• by Erik Sass  @eriksass1, July 21, 2009

More grim news for the newspaper business this week as McClatchy Co. reported that total advertising revenue declined 30.2% in the second quarter of 2009 compared to the same period in 2008, from $406.4 million to $283.7 million.

 

This powered an overall revenue decline of 25.4%, from $489.7 million to $365.3 million, in the same period. For the year-to-date, total revenues are down 25.3% to $731 million, due mostly to a 29.9% drop in ad revenues, which totaled $568.4 million in the first half.

Despite the precipitous drop in total revenues, McClatchy managed to post a 43% increase in earnings from continuing operations in the second quarter, from about $17.3 million in 2008 to $25.2 million this year. This was attributed almost entirely to the stringent cost-control measures implemented by McClatchy over the last year.

The continuing freefall in advertising revenues, however, suggests the long-term health of the company is still in peril.

Like other big newspaper publishers, McClatchy has been hit by a one-two punch of Internet competition, combined with one of the steepest economic downturns in American history. Together, they have decimated all the major ad categories.

Classified revenues, long the mainstay of the newspaper business, fell 41% at McClatchy in the second quarter, from $135 million to $80 million: a 62.5% drop in employment classifieds, 45.7% in real estate and 34.4% in automotive. Retail advertising fell 24% to $149 million, and national advertising tumbled 34% to $24 million.

The collapse of employment classifieds also forced digital revenues down 2.9%; excluding employment classifieds, online revenues grew 24.7% in the second quarter. However, they still remain a relatively small part of the business.

McClatchy CEO Gary Pruitt noted that the proportion of total ad revenues contributed by digital increased from 11.8% in the second quarter of 2008 to 16.5% in the second quarter of 2009. This was due entirely to the decline in overall revenues, not growth on the digital side. If total ad revenues had remained stable at their 2008 level, digital revenues' contribution would actually have decreased slightly, from 11.8% to 11.5%.