjoy. At the same time, we have built a business that is now a $375 million
to $400 million de novo business on the non-daily side that has high teens, low 20's
margins. We are very pleased to have that kind of growth. Those are the kinds of
initiatives we will have. We will continue to be very focused on the topside. But we are
going to continue to grow the company to improve the cash flow.

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Is it impossible to think about then just the core community newspaper business? Are
the margins in that business sustainable over time?


You know, that again is going to ebb and flow depending on where a variety of pieces
are. Some of the cost pressures that all of us have seen in the industry in general have
been on the healthcare side. That's a big problem for everyone in this country. We will
have to see how that all plays out.

The newsprint side, as we know, there has been upward pressure on newsprint pricing
over the last couple of years, and there continues to be this year and probably into next.
Those prices, as we know, over the last 15 to 20 years have ebbed and flowed. It will
depend on where some of those pieces are. But we will do the very best job, as you
know, on the expense side in making sure we continue to spend the dollars to improve
the top line.


When you transfer over onto the digital side, we also see significant opportunity with
rich media – as with our most recent acquisition, PointRoll. We have had immediate
success with that. As a way to work through putting all the pieces together, we feel
pretty comfortable with where all this is headed overall from a margin standpoint.


Presumably that Internet business would have considerably higher margins --


Absolutely.


-- than the overall operation. Gracia, you mentioned newsprint. Another year of 8% to
10% increases next year?

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It's probably a little bit too early to tell. We still need to finish up this year and see
where we all end up. We've been very fortunate. In the first 6 months of the year, we
had fixed-price contracts with about 75% or 80% of our suppliers. We did the same
thing again on July 1st so we have been able to moderate some of those price increases
that we've seen. As well, while the newsprint producers have reduced capacity either
temporarily or permanently in some cases, the newspaper companies at the same time
have responded with a variety of initiatives. These would be reducing waste and
reducing Web widths. We’ve taken some single-wide presses and reduced Web widths.
We're now looking at double-wides and doing some things there. We are looking at
some lightweight newsprint where it makes sense for us and where the quality of it
works in a particular plant.

But, at the end of the day, to have some price stability and to do some things on a more
long-term basis would benefit both the newsprint producers as well as ourselves.
They've not been very fortunate in having a return on capital as they had wished. They
have had to deal with currency issues and a variety of other issues, and we are
sympathetic to that. But, at the same time, we also have a business to run. If there's
some way to bring in longer-term pricing and some rationale into the business, as we
have in the UK, that would probably make a little bit more sense.


So from your mouth to the newsprint producers’s ears.

Craig, the broad range of competitors to the traditional media companies, particularly
the newspaper companies, love to denigrate the newspaper industry based on declining
circulation; older, skewing demographics; high CPMs; etc. I think we even heard some
of this this morning. These are the people that are all jealous of your operating margins.
So how do you respond to that? In particular, give us your perspective on what the bull
case is for the newspaper industry.


Our whole point is in how we can best serve that customer base. There are all kinds of
statements that haven't been made. At the end of the day, our goal is to create the
greatest opportunities from that advertising side. We think with the mix of
opportunities we have created -- as I had mentioned earlier with respects to the non-
dailies and how that will supplement and augment what we're doing on the core side.

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Then certainly as we build that forward, the digital side and what that can mean in the
cross platform sale, we are very confident in where we can go.

It is a great opportunity as we see it. Over the next period of time here, we are going to
be unfolding the strategy that we're working on today to develop into this area much,
much further than we have today. We are excited about it.


Can you talk about what you think realistic long-term revenue or earnings per share
growth rates are for Gannett?


Well, for instance on the Internet side right now, our Internet revenues are growing
frankly at a faster pace than Internet revenues on average nationally. To the extent that
we put more investment dollars into that arena, given that it seems to have higher
growth rates at this moment, although albeit from a very low base. Certainly on that
side, we would expect our growth rates would continue to be very strong. We will
continue to work on the non-daily side.

We're probably not going to start 909 more publications in the next 2 years, but we will
continue to grow that and increase our audience in all of the local markets that we
serve, which we think is very important. Then the core business will depend on the
categories and what is up and what is down.

On the Newsquest side, we've had a wonderful run there. The economy there has been
more difficult and they are having a tougher time this year.

If you look at our core U.S. newspapers, absent Newsquest, we're actually having a
fairly okay year. Employment advertising has been very good, as has real estate. Auto,
as we discussed before, has been challenged this year. But overall, we've had a
reasonably good year in the core newspaper side. As long as we continue to follow our
customers and meet the needs they have in our local communities and be focused on
creating the products that meet those needs, we can sustain good growth rates vis-à-vis
GDP and everything else.


Newsquest -- obviously you have brought it up a couple times -- has been a great
contributor the last couple of years -- problematic this year. Macro environment is

18

difficult we know. How important is the international operation going to be to you on a
go-forward basis? I think about 20% of revenues …


A little over $1 billion.


Is there opportunity for more acquisition there? Is it going to be a bigger scale?


Yes, we think there is. As we said earlier, the first 5 years have been terrific from a
currency standpoint as well as the management team that we have in place. Frankly, the
acquisition would not have happened had we not been able to secure this management
team. We think there is greater opportunity in the UK and beyond with this group --
ought to continue to pursue what we have done already.


