McClatchy Co. dropped a bombshell in its report of fourth quarter 2010 earnings this morning.
Results for the quarter were not especially strong, but that was not the worst part. January advertising revenues at McClatchy are down 10 percent from January 2010.
While we are only talking about one month for one company, the news is a splash of cold water on hopes that 2011 will usher in a more robust industry recovery than last year’s. (Advertising revenues improved in 2010, only in the sense that declines were not nearly as steep as they had been in 2009.)
Other media industries — magazine and broadcast — saw advertising bounce back to the tune of 10 percent in 2010, keeping pace with the nation’s partial economic recovery.
The recent run of weak results suggests that newspapers’ ad revenue difficulties go well beyond the economy. Apparently budgets for print advertising in newspapers are being raided as companies shift resources to a variety of digital marketing options.
A look back at the transcript of The New York Times and Gannett earnings calls last week, shows that management at both companies also hinted that January results were weak without specifying a percentage decline. Executives said they thought bad weather on the East Coast was probably a factor — though that would be minor for McClatchy, whose papers are mostly on the West Coast and in the South.
McClatchy CEO Gary Pruitt said in a conference call with analysts that the company’s heavy presence in California and Florida was part of the advertising problem. Local economies there, especially real estate and related businesses, have been slow to rebound.
But the bigger negative was national advertising, both in January and December. In the holiday season and start of the year ago, national advertising rallied and led a 17 percentage point improvement in the rate of advertising decline at McClatchy (from 28 to 11) in just two quarters. No such dynamic materialized this winter, Pruitt said.
Asked to project results for the entire quarter, Pruitt declined. “We just don’t have the visibility to project for the full quarter,” he said, and it is too early to tell about February.
He said that the company would concentrate sales effort on its digital products and local retail since they afford “the most chance to move the needle.”
Pruitt volunteered the bad numbers for January, in part to explain a series of recent cuts at selected papers. Since the beginning of the year, the company has trimmed 20 jobs at the News and Observer in Raleigh, 20 more at the Charlotte Observer, and 32 at its flagship Sacramento Bee.
The Miami Herald announced that it will ask all workers to take a week’s furlough without pay in the first half of the year. Gannett has also ordered a week’s furlough for all employees at its 80 community newspapers.
An optimist might read these results as just symptoms of a bumpy recovery. Newspaper results should improve some as hiring and the real estate sector pick up. And the industry’s digital advertising base — McClatchy’s included – has been growing the last several quarters.
At McClatchy and other public companies, fourth quarter advertising declined at about the same rate as the third quarter, ending a string of four quarters of sequential improvement. Now the possibility looms that the first quarter of 2011 will amount to a step backward.
So, for right now, the industry remains stuck where it has been — traditional revenues falling off the table faster than it can generate new revenue streams.
McClatchy shares were down about 10 percent by mid-day.
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