McClatchy, the parent company of the Kansas City Star and the Wichita Eagle, continues to lose money and miss expectations. In its most recent quarterly financial report issued in May, the newspaper chain revealed a net loss of $42 million, or $5.34 per share, in the first quarter of 2019. That compares to a net loss of $38.9 million, or $5.04 per share, in the first quarter of last year.
Despite the upsell in McClatchy-issued press release, the Kansas City Star didn’t blast its parent company’s earnings on its website.
“If this were any other institution of comparable size or cultural significance, it’s financial crisis would be on the front page daily and those responsible would be pilloried,” said David Kensinger, a former campaign manager for Gov. Sam Brownback and U.S. Sen. Pat Roberts. “But illustrating part of the problem, the Star won’t report the news it doesn’t like.”
Among the bad news for McClatchy:
- Total advertising revenue dipped by $85.2 million;
- Digital-only advertising declined by 5.2 percent;
- Audience revenues accounted for 46.1 percent of McClatchy’s revenue in the first quarter of 2019 but dropped 3.7 percent compared to the prior year.
McClatchy officials put a positive spin on the report, however. A press release announcing the earnings noted that companywide, digital subscriptions have increased for 12 consecutive quarters up to 179,100 digital-only paid subscribers at quarter’s end. The press release said the decline in digital advertising revenues was due to “a softer news cycle generating fewer page views,” and “a strategic tightening of website paywalls that accelerated digital subscriptions.”
Craig Forman, President and CEO of the Sacramento-based company, said the financial report showed a second consecutive quarter of “improving trends in operating results.”
“Our focus on paid digital subscriber growth is a key performance measure in our continuing digital transformation and a contributor to improving our audience revenue trend this quarter,” Forman said.
Before interest, taxes, depreciation, and amortization, Forman said, the company’s earnings are down less than they were in 2018.
“This reflects our discipline in controlling costs while we make strategic investments in our digital transformation,” Forman said.
Recent layoffs, selling a Star real estate asset, and tax incentives may be helping keep the company above water. Its earnings are down more than $900 million since 2016. That’s despite a one for ten reverse stock split that pushed McClatchy’s stock price above $11 a share in 2016. At the close of June 17, McClatchy stock was trading at $2.75 per share.
A few weeks before the close of the first quarter, McClatchy announced it offered voluntary buyouts to 10 percent of its staff. Several Star reporters cashed in their chips, including reporters Matt Campbell, Mark Davis, Lisa Gutierrez, Lynn Horsley, and Rick Montgomery. Editorial writer Steve Kraske also accepted a buyout. Individuals self-reported their departures to public radio.
Public radio also reported on McClatchy’s sale of the Press Pavilion and the Star’s iconic headquarter building, located on Grand Boulevard downtown. Opened in 2006, the $200 million Press Pavilion occupies two blocks in downtown Kansas City. The eight-story, mega press building received a 10-year tax abatement and then received a 15-year extension as the original abatement was set to expire in 2015. Public radio reported that abatement saved McClatchy nearly a million in taxes in 2017.
Two years later, McClatchy sold both buildings for $42 million, and the Star is currently leasing back the press building.
In addition to the Star and Eagle, McClatchy owns more than 25 newspapers in 14 states including the Miami Herald, the Sacramento (California) Bee, the Raleigh (North Carolina) News & Observer, and the Fort Worth (Texas) Star-Telegram.
For now, the Star and Eagle are published seven days per week, but the newspaper chain announced an experiment to drop Saturday print editions in several markets. According to Poynter, the experiment will include beefed-up digital coverage on weekends and will not result in job cuts. The experiment is likely to spread to Kansas City and Wichita if the financial bleeding continues.
“The day of reckoning is coming, and it’s not far off,” Kensinger said.