The newspaper business is in for another round of grim revenue reports, judging by the early third-quarter announcements from the McClatchy Co. and Gannett, which are often viewed as bellwethers for the rest of the industry.
In terms of earnings, both publishers have done surprisingly well, as their bottom line benefits from deep cost-cutting measures, including layoffs, unpaid furloughs, freezing pension plans and suspending matching 401(k) contributions. However, they also reported steep, double-digit declines in overall ad revenue as they moved into the critical fourth quarter.
On Thursday, McClatchy reported net income of $23.6 million in the third quarter of 2009, up from $4.2 million in the same period in 2008, thanks entirely to a big reduction in expenses, slashing 29.4% from about $359 million to $253 million. But the overall trend remained one of shrinkage, as total revenues fell 23.1% from about $451 million to $347.4 million in the same comparison. This was due largely to a 28.1% drop in advertising revenue, from $370.1 million to $266.1 million.
As in previous quarters, McClatchy reported that all major newspaper advertising categories took big hits, with classifieds revenue down 37.7%, retail (or local) down 23.1%, and national down 28%.
The losses in classifieds, long the mainstay of the newspaper business, are particularly significant. Like other publishers beset by both Internet competition and the cyclical downturn, McClatchy has seen employment classifieds (down 59.7%) overtake real estate (down 42.9%) as the leading area of losses in classified revenues. Automotive was down 34%.
Striking an ominous note, McClatchy CEO Gary Pruitt downplayed hopes that ad demand will pick up substantially in the near future, adding that further cutbacks were coming.