March 7, 2019

McClatchy recorded sharp declines in print advertising and circulation revenue in the fourth quarter of 2018, the company reported Thursday. That and some special charges led to a $27.5 million loss for the quarter on revenue of $213 million.

The print advertising blues (continuing into 2019) have been widely reported, but McClatchy’s losses were deeper than at other public regional chains — off 26 percent year-to-year for the quarter or 22 percent factoring out an extra “fourteenth” week in the 2017 period.

As I reported last fall, McClatchy is pursuing aggressive price increases to its print subscribers, essentially treating print as a luxury item. Predictably volume was down (by 8.6 percent daily and 7.6 percent Sunday). But revenues declined too — apparently plenty are opting not to pay the higher price, and the company likely has cut marketing of new subscriptions as well.

Strong growth in the number of digital-only subscriptions (up 51 percent to 155,000) at McClatchy’s 30 properties didn’t translate to much of a revenue gain, suggesting the average price of all those new subscriptions is very low.

Altogether audience revenues were down 11.2 percent year-to-year for the quarter

President and CEO Craig Forman spun the results in a press release as “significant progress in our digital transformation.” Part of that transformation is a steady reduction in costs — 450 staff members have been offered buyouts already this year with about half accepting.

So if McClatchy stays intact and tips deeper to digital it will become a much smaller company — with cuts in production and delivery expenses matching the lower revenues digital generates.

News typically plays a minor role in these reports, but Forman cited McClatchy’s journalism as one of the bright spots in the quarter. That work included The Sacramento Bee’s coverage of the Camp Fire, and Julie K. Brown’s expose in the Miami Herald of a billionaire who walked away with a slap on the wrist after being charged with sex trafficking with underage girls.

In a conference call with analysts, Forman shared an internal metric the company uses to track digital transformation — recording a 17 percent increase in the number of uniques compared to newsroom costs.

He declined to be drawn into speculation, when questioned, about when McClatchy might stop print editions altogether. Forman did note that The Myrtle Beach (South Carolina) Sun News has combined its Friday and Saturday issues with no significant revenue impact.

Forman also said that he would not discuss rumors of a potential merger with Tribune Publishing.

It has been a tough week for the local news business. On Wednesday, Jim Brady’s Spirited Media announced that it sold the Denverite to Colorado Public Radio and will dispose of its two other for-profit digital sites in Philadelphia and Pittsburgh (in favor of shrinking to a consulting business).

At another public company, Lee Enterprises, 14 newsroom staffers at its flagship St. Louis Post-Dispatch reportedly accepted buyouts, including the political editor, the projects editor and the night metro editor.

By contrast, in the healthier national newspaper sector, The Wall Street Journal announced Wednesday that it is adding more than three dozen journalists.

The McClatchy results were roughly what analysts had expected. Shares were off about 2 percent in afternoon trading but have fallen 29 percent since the beginning of the year.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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