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What’s the Star Tribune’s ‘Project Celsius’?

In a bankruptcy court filing, the paper’s pressmen hint at management’s Bondian-named long-term strategy — or lack thereof.
By David Brauer

Today’s Star Tribune bankruptcy filings disclosed for the first time a “Project Celsius,” the James Bondian code name management has hung on its long-term survival plan. Perhaps this explains the “M” in publisher Christopher M. Harte’s name.

A few details trickle through ia document submitted by the pressmen’s financial consultant, R. Michael Fox. The 166-employee local — from which management demands $3.5 million in annual compensation cuts — is fighting the Strib’s motion to abrogate the labor contract due to alleged bad-faith bargaining. More on that later.

Remember, what follows is labor’s representation of the Celsius strategy. Management won’t comment until it fires back in court later this week. (Certain financial details were redacted in the filings because of a union-management confidentiality agreement.):

♦ Somewhat improbably, management is relying on “Sunday circulation to climb in 2009.” That would be a real reversal of fortune. Here are the last five circ reports:

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Sept. ’06: 596,000
March ’07: 574,000
Sept. ’07: 570,000
March ’08: 534,000
Sept. ’08: 520,828

And this was back when people had money.

Although management may have some trick up its sleeve, the likeliest way to goose the number would be discounting.

Not only is that not a cinch to work, the bigger the bargain, the lower the revenue gain. I suppose print ad revenues could climb enough to make it worth it, but that’s really not a sure thing.

♦ And in fact, the union’s consultant declares, “Our review of its long-term plans [Project Celsius] shows no effort being expended to find new or expanded sources of print revenue.”

As you can imagine, that’s a big concern for a bunch of employees whose jobs are tied to print. Then again, in this day and age, it’s a little hard to imagine what new or expanded sources of print revenue could be.

Not illogically, management is banking on lots of low-priced online ads replacing higher-priced print display ads known as ROP. As Fox describes it:

There is a plan to build online revenue, in large part to compensate for lost Classifieds revenues but also as a substitute for both Retail ROP advertising and National ROP advertising. There is a temporary bump in circulation revenue followed by a decline and slight growth in preprint revenue.

Given the softness in even the online ad climate, this seems at best a recipe to slow declines, not maintain or increase revenue.

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♦ More generally, the union repeatedly complains management has no real plan to grow the business. For example, they’re befuddled by the paper’s recent partnership with WCCO-TV:

We asked what the management anticipated from its announced relationship with WCCO TV. The answer was [redacted]. This question is part of our search for a real survive and growth strategy. To date, we have not discovered any reason to believe the company has thought beyond “survive.”

Although Paul Douglas claims otherwise, I’ve been told  that this is at best a low, low money deal, at least for now: the Strib saves Douglas’ freelance fee and both sides get cross-promotion. In other words, not a game-changer.

To the union, there’s not much heat in Celsius — ultra-rosy scenarios aside, it all comes back to cost-cutting. Writes Fox:

As business consultants, we are supportive of cost-cutting when the overall market declines; however, to be viable, a business must also have strategies for recapturing lost revenue and more importantly, for developing new sources of revenue. These are missing from the Star Tribune’s plans.

By the way, the union explicitly declares its willingness to take double-digit pay cuts. Again, more on that later.

Fox does note that management completed its 2009 budget after it ginned up Celsius, so perhaps the more improbable scenarios have been jettisoned. But, the union claims, the two documents are inconsistent, making it difficult to know exactly what management bases its $3.5 million comp cuts on.