By: Seth Sutel, The Associated Press
Newspaper publishers reported sharply lower advertising revenues for the second quarter on Thursday, and two of them laid part of the blame on a drop-off in real estate advertising in key markets.
McClatchy Co. and Media General Inc. both reported steep advertising declines and lower profits, while Dow Jones of The Wall Street Journal and the target of an acquisition bid by Rupert Murdoch’s News Corp., had lower profit because of a charge but higher revenue and operating income.
McClatchy, which owns The Miami Herald and several newspapers in California, including The Sacramento Bee and The Fresno Bee, had a 9.8 percent decline in advertising revenue across its 31 newspapers, with the biggest drops coming in Florida and California. McClatchy is the country’s third-largest newspaper company, behind Gannett Co. and Tribune Co.
McClatchy attributed much of the weakness in those markets to economic factors including the slowdown in the formerly hot housing sector. With real estate playing a key part of the local economies, other ad categories such as autos and employment also sagged, McClatchy Chief Executive Gary Pruitt said.
Media General Inc., a regional publisher based in Richmond, Va., had an 11 percent decline in advertising, including sharply lower results at The Tampa Tribune newspaper, which reported a 36.7 percent drop-off in classified advertising.
Media General, which also owns the Richmond Times-Dispatch, Winston-Salem Journal, 22 daily community newspapers and 23 TV stations, had net income of $5.1 million, or 22 cents per share, compared with $20.2 million, or 85 cents per share, in the year-ago period.
Its Income from continuing operations in the second quarter in 2006 was $18.3 million, or 77 cents per share, which excludes the sale of four CBS stations.
McClatchy earned $39.9 million in the quarter or 49 cents per share, beating analysts’ expectations as operating cash flow rose 4.4 percent on tighter cost controls. Its shares rose 13 cents to $26.41.
In the year-ago period, McClatchy earned $44.1 million or 94 cents per share. The per-share results swung widely because McClatchy issued 35 million shares last year as part of its purchase of Knight Ridder Inc.
The addition of 20 newspapers from Knight Ridder also resulted in McClatchy revenue more than doubling to $580 million in the quarter versus $212 million in the same period a year ago.
Pruitt, the McClatchy CEO, said in a statement that cyclical factors represent “a significant portion of the current advertising downturn,” and that he expected California and Florida to be “strong performers” again.
However there are some doubts about how much real estate advertising would come back to newspapers even after the housing market recovers, given that classified advertising for jobs, cars and real estate — a very profitable business for newspapers — are increasingly migrating to the Internet.
Mark Panus, spokesman for Realogy Corp., the nation’s largest residential real estate services company, said in an e-mailed response to a query that newspaper classifieds are “not a cost-effective or efficient way” for real estate brokers to market listings.
Panus, whose company owns Century 21, Coldwell Banker, ERA and other real estate franchises, said Realogy has made “a considerable shift” from print to online advertising, which now accounts for about 15 percent of its total advertising, up from less than 5 percent as recently as three or four years ago.
Dow Jones, meanwhile, reported earnings of $21 million or 25 cents per share, down from $28.8 million or 34 cents per share in the year-ago period.
Without charges in both periods, however, operating income rose 28.2 percent to $66.3 million from $51.7 million in the same period a year ago, driven partly by the acquisition of the other half of news database Factiva that it didn’t already own.
Even without the effect of acquiring the rest of Factiva as well as another business, the U.K.-based eFinancialNews, Dow Jones still reported a 0.9 percent increase in revenue. Operating income benefited from a 41.7 percent increase in Dow Jones’ indexes business, which includes a number of well-known stock market indicators as well as the Dow Jones industrial average.
Dow Jones’ growth in the quarter was offset partly by a 6.8 percent decline in print advertising revenue in the U.S. edition of The Wall Street Journal, Dow Jones’ flagship property, and a decline of 8 percent in advertising revenues at its community newspaper group.