A $30 million problem: What’s next for the Strib?

Star Tribune staffers sometimes refer to the place as “425 Portland,” its downtown address. Even before Tuesday’s announcement that another $30 million in cuts are coming, one wag suggested the place be re-dubbed “212 and a half Portland.”

The mood inside the building is grim, and faithful readers can only assume the worst. Sensibly, the Strib decided to cover its own story yesterday (the news always gets out), but didn’t fill in the blanks about what the state’s biggest newsroom will look like after what could be a 20 percent cut.

Here are a few scenarios:

The newsroom
First, the cuts likely won’t be evenly distributed.

The Strib’s Big Four unions (the newsroom’s Newspaper Guild and Teamsters locals representing drivers, pressmen and mailers) were given their cost-cutting targets separately Tuesday. They’ll be comparing notes Wednesday afternoon.

However, a source close to the Teamsters says drivers’ pay would fall from $27.19 an hour to $18.50. That’s a 32 percent reduction from about $54,000 a year to $37,000.

It’s also a far bigger cut than the overall percentage; if other Teamsters locals are hacked similarly, the newsroom might be getting by with a smaller (though not inconsiderable) reduction.

The circumstantial evidence for such a tilt? That management wants the most news-gatherers pushing the most content toward the biggest local news site. Scale remains the Strib’s competitive advantage.

Despite year-to-date cost-cutting, management has sunk dough into Web-friendly tech upgrades that include new computers and video facilities. Meanwhile, new hires include ex-PiPress business reporter Jennifer Bjorhus and health team leader Dave Hage (a former editorialist who briefly left the paper).

To be sure, some of those hires came only because others left, and some newsroom support positions were axed. But when the newsroom accepted a 10 percent cut this summer, it did so through wage freezes and benefit cuts, not layoffs or buyouts.

Newsroom Guild members get the new target at a Thursday 4:30 p.m. meeting, when they’ll learn just how hard they must fight among themselves over job cuts versus compensation decreases.

The paper
Harte has pledged to find $10 million from nonunion sources. While those workers will undoubtedly take it in the shorts, there are print-product options the rest of the industry is trying.

The Strib would likely kill stand-alone sections such as business on certain days, and fold together others. They could produce vestigial editions on low-revenue weekdays (like the PiPress does on Monday and Tuesday).

Management has already whined about the million-plus they spend on Associated Press coverage that’s available throughout the Web. Though the AP contract prevents quick cancellation, the Strib could cut costs by eventually picking up CNN’s heavily marketed (some say inadequate) upstart.

The Strib could cut a deal to consolidate state Capitol coverage, as the Miami Herald and St. Petersburg Times have done in Florida. But that shiny Web future could be compromised if there are fewer original stories in a heavily clicked topic area.

The Teamsters and bankruptcy
Blue collars clearly represent an era Strib management wishes were past.

The mailers and drivers voted for their own reductions this summer, but pressmen killed that action by turning down a 10 percent wage cut — a sliver of the newly rumored figure.

After the pressmen rejected Harte’s summertime bankruptcy threat 80-29, he promptly laid off 19 of them, plus seven other workers. That doesn’t set up a chummy negotiation now.

If things break down, would the Strib lock out its Teamsters (who have unexpired contracts, most negotiated during the Avista Capital Partners’ two-year ownership)? Would the paper go Web-only, a place it might be headed toward anyway? Would the Strib get the paper out with scabs, and would the newsroom Guild cross a picket line?

Unknowable at this point.

Another question that looms: If the unions balk and the Strib declares bankruptcy, what would happen? As Neal St. Anthony noted in his Strib piece this morning, labor contracts are typically unaffected. (Bankruptcy lawyers have told me new union deals are better-protected than older ones, a big reason the newsroom okayed cuts just months ago).

Bankruptcy would allow the Strib to stop paying other creditors, but it hasn’t made a debt payment since this summer, and the check due Dec. 31 probably won’t be in the mail, either. If labor costs are mostly off limits, how much can Avista save? And remember, bankruptcy lawyers cost money.

Is there a buyer out there?
Eager investors weren’t flocking to buy the Strib this summer, even before everyone’s cash evaporated.

