Braublog Local gasbag opines on Star Tribune’s fortunes Share this:EmailFacebookTwitterPrint By David Brauer | 04/30/2009 From WBUR in Boston. Share this:EmailFacebookTwitterPrint Name: Email: Comment: Get MinnPost in your email inbox: Sign up You can also learn about all our free newsletter options. Comments (9) Submitted by John Walton on 04/30/2009 - 02:33 pm. Interesting…since between the print version and the online version they are reaching a little over 2 million unique people – more than at any point in their history – it is confusing to say fewer and fewer people are reading it. Name a media that is increasing audience. The statement should be that newspapers are reaching more people than ever before, but are having a challenge in monetizing it. Log in to Reply Submitted by David Brauer on 04/30/2009 - 02:43 pm. John – if the transcript/editing didn’t make clear, we’re talking eyeballs in the local market, which are going down, even print+web. (That’s because print audience is declining at faster at the local level than online audience is increasing.) As I’ve written before, at the *national* level, you’re right, but that it is the toughest stream to monetize. Log in to Reply Submitted by Mark Gisleson on 04/30/2009 - 02:53 pm. You really have to wonder just how stupid venture capitalists are. What possible basis was there at the outset of the Internet age in thinking that ridiculously high, monopoly-driven ad revenues could be maintained? Especially when Warren Buffet was sounding the alarm about newspaper stocks back in ’92. For many businesses, newspaper and Yellow Page monopolies drove the cost of advertising through the roof. If the Strib fails don’t be surprised if hundreds of local business people show up at the funeral just to relieve themselves. I for one will cheerfully stand in line. Twenty to thirty percent. I remember expressing extreme anger and frustration about that years ago and then getting schooled by two rightwing financial experts on how they weren’t sure that 20% was really a decent enough profit margin. Needless to say, if Congress appropriates so much as one penny to bail out newspapers, I will be furious. News continues to flow, with or without newspapers. Any money spent by Congress should be for the purpose of making lending capital available to journalists wanting to do a MinnPost…. Log in to Reply Submitted by William Souder on 04/30/2009 - 04:09 pm. Two things. One, as previously noted ad nasueum, the Star Tribune’s operating margin is being maintained via draconian cuts to operating expenses and by suspending debt service…a scenario in which the phrase “healthiest of the three” seems forced even if tecnically true. Ignoring your creditors and cutting expenses just fast enough to keep pace with shrinking revenue is not a viable business model. Two, I think this is the first time I’ve seen Avista called a “venture capital” company. Venture capital typically refers to money pooled and invested in small or start-up companies with high growth potential. Log in to Reply Submitted by David Brauer on 04/30/2009 - 04:19 pm. Bill – Keep in mind, it’s all relative. All three papers are doing the same cutting, but the Strib was the only one making money on an operating basis, at least until the end of 2008. (But, with the highest relative debt, the only one to default.) As for Avista, clearly investing in newspapers does not fit the definition. But yes, should’ve said private equity. I think if you read my copy (as opposed to my interview), that’s the term I’ve used. Log in to Reply Submitted by Jim O'Donnell on 04/30/2009 - 04:26 pm. David: Thanks as always for your informative posts. As a point of information, Avista isn’t technically a “venture capital” firm. They are better described as a private equity firm which invests in mature companies within specialized industries In the case of Avista, it’s media and healthcare. A venture capital (VC) firm invests in immature high potential growth companies (e.g., technology startups) often with other VC firms and multiple rounds of financing. Log in to Reply Submitted by Eric Ferguson on 05/01/2009 - 11:21 am. David, I hope you’re still monitoring this thread. The aspect of I haven’t seen covered yet is how one company can buy another, use debt to finance it, and then put all the debt on the purchased company with no further responsibility. How can Avista legally saddle the Star Tribune with debt and not have to cough up the money to make the payments? Sam Zell did the same thing with the Tribune Company, and Cerberus did it to Chrysler. Why aren’t Avista, Zell, and Cerberus responsible for paying off the debts? Log in to Reply Submitted by David Brauer on 05/01/2009 - 11:27 am. Oh Eric, I never stop monitoring! Here’s how it goes down. Avista (96% owner of Strib) creates Star Tribune Holdings Corp. That’s who the banks loan money to. It’s the STHC who owes the money, and that’s who filed Chapter 11. In bankruptcy, the equity shareholders lose all their cash (about $100-or-so million between Avista and publisher Chris Harte) but that’s the limit of their liability. The banks were stupid enough to do the deal and not require Avista/Harte to guarantee with corporate/individual collateral (as, say, Denny Hecker did). So it was bad risk assessment by the bank, and they’re left holding the bag once the equity owners are tapped. Not sure of Chrysler, but Zell basically leveraged the Trib purchase with the employees’ stock ownership plan. He limited his exposure (and ownership) more than the Avista folks, and potentially captured more upside, which made him seem shrewd at the time. He still lost his equity. Log in to Reply Submitted by Eric Ferguson on 05/01/2009 - 04:04 pm. Thanks for answering that David. It makes sense now. The buyer pretends the purchased company is still separate, and the lender lets the buyer do that. So OK, there was a price paid by the buyer and lender, but it seems they get to leave a bunch of innocent victims in their wake. The employees did everything right and still got undercut, communities lose employers, communities lose their newspapers or, in the case of Chrysler, the country could lose part of its manufacturing base. Somehow, it seems like there’s a gap in our laws. If the Star Tribune was still part of a chain, the chain could close the paper if it wanted, but it couldn’t pretend the debt was owed just by the one paper. Maybe if Zell, Avista et al couldn’t pretend these were separate companies, they couldn’t take stupid risks, and the Star Tribune, Chicago Tribune etc. wouldn’t be in danger. Maybe we wouldn’t be trying to figure out how to save Chrysler. Log in to Reply Leave a Reply Cancel replyYou must be logged in to post a comment.