Knock-tober: McClatchy, New York Times Co., Media General Take Hits

by Erik Sass, Nov 20, 2008, 2:49 PM

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October was another bad month for three leading newspaper publishers. The New York Times Co., McClatchy, and Media General--among the few publishers still brave enough to release monthly figures--all saw advertising revenues plummet heading into the fourth quarter. That spells bad news for the newspaper industry as a whole, which stands to incur huge losses from the collapse of print advertising during the fourth-quarter holiday season.

At the New York Times Company, advertising revenue decreased 17.2%--more than offsetting a small 5.3% increase in Internet advertising revenues. Like its peers, NYTCO's losses were led by classified revenues, which have plunged 26.3% for the year-to-date. However, these losses were amplified by continuing declines in national and retail advertising--down 7.4% and 11.2%, respectively.

McClatchy revealed Thursday that total revenues in October were down 17.8% compared to the same month last year--due to a 20.4% drop in ad revenues, from $181.6 million to $144.5 million. Classifieds led the declines, with total classified revenues tanking 35.8%. Real estate, long the area of biggest losses, was down 41.5%--but now faces stiff competition from the employment category, which plunged 48.6%. Automotive was down 30.5%. Total advertising revenues for the first 10 months of the year are down 17.4%, compared to the same period last year.

Media General said its total revenues were down 5.8% in October compared to the same month last year, dropping from $91.2 million to $85.9 million. This relatively small decline was due mostly to the boom in political ad spending at Media General's TV stations; results at its publishing division were significantly worse.

Total newspaper revenues fell 16.9% in October, driven by a 37.9% decrease in classified ads. As with McClatchy, the decline in employment classifieds passed real estate to make it the biggest loser, with a 58.5% drop compared to real estate's 49%.

Both McClatchy and Media General pointed to relatively strong growth in their online advertising revenues--up 12.4% and 6.8%, respectively. Importantly, this revenue growth was almost entirely the result of increases in local online advertising--including local display, one of the few areas where newspapers in general have enjoyed continued growth.

The increases in local display advertising offset big drops in online classifieds, which have traditionally been sold as "up-sells" from print classified listings. As print classifieds disappear, there have been fewer opportunities for such up-sells.

Indeed, Pat Talamantes, McClatchy's CFO, said: "When employment advertising--which has declined both in print and online as a result of the nationwide slowdown in hiring--is excluded, our online advertising revenue was up 57.6% in October 2008 compared to October 2007." Likewise, Marshall N. Morton, president and CEO of Media General, revealed that "the revenue growth in the Interactive Media Division was attributable to a 51.7% increase in local advertising."

However, the continuing declines in retail, local and national revenues are more bad news. At McClatchy, retail was down 11% in October, while national tumbled 13.9%. At Media General, retail fell 9.5%, while national was down 5.6%. This suggests that retail chains are still cutting back on newspaper advertising as they head into a holiday season overshadowed by economic gloom.

This could be a critical blow for the newspaper industry, which has already been hit by the migration of readers and advertisers to the Internet. The addition of an economic downturn could prove to be a fatal one-two punch.

 

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