In another sign of the growing financial crisis in print journalism, McClatchy, the owner or 30 US newspapers, has filed for bankruptcy protection.
The company, whose newspapers include the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The News & Observer in Raleigh, North Carolina, and the Fort Worth Star-Telegram in Texas, says it plans to stay in business and emerge from bankruptcy in the next few months.
McClatchy is the nation's second largest publisher of local newspapers behind only Gannett, the publisher of USA Today and hundreds of local newspapers. Gannett has had its own problems and was recently acquired by New Media Investment Group.
McClatchy and some of the newspaper companies it has acquired over the years, including Knight-Ridder, have a long had a higher reputation than Gannett for quality news reporting. It recently won two Pulitzer Prizes and many other awards, most recently for the Miami Herald's coverage of the Jeffrey Epstein scandal.
Despite that reputation for quality, it has been cutting staff in response to falling revenue and mounting losses. Company filings show McClatchy had 3,500 full-time and part-time employees as of December 31, 2018, the most recent figure available. Five years earlier it reported just over twice as many employees. The company's press release said it has reduced its operating expenses by $186.9 million, or 23.3%, in the last three years alone, but it wasn't enough.
The company reported a net loss of $364 million in the first nine months of 2019, up from a loss of $52 million in the year-earlier period. Revenue in the first three quarters of 2019 fell by 11%, or nearly $68 million, with a decline in revenue from both advertisers and readers.
Much of the larger loss was due to a write-down in the assets of the company, as well as restructuring expenses and severance charges. But even without those charges and other special items, the company would have reported a net loss of $34.2 million in the first nine months of the year.
The job cuts at McClatchy have become the norm for the troubled newspaper industry, which has seen increased competition from online outlets for both readers and advertising dollars.
Labor Department data show that jobs at newspapers have fallen every year since 1998, a net loss of nearly 300,000 jobs during that period. That represents a nearly 70% drop in employment.
The company said it will use bankruptcy process to reduce "legacy debt and pension obligations." It said it will be working with the federal Pension Benefit Guaranty Corporation, the agency that guarantees pension payments to beneficiaries of bankrupt companies, the same way the Federal Deposit Insurance Corp. insures bank deposits to banking customers. The company said it believes there will be no cut in retirement benefits to its plan participants as the PBGC takes control of the plans.
"While this is obviously a sad milestone after 163 years of family control, McClatchy remains a strong operating company and committed to essential local news and information," said company chairman Kevin McClatchy, the great-great grandson of the company's founder, in a statement in a story by the company's Washington bureau. "While we tried hard to avoid this step, there's no question that the scale of our 75-year-old pension plan -- with 10 pensioners for every single active employee -- is a reflection of another economic era."
The company's press release said the bankruptcy should be able to help transform more quickly to a digital news company. It said it remains committed to quality local news.
"When local media suffers in the face of industry challenges, communities suffer: polarization grows, civic connections fray," said CEO Craig Forman. "In this important moment for independent local journalism in the public interest, a reorganized capital structure will enable McClatchy to continue to pursue our strategy of digital transformation and continue to produce strong local journalism essential to the communities we serve."
Shares of McClatchy were not trading early Thursday following the news. Shareholders are likely to have the value of their holdings wiped out. Share price had already declined 88% in the last 12 months through Wednesday's close at 75 cents.