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Financially, Star Tribune’s August is month to forget

I know; enough already with the Strib bankruptcy. Isn’t it all but over?

It is. But before the private company exits court supervision Monday, I still have a final month of public operating reports to chew over, and I’ll be damned if I’m going to let that opportunity pass.

So: August. Not a great month at 425 Portland. Ad sales fell below $10 million; the lowest level in seven monthly reports. That’s not shocking, because the third quarter isn’t strong traditionally, and continued ad-sales erosion is a fact of media life everywhere.

Based on its own financial projections, the Strib is counting on a substantial sales rebound in the holiday season — roughly $13 million per month in October, November and December.

Overall, the paper posted a whopping $12.3 million operating loss from Aug. 3 to Aug. 30, but that’s a bit misleading. The paper took  $12.4 million amortization charge; $10 million of that was a catch-up from delayed “impairment tests.” Amortization is a write-down of intangible assets, which aren’t specified in the filing.

Take away that non-cash charge and the Strib netted $68,000 in EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), a common measure of cash a business spins off. That’s puny for a company that forecasts $20.8 million next year.

However, even in bankruptcy, the Strib overall has produced $6.1 million in EBITDA since its Jan. 15 filing. Due to big depreciation and amortization expenses, the company’s net operating loss totals $17 million over the same period.

In other details, the paper’s newsprint costs ($1.4 million) sunk to their lowest levels in bankruptcy, which likely mean smaller papers with fewer ads, though I haven’t checked pulp prices lately. Compensation costs ($8.3 million) remained roughly constant.

The Strib also reported $1 million in “professional fees directly related to reorganization.” That monthly spending has more often been $1.5 million, but should diminish with Sept. 28’s bankruptcy exit dead ahead.

Comments (6)

  1. Submitted by karl anderson on 09/23/2009 - 09:00 am.


    One would assume you are hoping for the worst. Is it because you are technically a competitor of the Stribs news site? Did they wrong you in the past? Didn’t your owner lose money through the bankruptcy?

    It is a newspaper. It is brutal for ALL media companies. I like the Strib AND the Pioneer Press (who have done a superb job on the recent Senate recount) AND USA Today, etc. Why is this so complicated? All I want is a newspaper to read over breakfast.

    We won’t know the extent of the problem until the economy recovers. If it recovers, and they continue to spiral downward there is a big problem. If their revenues go up – and they are profitable – then eveything will be fine for the time being.

    My bet is they will emerge as a profitable (yet not rearly as profitable as the past) company in the next couple of years.

    I know in the past that you have said this warrants your attention because it is the biggest news generator in Minnesota. But as you have also said before, there are many sources of news now so that excuse doesn’t hold water.

    To be fair, it would be nice for you to do an indepth analysis of your websites finances.

  2. Submitted by David Brauer on 09/23/2009 - 09:37 am.

    Karl –

    As they tell us in this business, it’s dangerous to assume.

    I do not wish the Strib ill – I would be heartbroken if it fails. The Strib has never treated me poorly, except when I’m trying to get a comment from their publisher. And while I’m not sure if Joel Kramer lost money in the bankruptcy (didn’t see his name on any docs), that’s not driving my coverage. It’s all on me.

    I find absurd the attitude that critical coverage = malice + deathwish. In this column, I regularly call for others to be tough-minded about influential institutions, and am trying to walk that walk. Like or not, my reporting has been based on company-disclosed facts/projections and expert testimony, not just my own analysis.

    You’re right that the future is not known, but frankly, your speculation that all will be well when the economy recovers is a bigger leap of faith. Newspapers won’t have the recession as a general drag on their business – they’ll only have the decade-old problem of profitable print ads migrating away. The Strib was losing ad revenue at double-digit rates *before* the recession.

    While I hope they can sell smarter, better and in new niches, I’m certainly not going to abandon my skepticism on that. As I’ve shown in past stories, the trend lines would have to starkly reverse, and it will take more than a stable economy to do that.

