Red Ink: McClatchy Cuts Employees, Gannett Pensions
McClatchy's restructuring plan follows an earlier reduction of 13%--or around 2,000 employees--from 2006-2008, achieved largely through voluntary buyouts and attrition. The company will have shed over 20% of its workforce in three years, when the second round of cuts is complete.
The company reported a 15% drop in May revenues, hurt by a 17% drop in advertising sales. The crunch was big in Florida and California, where McClatchy owns big newspapers hit by a falling housing market. The cuts will involve about 1,400 full-time employees and save $70 million annually.
Like other major newspaper publishers, McClatchy has suffered declines in print advertising revenues over the last five years, beginning with classifieds and then expanding to national and retail categories. In 2007, total advertising revenues fell 8.6% to $1.9 billion. The declines are due largely to competition from the Internet, but are accelerating because of the general economic slowdown.
Worse, McClatchy's online revenues grew just 2.2% in 2007, to $164 million--and they still constitute just 7% of the company's total revenues of $2.26 billion.
McClatchy CEO Gary Pruitt remarked: "The effects of the current national economic downturn--particularly in real estate, auto and employment advertising--make it essential that we move faster now to realign our workforce and make our operations more efficient."
McClatchy isn't the only big newspaper publisher making cutbacks. Last week, Gannett said it would freeze the employee pension program in favor of more 401(k) contributions, according to Editor & Publisher, which first reported the news. The pension fund will be frozen on August 1, resulting in a savings of $90 million--of which $60 million will go to 401(k) in the form of increased matching contributions.
The announcements from McClatchy and Gannett came a week after Tribune Co.'s new management, led by Sam Zell and Randy Michaels, said they would begin "right-sizing" newspapers to ensure they contain no less than 50% advertising versus editorial content. Describing this as a cost-cutting measure, they said it would chop newsprint and circulation expenses, and also allow the company to make substantial staff reductions.
Finally, last week Wachovia analyst John Janedis said he expects total newspaper ad revenues to tumble 10.4% in 2008, and a further decline of 6.5% in 2009. Those declines are larger than his previous forecasts of 9.2% and 3.6%, respectively.