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Star Tribune CEO Michael Klingensmith: ‘Daily print is not going anywhere’

A Star Tribune box brags about newsroom size
MinnPost photo by David Brauer
A Star Tribune box brags about newsroom size

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.

Michael Klingensmith
startribunecompany.com
Michael Klingensmith

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 [2010] 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.

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Comments (6)

  1. Submitted by Hiram Foster on 09/28/2011 - 11:23 am.

    Let’s just say that nobody is going to be starting a newspaper any time soon.

  2. Submitted by John Reinan on 09/28/2011 - 04:36 pm.

    What does Klingensmith know? He’s only the publisher of a top-10 newspaper, while I’m a guy who pulls a column out of my ass every week.

    But seriously, I’m glad he took the opportunity to give the “State of the Strib.” A lot of people care deeply about that (I being one of them). And I’m glad he has positive things to say.

    I’ll point out that the New York Times just announced that its third-quarter print revenue will be down about 10 percent and — this is more striking — digital revenue will be down 2-3 percent.

    The explosive growth of digital is slowing down, at least insofar as the digital operations of traditional media are concerned.

  3. Submitted by Hiram Foster on 09/29/2011 - 06:36 am.

    The growth of digital may decline even further once they realize no one is seeing their advertising. I would hope that among the first things Strib ad salesmen tell customers is that at least with print media, you know the reader is getting the ads.

    This clash between hard copy media and the internet is fascinating. You see it everywhere, the issues surrounding Netflix, just being one recent example. The relative disadvantages of print are obvious. A huge amount of effort and cost goes into the creation of a newspaper which needs to be physically transported from place to place. Online news sources literally dispense with all of that. Online news is immediate, and the generations on the way will expect immediacy, in their news and in everything else.

    But what about the problems on the internet side? I have alluded to one, the fact that ads get blocked. Advertisers of the future might well be willing to pay a premium for media they know are delivering ads to their customers, newspapers and NFL football being two such media entities that come to mind. Will the internet have the capacity to deal with the demands we make on it? Are it’s pricing models sustainable?

    The late Sen. Ted Stevens of Alaska took a lot of heat from Jon Stewart and others for describing the internet as a set of tubes. To be perfectly frank, and as an old fogy set in his ways, my own understanding of the internet, how it works, what it does, and where it’s going, doesn’t go much beyond Sen. Stevens understanding. But one thing I do understand pretty well I think, is that you can’t really know the future of hard copy media, without knowing a great deal more than most of us do, about the future of the internet. And just in case you haven’t noticed, for journalists, the future is a lot harder to cover than the past.

    It’s all very interesting.

  4. Submitted by Hiram Foster on 09/29/2011 - 06:46 am.

    A moment ago, I read a piece by Andrew Leonard at salon.com talking about his daughter who, for her 17th birthday, got a Kindle that as it happens after yesterday’s news, is now suddenly cheaper. He talks about his daughter discovered that she could purchase the complete works of Jane Austen for 99 cents, and is now happily snuggled up with “Emma”, which was, I am sure, downloaded within seconds to her Kindle moments after she ordered it.

    Isn’t that the most amazing thing?

  5. Submitted by Rick Prescott on 09/29/2011 - 12:09 pm.

    ‘Daily print is not going anywhere’

    Hmm, that quote can be read in two distinctly different ways.

  6. Submitted by Richard O'Neil on 10/27/2011 - 01:32 pm.

    Who likes to pay more for anything? I dont’t. But my compliments go to the Strib for surviving (so far) in the digital age. The PiPress didn’t make it. RIP Network local TV news is just headlines.

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