Sacramento-based newspaper publisher McClatchy, which has embarked on a chain-wide digital transformation, on Friday reported gains in digital audience and advertising in last year’s fourth quarter and all of 2017.
And in a sign of a sea change in the newspaper industry, McClatchy President and CEO Craig Forman said “we are nearing a crossover point where digital advertising revenues exceed those from print newspaper advertising, which we expect to hit in 2018.”
Revenue fell, however, pulled down by the ongoing slide in print earnings.
McClatchy, publisher of The Fresno Bee and 29 other newspapers, reported net income in the final quarter of 2017 of $60.4 million, or $7.80 per share, compared with net income of $3.1 million, or 40 cents per share, in the fourth quarter of 2016. However, the company also noted that it recorded a substantial fourth-quarter tax benefit that included $53.6 million as a partial reversal of the non-cash provision for income taxes recorded in the third quarter of 2017. That adjustment was a byproduct of the new federal tax bill signed in December.
The company said adjusted quarterly net income – which excludes severance, unique tax items and other items – was $3.2 million, compared with adjusted net income of $12.9 million the fourth quarter of 2016.
“In a challenging quarter, we achieved strong progress on our transition to a digital company,” Forman said. “While headwinds in print newspaper advertising obscured growth, our focus on cost control and business-process improvement offset a portion of the advertising revenue declines.”
The company said it achieved record growth in digital-only subscribers in the fourth quarter. Average total unique visitors to the company's online products grew to 71.3 million, up 9 percent from the close of 2016. Digital-only subscribers at year’s end totaled 103,000, up from 92,800 at end of the third quarter.
McClatchy’s total revenue in the fourth quarter was $244.7 million, down 6.7 percent from 2016. The company noted a soft holiday retail advertising season and continued declines in print advertising. Quarterly advertising revenue was $138.2 million, down 12.7 percent year-over-year. However, digital-only advertising revenue grew nearly 10 percent.
In calendar 2017, McClatchy had a net loss of $333.1 million, or $43.65 per share, which included a $192.3 million non-cash valuation allowance on deferred tax assets and $191.5 million of other non-cash charges. The adjusted net loss for 2017, excluding those items, was $23.3 million. In 2016, McClatchy reported a net loss of $34.2 million.
Company revenue for all of 2017 was $903.6 million, down 7.5 percent from 2016. Advertising revenue last year was $498.6 million, down 12.3 percent from 2016. Digital-only advertising, however, was up nearly 10 percent in 2017, largely offsetting the impact of the softening print adverting declines on total digital advertising.
Like other media companies, McClatchy has seen a steady, prolonged decline in print advertising revenue. The company said Friday it expects that trend to continue.
Expanding on the expectation of digital ad revenue exceeding print ad earnings this year, Forman added: “While this milestone reflects our expectation of continued declines in print advertising, we also expect to continue to post strong digital revenue growth this year as we increase our digital product offerings and opportunities. It is our focus on new-subscriber and advertising products and go-to-market strategies that will be the headline of our digital transformation story in 2018.
“We also expect growth in digital subscribers.”