It’s Not As Bad As The Doomsayers Say, McClatchy’s Gary Pruitt Tells Newspaper Executives

Philip M. Stone April 9, 2009

If there is one guy in the US newspaper business who really understands the state of play these days it’s Gary Pruitt, CEO and chairman at McClatchy, a business that comprises 30 metropolitan newspapers and their web sites. There’s nothing else to spread the risk – the company lives or dies depending on how it does with its newspapers.

So it was somewhat refreshing that Pruitt’s address at the Newspaper Association of America (NAA) meeting this week in San Diego was really quite upbeat. And that from a man who has seen his share price drop from the mid-50s when he bought Knight Ridder a couple of years back to barely more than half a dollar today – you can buy a share in the company for less than a copy of a McClatchy newspaper at the newsstand.

But for all that he noted McClatchy was doing particularly well on the digital front with 15% of its advertising revenue today coming from online ads  -- he expects the company will generate nearly $200 million in digital revenue this year at a higher profit margin than its print business. (Not to be a naysayer, but is that 15% because online is doing so well, or because online revenues have grown so much in  percentage terms because print revenues are down so much?)

Whatever the reason, he is very sure newspapers have a good future and that’s why what he had to say on that front deserves a wider audience, so here are the key parts:

 Absolutely we’ve got a future. But just what does it look like and how do we hurry up and get there? Alan Kay, the visionary computer scientist, once said, “The best way to predict the future is to invent it.” That’s where we are today. It’s up to us to invent that future. There is no silver bullet. There are no easy answers. And, sadly, as we have seen already, not every newspaper will make it.

But here is what I see going forward:

Print remains viable now and into the future. Most newspapers today are profitable even in the depths of this crippling recession. More than 100 million adults in the United States read a printed newspaper every day – more than watched the Super Bowl. As troubled as the U.S. economy is, if 100 million consumers want and use something, that product usually doesn’t go away. Sixty-one percent of 18 to 34-year-olds read a newspaper in an average week. So much for the notion that younger people don’t read newspapers.

Despite all these positives, newspapers alone are not enough. Our future depends on becoming successful hybrid media companies – fully engaged and vested in digital publishing and digital platforms as we have been historically with print.

This isn’t breaking news. In the month of January, 44% of all U.S. internet users visited a newspaper website. And audience growth at newspaper websites is outpacing overall U.S. internet audience growth. So we’ve been moving in this digital direction for some time – but we need to accelerate the pace and sharpen our focus.

We need to establish our brands and offer our services on many different platforms. We need to leverage social media, mobile technology and the web’s interactivity as our communities and customers change how they acquire and share information.

This economic downturn makes it difficult to take risks, but we need to experiment smartly and partner where it makes sense. We need to learn from our mistakes, adjust and move on. Let’s listen to our audience and our advertisers – not conventional wisdom.

The same technology that challenges us on the revenue side offers savings on the expense side through centralization, collaboration and outsourcing. We must continue to shed those legacy, 20th century, monopoly cost structures that weigh us down, limit our flexibility, jeopardize our health. Think of the newspaper company of the future as an athlete – lean, fit and trim, yet muscular where we need to be.

We need to ensure strength in our newsrooms and advertising sales staffs – our two most powerful assets, our core competencies and our social responsibility.

Even today, with all the downsizing across our industry, we have the largest newsgathering operations in our markets by far. No other local media outlet is as well equipped to produce and deliver the high value, premium local content that’s growing our total audience in print and online. And we know that audience growth remains the best predictor of long-term success for any medium.

While we’ve done a good job growing audience, we need to do a better job of leveraging our sales forces. We must empower our sales staffs to sell our full portfolio of print and digital products – giving them the right tools, training and incentives. Also, think of the possibilities of harnessing that large, local sales staff to sell on behalf of others and share revenues. The untapped potential of local digital advertising in each of our markets is why internet giants like Yahoo and Google seek partnerships with newspapers. We need to mine that local digital revenue stream. We can’t afford to fumble the opportunity.

Lastly, we need to accept the reality that we’re in a tougher, more competitive business, now and forever. Ours is a business that’s still viable and vital – just with a smaller margin for profits and a smaller margin for error. Let’s appreciate how lucky we are to work in the media business in this critical time of transition. Our actions count. No unbearable lightness of being here. The ball is in our hands and the game is on the line.

Pruitt has suffered a personal financial shortfall because of the downturn, so no doubt he is hoping everything he said results in higher McClatchy revenues so that debt  and working capital needs can be better met out of future earnings. The company announced a couple of weeks back that Pruitt’s 2009 remuneration fell by 40% last year, but don’t cry too much – it was still around $2.8 million, just not the $4.6 million from the year before. Base salary was $1.1 million but he has agreed to reduce that by 15% for this year.

The company announces its Q1 earnings in a couple of weeks. For all of Pruitt’s upbeat assessments the results probably won’t be pretty. For Q4 without impairment charges adjusted earnings from continuing operations were $36.1 million – 44 cents a share – so, yes, all those job cuts and consolidation are resulting in the business still churning out a healthy profit if it wasn’t for all that money that had to go to pay debt, but impairment charges for reducing the value of its properties and goodwill brought about a total loss for the quarter of $1.43 billion, or $17.46 per share.