More than a year ago, Craig Forman was named CEO of McClatchy with a mandate to accelerate print-to-digital transformation at its 30 properties.
In an unusually detailed quarterly earnings report, Forman claimed big progress on that goal. All areas of the operation — subscriptions, advertising, and the news report — are tilting fast to digital.
But — and it's a big but — for now, financial results are no better. In fact, they are probably worse. Some particulars:
- Total revenues for the first quarter this year were down 10.1 percent compared to the same period in 2017.
- The company booked a net loss of $39.8 million for the quarter on revenues of $198.9 million. Some of that resulted from special charges, and the first quarter is typically softest for advertising, while most expenses stay fixed.
- Digital-only subscriptions increased to 112,000, up 32.8 percent from a year ago. But spread across 30 properties, that is a modest number — a promising start but not enough to have much impact financially. By contrast, the Boston Globe has roughly 100,000 paid digital subscribers and the Minneapolis Star Tribune 50,000.
- Digital subscription revenue did not grow nearly as much as the raw number. Digital-only audience revenues grew 16 percent year-to-year. And since McClatchy assigns a share of print-digital subs to digital, total digital audience revenues were up just 2.6 percent. A positive, Forman said, is that more than half of the new digital subscribers are new customers.
- Under questioning by analysts during a conference call, management said that print subscription revenues are declining at a high single-digit or low double-digit percentage rate. In so many words, that says that print circulation is allowed to drift downward, as McClatchy devotes more resources to building digital.
- The company did not specify a percentage decline for print advertising, but it would appear to be down at least 20 percent year-to-year for the quarter. Those results include a direct marketing/direct mail business that is declining along with print advertising as big retailers and local merchants shift budgets to digital.
- Expenses were down 8.4 percent compared to the first quarter of last year. Forman said that more cuts the rest of this year are expected. The flagship Sacramento Bee announced elimination of 15 newsroom jobs earlier this week.
However Forman said that the company now actually has a higher percentage of its employees in news than it did in 2012. That indicates that much of the savings are coming from outsourcing other functions, including printing. Only nine of the 30 properties still have their own presses.
Long story short, the numbers show McClatchy becoming a considerably smaller company in revenue, but predominantly a digital one with a secondary emphasis on print. Forman emphasized that digital ad revenue "crossed over" this quarter to being more than print advertising. He also said that 80 percent of revenues now come from sources other than print advertising — not so long ago the heart of revenues for the industry.
News operations typically get only minor discussion in these financial reports. But Forman did make it a point to highlight a reorganization that includes putting four regional editors, all with strong digital backgrounds, in charge of regional groups like the Carolinas and the West.
Also, as I reported last year, vice president of news Tim Grieve and a digital transformation team have been going from newsroom to newsroom tasking reporters and editors to produce a story mix that drives digital traffic, dropping some of the rest, such as routine meetings.
McClatchy is the first of the publicly traded news companies to report results for the quarter. So its revenue difficulties can be taken as a preview of more to come.
The company's shares lost 2 cents, closing at $9.27 a share for the day. For the year to date, the stock price has also stayed roughly even.