McClatchy's Strategy Is to Think and Act Local

Newspaper Publisher Aims to Dominate in Fast-Growing Markets

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CHICAGO ( -- McClatchy Co.'s $4.5 billion purchase of Knight Ridder this week transformed the publisher of mid-sized market titles such as the Sacramento Bee into a national advertising heavyweight, but that doesn't mean better options for marketers looking to carpet the country with print buys.

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In fact, if the company goes ahead with an already-announced plan to sell 12 Knight Ridder papers in slower-growing markets like Philadelphia and the Bay Area, the post-merger McClatchy will do less national advertising business than the pre-merger Knight Ridder did, based on 2005 results.

Selling off top earners
After all, the soon-to-be discarded Philadelphia Inquirer and Philadelphia Daily News earned nearly as much national ad revenue ($97 million) as the entire McClatchy chain ($100 million) during 2005, according to a Knight Ridder spokesman. And the two Bay Area castoffs, the San Jose Mercury-News and the Contra Costa Times, were also formidable national advertising contributors, combining for nearly $53 million in revenue last year, the spokesman said.

But Wall Street analysts -- who've seen past newspaper mega-mergers fail to deliver on promises for a synthetic national ad buy made up of far-flung titles that would rival USA Today and The New York Times -- said McClatchy, now the nation's No. 2 newspaper chain by circulation, is right to keep its focus local. Its strategy has been to smother fast-growing regions with multiple titles.

"I don't think they really care about national, even though they're bound to get a lot more of it now," says Deutsche Bank media analyst Paul Ginocchio. "They don't have the market size or critical mass to form a really effective buying network."

Effective on the local level
Mr. Ginocchio said the chain's history suggests it is more comfortable establishing dominant local positions, and advertisers in its home market, California's Central Valley, concur. They say the chain's four papers there aggressively offer advertisers options such as direct-mail and multi-paper ad buys that have been so effective that most of its smaller competitors there have folded.

"They own the Central Valley," said Leo McElroy, a media buyer with Sacramento-based Bouchard McElroy Communications Group. "It's one-stop shopping for us."

McClatchy's newfound scale gives it a chance to wield similar newspaper clusters in other large markets. In Washington state, for instance, the merger gives it Knight Ridder's 49.5% stake of the Seattle Times, as well as sole ownership of Olympia's Olympian, which it can pair with the two dailies it already owned, the Tacoma News-Tribune and suburban Kennewick's Tri-City Herald, as well as two other weeklies.

Shoring up the Carolinas
And in the Carolinas, the merged chain now boasts the region's four largest-circulation dailies (McClatchy's Raleigh News & Observer and Knight Ridder's The State, Charlotte Observer and the Myrtle Beach News-Sun), as well as three smaller dailies and eight weeklies McClatchy already owned there.

"We think that in the Carolinas there are significant revenue opportunities as we own several papers there and can have integrated buys, network buys, and direct-mail delivery to successfully combat competitors like Advo," McClatchy Chairman-CEO Gary Pruitt told Wall Street analysts after the deal was announced March 13. Advo is a direct-mail marketing services company with $1.2 billion in annual revenues.

A McClatchy spokeswoman declined to elaborate on Mr. Pruitt's comments.

"By discarding the Philly papers, they're saying they're going to focus on local-market growth, and not national advertising," said Silver Springs, Md.-based newspaper industry analyst John Morton. "That's why they've done so well up until now."

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