Highlights from McClatchy's Earnings Call with CEO Pruitt

By: With its advertising sales down by 30 percent through the first half of the year, newspaper publisher McClatchy Co. has been wringing more revenue from readers by raising newsstand and home delivery prices. The higher prices helped boost McClatchy's circulation revenue by 5 percent, or about $3 million, in the second quarter.

But the higher prices at 26 of McClatchy ( MNI - news - people )'s 30 daily newspapers are the main reason the company's total weekday circulation fell by 12 percent to 2.3 million.

McClatchy Chief Executive Gary Pruitt discussed the rationale for the higher newspaper prices in a Tuesday conference call with analysts.

QUESTION: It looks like circulation declines accelerated from the first quarter. Do you expect that to continue into the back half of the year? Are you comfortable watching circulation drop, given it will leave you with a smaller audience when advertising rebounds?

RESPONSE: Most of that (decline), two-thirds to three-quarters, was driven by actions that we took that we feel are generally nonrecurring. They include more aggressive pricing. We felt we had the pricing power to do that. Most of it is sticking as you can see by the revenue growth and we needed the (circulation) revenue numbers.

Less discounting also caused some of that pricing. That pricing caused greater erosion in circulation. Also we eliminated more of the 'other' circulation categories that includes hotel sales and third-party programs. We limited some of that. That circulation has far less value to advertisers and we continue to eliminate some outlying advertising, advertising outside the major geographic market for each of our papers. And so those are more or less one-time events. And so while we think you'll see that run rate in circulation through the end of the year, we will roll over the next year. We don't think that is the current run rate.

If you look at the year-to-date numbers excluding Miami, we are down about 8.8 percent daily and 6.9 percent on Sunday. That we think is an acceptable level and I would stress Miami lost much because they had more hotel editions and more international editions which were cut back. What we are basing sales on more now than circulation is readership and audience. And our syndicated research indicates that our readership decline of our print product is much smaller than the circulation decline and that is what's important to advertisers. This circulation is just not as valuable to advertisers. So while the drop can seem more dramatic, the readership decline is a fraction of the circulation decline.

And then when you look at total audience with online, it's actually growing based upon the research we had in the majority of our large markets, reaching about 70 percent of the adults in our markets.