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Gannett (NYSE:GCI), the media and marketing company, is gambling it can stop and reverse its revenue slippage by charging a subscription fee to access its online news websites. Access restrictions will not be applied to the company's USA TODAY online news website.

In the current implementation, a viewer is notified of the number of remaining free accesses, and once the free accesses are depleted, the person is then prevented from viewing additional articles and given the option of accessing the website via a paid subscription. However, the access restriction is apparently being performed using Internet browser cookies, so a user after being restricted can regain access by deleting all the Internet browser's cookies or with a little more effort just delete the individual cookie associated with the Gannett website.

Maybe the restriction-by-cookie approach is a temporary strategy being used to ease current readers into the subscription model, with a hard restriction option planned for a later date.

Apparently Gannett thinks it can follow the Wall Street Journal and charge a subscription fee for access, and apparently in at least one instance, the cost of the subscription on an annual basis is more than the cost of subscribing to the Wall Street Journal. An annual subscription to the online Wall Street Journal is a little over $100, but a subscription to Gannett's delawareonline.com is $15 per month or $180 per year.

In its most recent Q4 2011 earnings call held on January 30, 2012, the company indicated that all business segments were solidly profitable in the quarter and for the full year. The company re-launched 100 mobile websites and launched iPhone news applications in 15 television markets. The company indicated it news application for the Windows phone and Kindle Fire is the number news application. The company noted that its job website CareerBuilder is performing well. Additionally, the company indicated automobile and telecommunications advertising performed well during the quarter. On a negative note, the UK economy apparently contracted slightly in the quarter.

Gannett's stock dividend yield of 5.3% is very attractive with the next dividend of $0.20 payable on April 2, 2012 to shareholders of record on March 9, 2012, making the ex-dividend date March 7, 2012.

Competitors to Gannett include The New York Times Company (NYSE:NYT), The McClatchy Company (NYSE:MNI) and Tribune Company (private).

Gannett's stock price for the last year is shown below:

The stock price dropped sharply earlier in the year, has since recovered and is nearing its previous resistance level in the $17 range.

Gannett's subscription model could come back to bite the company in the short term, especially since an Internet savvy person can easily circumnavigate the company's page restriction efforts. However, longer term, the subscription model may pay off.

With the company's fat dividend payment, an investor might consider entering a covered call with protection also known as a collar position for the company as a way of protection in case the subscription model falls flat, yet potentially make a profit even if the price of the stock is stagnant. The covered call may be entered by selling a call option against the stock and then the put option may be purchased using some of the proceeds from selling the call option.

Using PowerOptions tools, a collar position was found for Gannett with a potential return of 5.3% (13.4% annualized) and a maximum risk of 8.7%, even if the price of the stock drops to zero. The potential return and maximum risk calculations include dividend payments of $0.40 during the holding time for the position. The specific call option to sell is the 2012 Jul 15 at $1.10 and the put option to purchase is the 2012 Jul 13 at $0.75. A profit/loss graph for one contract of the position is shown below:

If the price of the stock increases to around $17.5, the position can probably be rolled for additional potential return.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Hedging Gannett's Subscription Gamble With A Protected Covered Call