Thanks to colleague John Reinan! His “End of newspapers is closer than you think” teed it up nicely for me to call Star Tribune publisher/CEO Michael Klingensmith about the state of Minnesota’s biggest newsprint purveyor.
“Everyone should relax,” he says. “Things are actually going well at the Star Tribune. And daily print is not going anywhere anytime soon.”
In his 20 months here, Klingensmith has been pretty forthcoming with numbers. One reason: They tell a good news story, with the Strib outperforming its industry. As always, the caveat is that the Strib is a private business, so there’s no independent way to verify most of Klingensmith’s figures. But his storyline — financial stability protecting journalist boots on the ground — has proven out so far.
In 2010, the Strib, fresh off bankruptcy and resultant cost-cutting, produced enough EBITDA to pay off $15 million of its $100 million debt. The paper also disbursed $1,163 in profit-sharing per full-timer to otherwise salary-frozen employees.
This year, Klingensmith budgeted for an equivalent EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). Through August, the Strib is making that number, he says. One reason: Second-quarter revenues were flat. That may not sound too impressive until you consider that the industry was down about 7 percent.
Yes, print advertising is down — about 4.5 percent in the April-June quarter. That’s about half the industry’s 9 percent drop.
However, circulation revenue — money directly from you, dear readers — is up 4 percent for the year through August. Since most of that money still comes from print, Strib readers are, for the moment, helping to lengthen the medium’s long-term decline.
Strib editor Nancy Barnes caused a kerfuffle a couple of weeks ago when she openly mused about the end of weekday print, a date she put more than five years out. As I noted at the time, Barnes didn’t say anything many analysts hadn’t, and didn’t mention the Strib specifically. However, the comment was surprising coming from an editor of a paper that’s never even hinted at fewer print days.
Klingensmith is categorical about the prospect of printless days: “Absolutely not, nor can I foresee a day where we won’t make available a daily printed paper.”
Yes, he allows, certain days might be unprofitable, but “once you start chipping away at the platform, it’s a slippery slope” that can undermine profitable editions.
Klingensmith insists he is no dinosaur. “We firmly believe in the future, a larger percentage of people will receive the daily package [of news] digitally,” noting digital ad sales grew 14 percent in the second quarter. “We’re not going to fight uphill, we’re going to go where the market takes us, and if that’s digitally, great, with print being more of a premium product.”
The Strib has upped that premium this year. Single-copy weekday prices rose 50 percent (to 75 cents) and subscriptions inceased 9 percent — the latter, the first hike in more than a decade.
While single-copy weekday print sales slipped, “we’ve seen no fall-off” in Sunday single-copy or subscriber sales, the publisher says, adding, “Sunday single-copy sales have exceeded  every single week since June 5 — some weeks by 10,000” copies.
When six-month figures are announced in October, weekday and Sunday circulation will improve over the same 2010 period. “Weekday, barely; Sunday, by a meaningful amount,” Klingensmith says.
Weekdays will increase thanks to digital replicas such as e-editions, currently a small revenue source. But such direct-from-consumer digital income should soon grow. In the next four weeks, the Strib will begin “metering” its website and, simulataneously, make its iPad app subscriber-only. (“Technology willing,” Klingensmith adds, without specifying exactly which tech the website will employ.)
Print subscribers will get the run of both digital products at no extra charge. Non-payers will only get certain types or quantities of web stories. They won’t be able to use the iPad app, which has 32,000 downloads since it was released Sept. 1. The pulp-allergic will be offered a digital-only subscription.
Despite balmy year-to-dates, Klingensmith knows that a rosy future is not promised. Earlier this week, a local print competitor, City Pages, cut two staff positions, forecasting ad weakness through the end of the year.
“The third quarter has taken a decided turn for the worse, which is reflected in the softening of the ad environment nationally, and we are not immune,” he says. “Our ad revenue may not be as strong as [2010’s] third quarter or [2011’s] second quarter, but our circulation performance has picked up.”
Of course, Klingensmith has also buttressed EBITDA by keeping costs in check. 2011 has been the year many labor deals have come up for their initial post-bankruptcy renegotiation. Klingensmith has had to thread a needle, convincing the public that the paper is flush enough to thrive, but not so flush that workers deserve raises.
This summer, the newsroom signed a deal that keeps pay flat through January 2013 — meaning four and a half years without raises.
So when will pay go up? “As a practical matter — and this is true of business in general — you can increase compensation when revenues grow,” Klingensmith says. “There are calls upon all of our [cash flow]: pensions, long-overdue capital expenditures and debt pay-downs.”
Last year’s debt pay-down won’t be repeated in 2011. “We’ve decided to make a sizable pension contribution instead,” the publisher says. “This year has not been kind to pension plans.”
(Debt-reduction urgency is also attenuated because the Strib’s adjustable rate is at its floor.)
Through it all, newsroom headcount has basically held steady since January 2010 layoffs just before Klingensmith took charge. These days, the Strib is confident enough to actually brag about staff size on its green newspaper boxes. “265+ journalists,” say the placards.
“I think that’s about right,” newsroom union co-chair Dave Chanen says of the number, adding, “certainly open positions are not going unfilled.”
The fillers include political reporter Jim Ragsdale and editor Maria Douglas Reeve, swiped from the Pioneer Press.
The PiPress’s corporate owner has a new CEO, one who has talked consolidation in a cost-cutting industry. Since the Strib opened a St. Paul bureau in 1987, people have said a “one-newspaper town” is just around the corner. But there are no talks between the two papers.
The Strib may not be able to resist various industry trends forever, but for the moment, “the end of newspapers” does not seem close.