Within the UK or--?


Within the UK, absolutely. We've been very successful up in Scotland at this point. So
we are very pleased with those kinds of results and certainly would anticipate we will
continue to grow it.


How about outside the UK?


We've had some experience, and this goes back a number of years, where we were
involved with newspapers in a number of other countries. Frankly, we have learned a
few lessons. If we don't speak the language, it is a little tough for us to read. We want to
be very careful so that we can really control and manage in the way that we have for
years. We're likely going to stay within the arena that we're in, unless there is

19

something really significant that comes up that would make good sense. We are very
pleased and still see that there is significant upside within the areas we are in right now.


How about just two more questions? The circulation environment, problematic for a
while but particularly troublesome for the industry overall in the last year or so. How
important is circulation growth? How realistic is it to anticipate that you can grow
circulation?


Circulation, obviously it's important overall. But at the same time, it goes right back to
that customer base and how we can support the ad side and the customer side. From
that, we're still very confident in the direction that we're headed with all of this. You
may want to be specific from the paper side.


Yes, I was going to say that certainly circulation is one important part of the audience
that we attract in the local communities we serve. With the non-daily products we have
started and with the online sites we have and various other initiatives, we are looking at
an aggregation of eyeballs in some of those local markets that are very strong.

For instance, in our Phoenix market where we have azcentral.com, which is an
extremely successful Web site between our newspaper, our television station plus our
non-daily products. Our penetration in that market is something in excess of 75%.
Similarly, in Brevard in Florida where again we own the newspaper, and have extended
the brand through our non-daily publications as well as a terrific Web site. Our
aggregation in that marketplace is in excess of 80%.

Circulation clearly is a piece of that. But what we are trying to do is with the various
products we have, aggregate eyeballs and then find ways to further monetize those
eyeballs either in a niche way, in a targeted way or in a mass way.


In those examples, do you find you are gaining relative share in terms of the local
media markets?

20


Absolutely. Another example we are working on right now is in Wilmington (DE).
What we've done there is create a streamed news site that is a direct connect with our
newspaper. We have two newscasts a day that are streamed on the Internet at 8 a.m.
and 4 p.m.. I am sure we have some employers that are a little upset with us because we
have a tremendous tune-in. We're certainly seeing, from a unique standpoint, a great
development there. We are finding there are other ways we can account and really
grow the eyeball opportunity. Again, if it's going to make the difference, creating the
results for the advertiser, that's what they are after. All we are trying to do is find more
opportunity and create that directly for them. We're being very successful with that.


August results for you folks for the industry overall were particularly weak. Is it a
hiccup? Is it indicative of something more significant?


You can start with our results. Then when you look on the broadcast side, we had both
an incredibly successful Olympic and election spending in August of last year. It was
about $37 million of net revenue that we generated. So clearly on the broadcast side, we
had quite a mountain of success from last year that we had to face. And, as Craig
mentioned earlier, the auto side, which is about 30% of our TV revenue, has not been
where any of us would have liked it.

On the newspaper side, USA TODAY had part of that same phenomena. They had
several million dollars of Olympic revenue last year. I think their revenues were up in
the 25% plus range last year.

So we had very tough comps. Our advertising revenue in total was up about 10.7% so it
was our second-best month last year in August. While we all want to have great months
every month, we're going to take a look and see where we are in September. Again, the
core business side, the core newspaper side domestically, they had good employment
follow through, good real estate follow through but the auto category is a little softer
and then Newsquest's softness as well.

21


Last question -- sort of by way of wrap up. Any thoughts, Craig, in terms of how
Gannett might look differently 5 years from now versus today, whether it's in terms of
business mix, financial performance profitability, any capital structure?


What we're looking to do, we want to make sure we're totally customer-centric. To us,
it is hugely important we can provide our products anywhere, anytime. To the extent
that we can further extend our core assets, to the extent that we can fill the voids, to the
extent that we can grow our broadcast opportunities by creation of our own new
programming, original programming and enhance that from a local news perspective,
time that directly with our online as well as untethered operations is really what we're
looking at. We think there is a tremendous opportunity there.

The key is again -- I mentioned it earlier: It's all about being local. When you consider
the scale of our company and the feet that we have on the ground, the opportunity that
we have, in my view, is absolutely incredible. How we are going to piece that together
in the future will evolve in part by what we're doing to create that success. That is what
we are looking for.


Great. Well, thanks very much to Craig and Gracia for joining us this afternoon.

Certain statements in this transcript may be forward looking in nature or “forward looking statements”
as defined in the Private Securities Litigation Reform Act of 1995. The forward looking statements
contained in this transcript are subject to a number of risks, trends and uncertainties that could cause
actual performance to differ materially from these forward looking statements. A number of those risks,
trends and uncertainties are discussed in the company’s SEC reports, including the company’s annual
report on Form 10-K and quarterly reports on Form 10-Q. Any forward looking statements in this
transcript should be evaluated in light of these important risk factors. Gannett Co., Inc. is not responsible
for updating the information contained in this transcript beyond the published date, or for changes made
to this document by wire services or Internet service providers.

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