Still, the Strib’s “restructuring consultant,” New York-based Blackstone Group, is a heavyweight dealmaker. Blackstone’s buyout side has taken a bath in the current market. However, its financial advisory arm is healthy and influential; the firm was recently Delta’s rep in the Northwest Airlines acquisition.

Could PiPress owner Dean Singleton’s Media News play Delta to the Strib’s NWA? After all, it’s cheaper to run one printing plant than two (especially with smaller print runs than ever) and consolidate other operations while letting two newsrooms function.

There would seem to be no problem declaring the Strib a “failing newspaper,” something federal anti-trust law requires for so-called “joint operating agreements.” Perhaps we’d go straight to one paper.

The hurdle is that Media News is also in hock up to its eyeballs, so would its creditors finance the up-front costs, especially for what is now a low- or no-margin business? The PiPress is believed to be one of the chain’s most profitable, so the deal might tempt.

Two other “economies-of-scale” possibilities: Gannett, which owns KARE11 and the St. Cloud Times, and North Dakota-based Forum Communications, which in recent years acquired the Duluth News Tribune and operates a half-dozen Minnesota dailies.

Gannett, too, is in financial trouble; it’s buying out KARE workers and just laid off 11 percent of its St. Cloud employees. The Strib might simply be too big a chunk for the conservative Forum to swallow.

A dark-horse candidate is Hearst Corp., which has consolidated operations with Media News in other markets and is effectively Singleton’s banker. But Hearst investors have already complained about tying up precious cash in print-heavy properties.

None of these companies are known for producing “great” newspapers — some are so wire-service-heavy it’s embarassing — so it’s hard to know what to root for.

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Comments (5)

  1. Submitted by paul johnson on 12/03/2008 - 04:09 pm.

    With all do respect, I don’t see a lot of advertising on your site. How long will this site be subsidized? To be fair to the Strib, WCCO, Sun Newspapers, KARE11, etc, you should give a comprehensive review of your own finances.

    How many sources do you have at the Strib? Are you talking to one person or 100? There is no way to verify what you are saying.

    Your column just seems to be a bunch of gossip and speculation….

  2. Submitted by Eric Ferguson on 12/03/2008 - 04:20 pm.

    A merger seems inevitable now that both papers have nearly cost-cut themselves into oblivion. Thinking about the decline of print, one thought that strikes me is that paper works much better for mass-transit riders, which sometimes includes me, yet I’m usually one of just a couple people reading some paper’s print edition. It’s like the managements get so focused on the readers they’re losing and the markets they don’t have, they miss what they do have and what should be obvious. They should occasionally have someone on the trains handing out free copies, just for a trial for the people who aren’t in a newspaper habit, but do have a boring ride.

  3. Submitted by David Brauer on 12/03/2008 - 04:28 pm.

    Paul – MinnPost is not yet sustainable, but I don’t report on the Strib because we have it figured out. We’re a different model (nonprofit) but face many of the same risks.

    As for my sourcing, it’s more than one, less than 100, but at the current moment I’ll leave it at that. Some of the figures I report above will eventually come out publicly, with names attached. If I’m wrong, I’ll let readers know. I think I have a pretty good track record on this beat.

    I think I acknowledge the unknowable and speculation but there are many facts (sources linked). I’ll try to add a few more links to some of the background points.

    Thanks for being a skeptical reader – that’s appropriate with less-than-full sourcing.

  4. Submitted by Richard Parker on 12/04/2008 - 01:40 am.

    >> A dark-horse candidate is Hearst Corp., which has consolidated operations with Media News in other markets and is effectively Singleton’s banker. have already complained about tying up precious cash in print-heavy properties.

  5. Submitted by Ron Brochu on 12/04/2008 - 05:45 pm.

    Very unlikely Forum Communications has sufficient cash to even dream about a Strib purchase. The Duluth News Tribune is cutting as aggressively as Minneapolis. A hideous redesign slaps sports into the “A” section Monday and Tuesday, and the business page no longer is offered daily. Their Superior, Wis., daily was cut to a twice weekly in October. Their presses have merged. Staff cuts have hit most departments. Not exactly a picture of prosperity, particularly when paying down millions in acquisition debt.

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