Several large newspaper chains have laid off employees in the past several months. Evidence suggests that higher newsprint prices are undermining margins as well. And a growing body of evidence indicates that newspaper revenue dropped as much as 10% in the first quarter.
The first large newspaper chain to report earnings for the first quarter was McClatchy Co. (NYSEAMERICAN: MNI). These results followed a similar pattern for numbers posted over the past several years. Revenue fell 10.1% to $199 million. The primary culprit for the decline was advertising, which was down 16.7% to $100 million. Digital and audience revenue, as well as online traffic, grew impressively, but the drag of print advertising was not nearly offset.
A very small number of newspaper properties have been able to offset ad declines with online subscriptions. First among these is New York Times Co. (NYSE: NYT). It had over 2.6 million digital-only subscribers at the end of 2017 and is expected to have added to that in the first quarter. This number is several times what it is at other publicly traded companies in the sector.
The large newspaper chains continue to be pressured by revenue attrition, and many of their options to cut costs have been exhausted. Most print far fewer pages than they did in the past. Some no longer print a paper every day of the week. Most also have cut the trim size of their papers, making them physically stronger. Some have grouped newspapers in geographic clusters so they can share services, particularly printing. Others have moved a portion of their editing and pay layouts to a central location.
Most tactics to cut costs have been implemented by most papers. That leaves them with only the costs of employees as the primary way to lower expenses. The industry believes that having fewer employees negatively affects editorial quality. That in turn cuts the appeal of papers to their readers. It is not a cycle the industry has been able to reverse.
It appears newspaper revenue dropped 10% in the first quarter, an intractable problem that continues to vex publishers.