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Amid newspaper industry woes, stadium deal could help Star Tribune

The Star Tribune could get a financial shot in the arm not from selling ads, but from selling land.

The latest Vikings stadium map

Movie theaters don’t make money on the movies – they make money on the popcorn. And the Star Tribune could get a financial shot in the arm not from selling ads, but from selling land.

The still-unfinished deal for a new Minnesota Vikings stadium in the Metrodome neighborhood includes at least one piece of valuable real estate owned by the Strib. According to reporting by my MinnPost colleague David Brauer, the Strib could be in line for a payday of anywhere from $3.3 million to $5.6 million – or even more.

Although Minnesota’s largest newspaper isn’t in the dire straits it was before going through a bankruptcy and reorganization, there’s no doubt that a multimillion-dollar check would be welcome at 425 Portland Ave.

The U.S. newspaper business has shrunk to less than half the size it was in 2005, and the industry news continues to be discouraging.

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The nation’s publicly traded newspaper companies all reported their first-quarter results in recent weeks, and there was little sign of improvement. Sure, the bleeding has slowed. Instead of the dizzying, double-digit declines of 2007-2009, many of the companies reported revenue decreases only in the single digits. But losing less money than you used to isn’t much of a business plan.

Digital advertising, which has been the hoped-for savior of the business for a number of years now, isn’t growing fast enough to make up for the print losses. The New York Times, in fact, actually saw digital ad revenue drop in the first quarter.

Here are the first-quarter sales of print advertising at major newspaper companies compared to a year ago. Keep in mind that most newspapers still get 80 percent to 90 percent of their revenue from print.

  • Gannett: down 8.4 percent
  • New York Times: down 7.2 percent
  • McClatchy: down 9.2 percent
  • Media General: down 8.3 percent
  • Lee Enterprises: down 5.3 percent

Those five companies represent nearly 200 daily newspapers of all sizes, in all parts of the country.  The Strib might indeed be a positive outlier, far outperforming this huge representative sample of peers. After all, the paper did well enough last year to give every employee a $300 profit-sharing bonus. But outperforming such a dismal group is faint praise.

Strib spokesman Steve Yaeger said the paper is doing better than the industry overall, but didn’t reveal any financial results. And he suggested that the Star Tribune will have positive news to report Tuesday when it reveals its latest circulation figures.

Outperforming today’s newspaper industry is faint praise. Still, if the paper’s piece of the Vikings stadium deal enables it to pay off some debt and get a little breathing room – or hire a few reporters and Web producers — that’s positive news.

But like a once-wealthy family selling off the heirloom silver, the Star Tribune can’t survive forever by selling off physical assets. In the 21stcentury news economy, the Strib organization will last only if it can keep offering advertisers a compelling reason to spend their money reaching its audience. That’s something that the newspaper business in general isn’t doing very well these days.

Update

I got a call this morning from Star Tribune Publisher and CEO Mike Klingensmith, offering some clarification after this article was posted.

In his view, I painted too gloomy a picture of the newspaper industry overall. He also offered a few tidbits that shed light on the Strib’s own financial situation.

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Klingensmith pointed out that most newspapers are getting a growing share of revenue from consumers, through increases in the price of the print paper as well as digital subscriptions. My original post listed the declines in print advertising  revenue at large newspaper companies — which, while accurate, didn’t reflect the overall revenue picture, in Klingensmith’s view.

The Star Tribune currently gets about 45 percent of its revenue from readers rather than advertisers, he said, and that piece of the pie “is growing in high double digits.” Going forward, he suggested, a better way to look at newspaper revenue would be to divide it into ad revenue and consumer revenue.

Print advertising revenue at the Strib was down marginally in the first quarter, he said, but that was due to a decline in national advertising that rippled throughout the entire industry. Local advertisers, he said, continue to see value in the Star Tribune and are holding strong.

He agreed that the industry overall is less than half the size it was just a few years ago. I suggested that in the future, newspapers might have to give up on the 30 percent profit margins they once enjoyed and be content with, say, 12 percent.

“Oh, we’re north of that,” Klingensmith replied.

I appreciate his well-taken points, and I’m happy to add to a fuller understanding of the valuable civic institution he’s trying to save.

Note about update

Klingensmith called after reading the update to say he misspoke — he intended to refer to “high single-digit” increases in consumer revenue for the Star Tribune, not double-digit increases.