McClatchy to Cut Staff by 3.5 Percent and Reduce Expenses

On the heels of a dismal second quarter 2018 financial report, McClatchy (NYSE: MNI) announced it will cut 3.5 percent of staff, or 140

Subscription Insider: McClatchy to Cut Staff by 3.5 Percent and Reduce Expenses

Source: McClatchy

On the heels of a dismal second quarter 2018 financial report, McClatchy (NYSE: MNI) announced it will cut 3.5 percent of staff, or 140 employees, and implement other cost-cutting measures. CNN said the announcement was sent to staff in an internal memo last week. According to CNN, president and CEO Craig Forman said the decision to cut staff was “painful and difficult” but necessary for the company’s long-term sustainability.

“Talented and passionate people who have dedicated their energy to our mission, colleagues we call friends and rely on every day, will leave our company,” said Forman in the employee memo. “We thank you all for your commitment to McClatchy and to local journalism and wish you nothing but the best in your future endeavors.

Impacted employees have all been notified. Additional cost-cutting measures include reducing operational expenses and asking senior management to take two weeks of unpaid leave, said CNN.

Headquartered in Sacramento, California, McClatchy currently operates 30 media companies in 14 states, including the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer and the (Fort Worth) Star-Telegram. On July 27, the company reported a net loss of $20.4 million, or $2.62 per share, for the second quarter of 2018. This is an improvement over a net loss of $37.4 million, or $4.91 per share, for the second quarter of 2017.

For the second quarter, the company increased digital-only subscribers 34.5 percent to 122,400, and digital-only advertising revenue by 20.2 percent. The company also, reduced operating expenses 4.8 percent, but it wasn’t enough to prevent the $20.4 million loss.

Forman commented on the company’s Q2 financials in a July 27 news release:

“In the 2018 second quarter, newspaper-industry headwinds continued but nonetheless our digital transformation progressed despite these industry challenges. We saw many areas of sequential improvement: our total digital advertising revenues were up almost 8 percent, while our digital-only advertising revenues grew more than 20 percent. In the first quarter of 2018, we achieved a milestone in our digital transformation that was repeated in the second quarter: total digital advertising revenues exceeded our print newspaper advertising revenues and that trend accelerated in the quarter just ended. Indeed, in May and June we met another milestone: our digital-only advertising revenues exceeded our print newspaper advertising revenues. Finally, while print advertising was down double digits, even in this hard-hit category, we saw improvement in the trend of our print advertising business in almost all categories.”

Forman hinted at necessary changes in the outlook.

“Management plans to reduce GAAP and adjusted operating expenses and will monitor costs for the remainder of the year to achieve expense performance in line with revenue performance. Management expects to continue to reinvest some of the legacy cost savings in additional investments in news and sales infrastructures, as well as in technology and products, to continue to generate new advertising and subscriber revenues,” Forman said.

In related news, McClatchy-owned Miami Herald and The Kansas City Star have launched sports-only digital subscriptions. The Star is calling its offering Sports Pass, and it’s available for $30 a year or $2.50 a month. The Miami Herald is offering the same pricing for Screenshot, but on its subscription page, it shows that the price will automatically renew at $50 per year after the initial term.

Subscription Insider: McClatchy to Cut Staff by 3.5 Percent and Reduce Expenses

Sourced: Miami Herald

“Sports Pass is your ticket to everything sports-related on KansasCity.com. As a subscriber, you’ll have unlimited digital access to every sports story The Star publishes, with no limits,” said Jeff Rosen in an August 23 column.

Insider Take:

McClatchy seems to be doing the right things, but is it too little, too late? It might be. If the company was experiencing even larger losses last summer, the reduction in expenses, staff cuts and launch of new initiatives should have come sooner. Now the company seems to be scrambling to stay afloat, which could make it ripe for a sale.

We are also not fans of the lack of transparency in the introductory offer for the sports-only subscriptions. While this information is disclosed on the sign-up page, this should have been more clear when touting the initial offer. For true sports fans, $20 a year is not going to make or break them, so why not be up front that this is an introductory or promotional offer?

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