As McClatchy Goes All In on Digital, Stock Price Sags Further

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To make the daunting leap from print to digital, McClatchy is bulking up with a fast and furious bit-by-byte strategy.

It has plunged into cutting-edge programmatic advertising with best-of-class help from digital advertising giant Google and its DoubleClick ad-management subsidiary. It redesigned its desktop, mobile and tablet platforms with dayparted content that aims at right-time reader engagement around the clock. It brought in coaches to teach salespeople how to close digital deals. It created a new vice presidency of products, marketing and innovation and another vice presidency that consolidated all technology operations. Amid continuing downsizing on the print side, it added 30 staffers in its digital video operations to enhance storytelling content aimed principally at under-served millennials. In almost every department of the 6,200-employee company that has been headquartered in Sacramento since its founding in 1857, the mantra is “digital first.”

This is a lot, and there’s more. But will it work, and is it enough?

In the past several weeks, as the blizzard of digital-first changes continued, McClatchy stock has hit record lows — going down from about $5 a year ago to around 80 cents per share now. The company’s market capitalization is $70.8 million, a plunge of more than 97% since 2005, the company’s peak year, when it was capitalized at $3.2 billion.  Compare it to Midwest-centered Lee Enterprises, whose one big paper is the St. Louis Post-Dispatch. Lee, which entered Chapter 11 reorganization and has only slightly more than half the revenues of McClatchy, has raised its capitalization to more than $166 million, and seen its stock price go from a 53-cent low in 2012 to above $3 currently.

When it announced its mediocre preliminary 2nd-quarter results recently, McClatchy said was “performing impairment testing of goodwill and other long-lived assets.” While the virtually certain reduction in asset value won’t result in an actual cash charge, it is likely to further rattle stockholders and potential investors, and intensify speculation about whether the company is nearing the digitally focused rebound pledged by CEO Pat Talamantes. (Analysts’ forecasts don’t see a net increase in revenue — digital+print — over the next five years.)

So why is there such a mismatch between the aggressive and — I would argue — smart steps McClatchy is taking in its digital leap and the company’s financial performance?

There are several reasons, none of them amenable to instant solutions brainstormed in executive suites:

  • Digital-only subscriptions: McClatchy’s 29 dailies have attracted only 75, 500 subscriptions. The new design is compelling, at least on desktop screens — check out the Sacramento Bee — but it will take Barnum-like promotion, and time, to put digital subs at the level they should be, at low-to-middle six-digits.
  • Dayparted editorial content: This is a terrific concept that will appeal especially to cross-platform-comfortable millennials. But it needs to be executed on by smart, motivated editors, reporters, videographers and producers who can consistently push out to multiple screens a mix of fast-breaking and deeper editorial. It can be done with inspirational editorial leadership. It too will require creative promotion, especially to millennials, who are plentiful in many McClatchy markets (e.g., Sacramento, Raleigh, Charlotte, Miami and metro Seattle).
  • Mobile: The editorial team has promised that content would be written and designed for small smartphone screens. But when I opened the Sacbee in the Safari browser on my iPhone, I had to scroll through a lengthy story, and there weren’t even any streamed ads to justify that format. The story I was checking on was huge — the “Rocky fire” that was burning through 47,000 acres between the Sacramento Valley and the North Coast — but it has to be broken into bite sizes for small screens.
  • Reader interaction: The digital-first strategy is supposed to integrate reader interaction with content. But I don’t see much, so far, either in substance or in promotion. Why no tweets featured from #rockyfire?
  • Programmatic advertising: McClatchy, as a principal member of the Local Media Consortium, has access to the top digital talent at LCM partner Google-DoubleClick, beginning with display and video advertising boss Neal Mohan. But all the pieces of programmatic, including how to measure results beyond “click-through-rates,” including at all the decision points on the “consumer’s journey,” are still being put together. When the work is done — after a year or more — and if it’s successful, programmatic is likely to become the gold standard in digital ad sales against premium content, and with consistently high CPMs that will pay for that content.

What I’ve looked at tells me that, for the most part, McClatchy is doing what it needs to do to make that big leap from print to digital. I hope its audiences around the U.S., especially those choosy millennials who prefer to get their community news for free, agree. They will, I believe, if McClatchy and everybody there does her and his bit (and bytes).

My earlier look at McClatchy, on July 9, is here.

Tom GrubisichTom Grubisich (@TomGrubisich) writes “The New News” column for Street Fight. He is editorial director of hyperlocal news network Local America, and is also working on a book about the history, present and future of Charleston, S.C.