All things considered, the Star Tribune had a bang-up 2010 – cash flow was so strong that employees got profit-sharing bonuses and reinstated 401(k) matches.
However, 2011 is off to a rocky start. Star Tribune CEO Michael Klingensmith confirms overall ad revenue is below budget, due to weak national advertising.
“The softness, which is being experienced by most major metro papers, is coming from three categories — pharmaceuticals, telecom and national automotive,” Klingsenmith says. “Meanwhile, local business, classified, and digital are all up, but not enough to offset these national accounts.”
How steep is the revenue drop? A knowledgeable Strib source says the figure of “more than a million dollars” is floating around the executive suites, a double-digit decline for the first two months. Klingensmith declined to “reveal or confirm specific numbers.”
The Strib was able to give out bonuses for 2010 not because sales rose, but because cost-cutting and conservative revenue assumptions (incorporating a sales drop) lifted cash flow. This year, the revenue assumptions aren’t starting out conservative enough.
Klingensmith — who has been remarkably forthcoming and accurate in his year-old tenure — says he does not necessarily expect the first-quarter trend to persist for the full year, stating the fall-off “means absolutely nothing to employment at the paper. Overall, our business remains very stable and we continue to make gains in consumer revenue (circulation) as well.”
The latest news comes just before the Strib’s newsroom labor contract expires on July 31. Workers, despite the profit-sharing and 401(k), will want to undo some of the deep cuts they absorbed during 2009’s bankruptcy.
Klingensmith has already stated that profit-sharing won’t be as large in 2011 because the Strib is making long-overdue investments in things like its website. Skeptics might view the latest news as a tactic to deflate future demands, though that wasn’t my source’s intention and management has not been poor-mouthing prospects to the troops.