Summary:

By now, investors ought to be used to The McClatchy (NYSE: MNI) Company’s consistent drift of revenue and net income declines since it retur…

McClatchy
photo: Sac Chef, Brian Bentzen

By now, investors ought to be used to The McClatchy (NYSE: MNI) Company’s consistent drift of revenue and net income declines since it returned to profitability at the end of 2009.

But the downward drift in profits has lately afflicted its newspaper publisher brethren, as Gannett (NYSE: GCI), A.H. Belo (NYSE: AHC), Washington Post Company (NYSE: WPO) and the New York Times Co. (NYSE: NYT) have all seen profits shrink this year (in the NYTCo’s case, it swung to a loss last week). The latest Q2 numbers raises a number of questions for newspapers: are the profits wrung from the major waves of cost-cutting over the years finally being exhausted? Is more cost-cutting on the way? Are digital gains getting close to offsetting print losses? So far, the answers all seem pretty bleak.

For McClatchy, the publisher of its hometown Sacramento Bee and The Miami Herald, Q2 reflected more of the same of the recent quarters:

– Ad dollars dropped 9.4 percent (identified as an “improvement” over Q1′s 11 percent fall in the earnings release, but it’s still higher than Q210′s 6.4 percent decrease.)
– Circulation revenue slipped 3.7 percent.

Like most of its rivals, digital advertising remains a strength on its own. But print upsells for online are naturally anemic, given print’s continued weakness. Digital-only sales grew 9 percent in Q2, but when combined with print, bundled sales were up just 1.6 percent. Interactive dollars now represents 20.2 percent of the company’s total revenues. In other words, it will be a while until digital can balance out the print losses, though the company is rightly expanding its digital-only sales initiatives.

Nevertheless, McClatchy is trying to broaden its digital revenues with social shopping and e-commerce programs. Last June, McClatchy struck a deal with Groupon on a daily shopping online discount service.

Its Dealsaver service has launched in about half of of McClatchy’s markets with remaining markets launching in next month. The company didn’t break out performance for the program in Q2, but insists early results are good.

Lastly, after resisting the pull of paywalls for some time, in late June McClatchy debuted a metered paywall at the Modesto Bee’s Modbee.com, our newspaper website in Modesto, Calif. “We’re experimenting with paid content elsewhere as well,” said Gary Pruitt, McClatchy’s chairman and CEO, said in a statement. “While most of our content is free online, we’re testing several different paid models, including paid mobile apps and niche online publications with deep, original content.”

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