    There ARE many sources of news, but the “excuse” still holds: the Strib still remains BY FAR the biggest and most influential source in town, and it’s bankruptcy is BY FAR the biggest media story in my 30 years in the market.

    In a way, my coverage is a compliment to them on their influence. But believe me, if I had similar financials for the the PiPress, or TV stations, etc., I’d report on those too. (I do cover what details turn up; non-Strib media folks would find laughable the assertion that I only write about the Strib’s financial difficulties.) I’ve feasted on the disclosure banquet the Strib’s bankruptcy has given me.

    I also regularly chuckle at the comment that I can only credibly report on the Strib’s finances if MinnPost is either a) making money or b) printing its monthly financials.

    For one thing, the notion that only a profitable institution can deploy reporters to cover an unprofitable company gives your employer’s accountants too much power over you.

    Also, the Strib is a 148-year-old for-profit while we are a not-quite-two-year-old nonprofit. I’m not sure we have many lessons for them, nor should we. And I’ve never believed that covering a company’s difficulties means I should solve their problems, too.

    And if we haven’t already, we’ll be posting a federal 990 where you can see everything. Joel Kramer regularly writes about our numbers; feel free to email him.

    Also, by the way, I’ve encouraged other reporters to take looks at our journalism AND our finances. That sort of thing is usually best done from a distance.

  3. Submitted by Annalise Cudahy on 09/23/2009 - 10:21 am.

    I’m really glad you are staying on this because it’s important news and you’re the only one covering it this constantly.

    It’s a very important topic because losing a major news outlet will hurt us. But it seems inevitable, given that the model that newspapers operated under for about 120 years is unquestionably broken. Can it be fixed? I can’t think of a more important topic. I also can’t think of a better way of examining it than a case study like the Strib.

    Just ignore people who assume motives for covering something. What matters is the quality of the reporting and the importance of the story, and they’re both very high.

  4. Submitted by karl anderson on 09/23/2009 - 10:36 am.

    A well reasoned argument….

    Call me an optimist, but the fact that 500,000 Sundays are sold each week despite the onslaught of the internet tells me that print is indeed viable.

    I shop at Mills Fleet Farm because Home Depot is replacing their checkout people with automated machines. I hate those things. Not everybody loves technological changes.

    No, I am not 87 years old. I am 42.

    I just want my newspaper each morning with my eggs and coffee. Why is this so complicated?

    Online is great for the headlines and I review MinnPost almost every day. It is great u are keeping them honest. That is your role. But frankly I don’t think your economic model is viable. You have great reporters, but what youngsters are going to fill your shoes? I hate to keep giving them kudos but the PP piece on the Senate race 2008 was kick ass. There won’t be any young journalists to replace you guys.

    So then what do we do??? We have cable like crap. Huffington Post, Facebook, Twitter, are ALL losing money. How long will those last if they don’t have newspapers to feed off of?

    Keep ’em honest!

  5. Submitted by Annalise Cudahy on 09/23/2009 - 11:01 am.

    Karl, just in case I was too hard on you before, I want to point out that you are dead on when you say that NO ONE has a working model right now to create a sustainable media outlet. People have never paid directly for news, so we really don’t know what it’s worth on an individual basis.

    I’ve covered this a few times on my own blog:

  6. Submitted by karl anderson on 09/23/2009 - 12:24 pm.

    good points eric.

    I would suggest the FREMIUM concept (where a mass media website like the Strib, Huffington Post, etc. can pay for content by offering certain things at cost. The Strib, for example, offers business info on local businesses OR fantasy football sports games etc where people see value enough to pay for it. A few thousand participants can generate a great deal of revenue).

    This freemium concept would not necessarily work for smaller websites however.

    The 2nd option is for newspapers to partner with their advertisers and offer unique discounts to subscribers thereby justifying the investment.

    The 3rd option is to beat Craigslist at its own game, and offer free listings. Craigslist seems to be a gutter of smut, crooks, etc. Newspapers can better control listings and offer premium spots at a nominal cost. Want to have your listing at the top? Pay $10 a day, otherwise your ad sinks like the rest of them on Craigslist.

    I think there are options available.

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