After an anemic Q3 for The McClatchy (NYSE: MNI) Company’s online advertising revenues, that segment showed a lot more strength in the publisher’s Q4 period. However, while the company was able to swing to a profit, its overall revenues remained in the doldrums, indicating that publisher of The Sacramento Bee will still have to struggle to maintain profitability, especially as it continues to wrestle with staggering debt resulting from its 2006 purchase of the Knight Ridder chain. In a statement before the company’s 11am ET webcast, Gary Pruitt (image, left), McClatchy’s chairman and CEO, pointed out that cash expenses were reduced by roughly $390 million, or 26.1 percent. Over the past year, the company cut about one-third of its total 14,000-member workforce. He added that the company expects to rein in costs by another 20 percent in Q1, as the publisher anticipates ad revenues down in the low- to mid-teens percentage range.
Update: During the call, Pruitt was asked about whether McClatchy had any thoughts on following the NYTimes.com’s announcement that it would add a metered system for access to its site. Pruitt said the company would be watching the NYTimes.com’s effort and others closely, but had no plans for building a paywall on its newspaper sites. He expressed confidence that the ad-supported would remain the dominant revenue model. “We get $200 million in online ad revenue and that comes with a higher profit margin than print, due to the absence of print costs,” Pruitt said, making sure to emphasize that the company would do nothing to sacrifice those revenues.
Still, Pruitt was also clear that McClatchy would continue to experiment with various forms of paid content. One example is the company’s state legislative news service in North Carolina, the NC Insider, which is published by The News & Observer in Raleigh. The site is targeted to North Carolina politicos with subscriptions starting at $949 a year, a rep told paidContent. In addition to in-depth political coverage, Pruitt said he considered financial news to be another natural area for a possible premium paid site at some point as well.
Turning to specifics from the earnings report, McClatchy’s online ads grew 14.9 percent in Q4. Online now makes up 15.8 percent of total ad sales, compared to 10.9 percent in Q408.
A look at the total revenues, which were down 16.5 percent to $393.2 million, show that online remains a small and lonely bright spot, as it often is. Ad revenues dropped 20.5 percent for the quarter. In addition to cutting costs, which is largely what helped McClatchy swing to $32.4 million profit, newspaper publishers have been looking to increase circulation revenue from higher subscription rates and newsstand prices. Following the trends of other publishers, McClatchy’s circ dollars were up 6.6 percent.
With this Q4 report, McClatchy continues the trend of profitability through cost-cutting mixed with revenue declines, as evidenced last week by Lee Enterprises (NYSE: LEE), which posted quarterly profitability in Q3 and Q4. However, McClatchy might stand out on online ads, as many companies have been projecting a weak recovery on the revenue side.
Still, Gannett (NYSE: GCI), which comes out with its Q4 earnings report on Monday, told an industry conference last month that revenue declines are appearing to slow and that Q4 is shaping up to be its strongest period all year.
Debt is another area publishers are still trying to come to terms with. McClatchy, which took on $1.95 billion stemming from the Knight Ridder purchase, said in a separate release that it will refinance bonds that would have come due in 2011 and 2014. It will now sell $875 million worth of new notes, with maturities extended to 2017. The publisher also secured agreements from creditors that will ease restrictions on how much debt the company can have on the books.