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Strib memo: 'Painful' cuts coming

As the economy melts down and newspapers around the country announce multiple rounds of layoffs, folks keep asking me when the Strib will announce new cuts.

Answer: any minute now.

In a companywide memo this afternoon, Strib publisher Chris Harte set up his employees for a lousy Christmas. "Star Tribune revenue in 2009 will be substantially lower than it was in 2008," he writes. "We will have to cut much deeper, and many of the reductions we make will be painful."

Harte didn't use the "layoff" word, but it's impossible to read the memo (reprinted below) without knowing that tomorrow's Strib will have fewer bodies than today.

Indeed, Harte's missive could've been printed on a razor blade, since he notes the paper's $400-million-plus debt problem remains "unworkable," and the only reassurance he can offer is times stink for the rest of the industry, too.

Still, he observes, "We will get to the other side by staying true to who we are."

There's nothing specific about how deep the cuts will be, where they will occur, or whether the Strib will make a mad play to marry the Pioneer Press. So anyone who cares about strong local journalism is in the same boat as the people who make it: on tenterhooks a bit longer.

Frankly, the only hope I have is that Harte is overstating the case to wring concessions out of his recalcitrant Teamsters locals. But as you look around the business world, that's really grasping for straws.

More details as they emerge.

Here's the memo:

A Preview of 2009

Over the past few weeks, many of us have working intensely on the 2009 Star Tribune budget. Even in normal times, budgeting is often hard and unpleasant. In times like these, it is agonizing.

Against the backdrop of the sudden and unexpected worldwide economic meltdown, we know — with near certainty — that Star Tribune revenue in 2009 will be substantially lower than it was in 2008. That means we will have to continue the aggressive cost reductions we have been pursuing these past two years in order to keep our diminishing revenue aligned with our expenses.

We will have to cut much deeper, and many of the reductions we make will be painful. But we absolutely must get our budget in line with our revenue.

Plus, we still have the compound problem of having to fix an unworkable debt structure. We continue to work with our lenders on what form a debt restructuring will take.

There is just no getting around that these are bleak times — the worst I have seen in the 45 years since my first newspaper job. The only reassurance I can offer is that we are not alone.

A respected industry observer analyzed 12 major market newspapers and wrote the other day that:

"the average profitability of newspapers tumbled 18 1/2 times faster than sales fell in the third quarter of this year ... In a three-month period when advertising and circulation sales among the 12 publishers dropped by an average of 10.3 percent from the prior year's level, the average operating profits of the group in the third quarter plunged by a staggering 198.3 percent."

And this performance is reflected in the tumbling stock prices of all major newpaper companies. For example, stock in McClatchy [the Strib's former owner] is selling for just over a dollar a share — down from its peak of $75 just three years ago.

We will survive this unprecendented set of bad circumstances we are in, but we will have to make sacrifices that we don't want to make. The retail, housing, jobs and automotive markets will all come back at some point. But technological changes and powerful economic forces at work right now are not in our control. And we will never regan the dominance we once had in employment classifieds and many other categories.

This is a perfectly bad storm that we will weather by making the touch choices that keep us on the course to recovery. In making these choices, I outlined a set of principles to the Operating Committee, which I would like to review with you:

1. We must maintain products that our readers and advertisers will find useful enough to buy in an increasingly competitive marketplace.

2. We must reduce every cost we can in all areas of our business, despite the pain, while maintaining the best service we can afford to our readers, advertisers and employees.

3. We must look for other new sources of profitable revenue, always with very careful analysis.

4. We must stop doing things that no longer work well, and question old ways of doing things that no longer make sense.

5. We must develop and maintain the best possible sales force for all our products.

6. We must keep the Star Tribune Company a good place to work, recognizing accomplishments and rewarding the best performance, while as quickly as possible improving weak performance.

7. We must set an example for our teams by our own actions.

8. We must figure out ways to thank people, encourage people, and generally try to motivate people through perilous times.

9. We must try to make decisions and institute changes faster than we have historically.

10. We must keep in mind that what do is critically important to our communities and our state. We make a difference every day.

This is not a comprehensive list, and I welcome your thoughts on other considerations.

I do firmly believe that if we stay true to our highest principles through these challenging times, we will emerge strong and healthy. We will get to the other side by staying true to who we are. That is what has gotten us this far.

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Comments (5)

I have a feeling the Star Tribune is in worse shape than other papers owned by mainstream media companies, simply because it's owned by an investment banking company which likely stand to lose (or has lost) a large pile of cash on credit default swaps and collateralized debt obligations.

Which leads me to: how does a one-city newspaper manage to get $400 million in debt? I may be an industry outsider, but it seems that sum of money could easily create a new newspaper from scratch and publish it to 500,000 people. What's the Strib's circulation these days?

P.S. David: the word is "tenterhooks" not "tenderhooks" -- see http://www.worldwidewords.org/qa/qa-ont1.htm

Chris, thanks for the gentle correction ... you'd think after all these years, I'd know that, but I do now!

PS Strib's circ is about 320,000 weekdays and 520,000 Sundays.

What's wrong with the mad dash for a joint operating agreement with the Pioneer Press? I would think this would be the logical outcome, since both newspapers are failing and Justice Department approval is virtually automatic. It would buy a few more years, perhaps allowing both newspapers to live to the economic revival. I suspect the reason this obvious solution has not happened is the Strib is waiting for PP owner Billy Dean Singleton to file for bankruptcy. Singleton is more badly financed than the Strib, but a Strib victory at this point could be the classic pyrric victory where the victor is so depleted by the fight he's no longer a viable force. My last point is that I found Harte's t0-point prescription for the future truly pitiful. How about making the Strib a compelling, RELEVANT, and indispensible part of my life today?

Still, he observes, "We will get to the other side by staying true to who we are."

Well now, you see, that's rather the heart of the matter, isn't it? "Who are you?" The newspaper formerly known as the Star Tribune which has morphed into Strib Lite with a double right twist? I'm guessing that Katherine Kersten is not on the endangered list. Watch your back, Nick! And as for the "little people," the word to OutsourceLand is: "Incoming!"

A formerly fine newspaper has sowed the seeds of its own destruction.

Not to quibble with the earlier poster, but the Star Tribune is owned by a private equity firm, which likely does not have exposure to CDOs or credit default swaps. The Strib's mountain of debt is a result of being owned by a private equity firm. These firms typically kick in a limited amount of equity, lever the rest, and hope their return exceeds the interest rate they're paying. It obviously didn't work out as expected.