02 February 2010

McClatchy CEO: Focused On Free, Ad-Supported Content Model

The Wall Street Journal

Gary Pruitt, chief executive with McClatchy Co. (MNI), said Wednesday that while the newspaper publisher is willing to experiment with online paid-content models, it's primarily focused on driving revenue with online content from advertising.

"We tend to believe that the overwhelming model [for the online news publishing industry] will be a free, ad-supported model," said Pruitt on a conference call with analysts following McClatchy's fourth-quarter earnings release.

He noted that online advertising "has proven to be very profitable for us."

Pruitt's comments come as many newspaper publishers have signaled a desire to try charging consumers online for news content as a way to stabilize their businesses, which have suffered amid the rise of web media and the recent downturn in ad markets.

Most notably, The New York Times Co. (NYT) said recently it will launch a metered pay model on the Web site of its flagship newspaper next year, aimed at requiring heavy users of its web site that don't subscribe to its print publication to pay in order to access articles.

The Times Co. is widely viewed as a bellwether for the newspaper industry's efforts to adapt to online media, but Pruitt voiced doubts about whether online subscriptions will flourish into a major business model for the publishing industry.

On the advertising side, prices for display ads have suffered as enormous quantities of inventory have populated the web from giant social media sites like Facebook. Pruitt, however, noted that McClatchy has worked with Yahoo Inc. (YHOO) to use behavorial targeting tools on its sites. He said providing advertisers with the ability to target certain consumers effectively online has helped support its ad pricing.

Pruitt also said McClatchy has had more luck recently with smaller, local advertisers than with large national advertisers, suggesting that the company is having some success in filling a void in local advertising that has been particularly painful for smaller, local media outlets.

McClatchy said its online ad revenue rose 15% in the fourth quarter, and accounted for nearly 16% of total ad revenue, compared with 11% a year earlier.

"Our efforts to evolve into a hybrid print and online media company are advancing," said Pruitt, noting that 44% of its 2009 online ad revenue came from online-only deals.

Despite its progress, a large majority of McClatchy's ad revenue comes from print, which continued to decline in the quarter, dragging down the company's overall revenue by 16.5%.

"The model isn't broken, but on the other hand, we are willing to experiment and see what works," said Pruitt. "If somebody cracks the code, we'll copy it."

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