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COVID-19 is a huge story for newspapers across Minnesota. For some, it could also be their undoing.

The massive decline in print advertising brought on by the coronavirus crisis is “going to separate the haves and the have-nots,” said Star Tribune Publisher Michael J. Klingensmith.

PiPress, Strib boxes
The massive decline in print advertising brought on by the coronavirus crisis is “going to separate the haves and the have-nots,” said Star Tribune Publisher Michael J. Klingensmith.
MinnPost file photo by Corey Anderson

The economic fallout from the COVID-19 pandemic is crippling the newspaper business. Star Tribune subscribers can see the alarming evidence every Sunday, when their paper hits the doorstep with a lot less of a thud than it did a month earlier.

Retail advertising, a critical source of newspaper revenue, collapsed as the virus spread across the U.S., devastating newspaper and media companies coast to coast. Preprints — those popular supermarket and department store circulars — vanished overnight. That led to swift, dramatic cost-cutting. 

In early March, the Poynter Institute website began compiling a list of layoffs, buyouts, furloughs and pay cuts, a tally that now runs multiple pages. The New York Times estimated 28,000 news media company employees have been laid off, furloughed or taken pay cuts because of the coronavirus. (There are some outlets choosing a different approach. The Hearst Corp., which owns the San Francisco Chronicle and 23 other dailies, is maintaining current staffing and salaries and even offering small bonuses.)

Here in Minnesota, Star Tribune employees and management are taking pay cuts, the already slashed-to-the-bone Pioneer Press is offering buyouts, and weekly papers in Hastings and Woodbury/Cottage Grove will cease publication in May. Adams Publishing Group, which owns more than 60 daily and weekly papers in Minnesota, reduced workforce hours by 25 percent and laid off many of its part-timers. Forum News Service, with papers in Minnesota, the Dakotas and Wisconsin, announced the end of its Monday and Friday print editions in some locations, along with layoffs.

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FTI Consulting, a Washington, D.C.,-based business advisory firm, forecasts a 37 percent to 41 percent decline in newspaper advertising revenue this year compared to 2019, a direct result of COVID-19. Even more ominous: Based on what happened after the 2008-09 recession, FTI predicts between 20 percent and 30 percent of lost advertising is never coming back.

“It’s an amazing number,” said media analyst Ken Doctor of the Nieman Journalism Lab and a former Pioneer Press managing editor. “That is a death knell for some, and it is forcing all the major changes we’re seeing.” 

Star Tribune Publisher Michael J. Klingensmith
Star Tribune Publisher Michael J. Klingensmith
Worst case, it’s the end of local print journalism, at least in markets without a robust daily. But even the best case is still pretty bad: fewer journalists, fewer publications, and fewer entities holding elected officials and nefarious folks accountable. At a time of public health fear, conflicting “truths” and rampant disinformation, that’s exceptionally not good. “It’s going to separate the haves and the have-nots, I think, pretty effectively,” said Star Tribune Publisher Michael J. Klingensmith.

To understand how we got here, it helps to know how newspapers make their money.

Back in pre-internet days, when there were many more department stores, airlines and car dealerships splurging on full-page ads, newspapers relied on advertising for 80 percent or more of their revenue. That’s why newspapers were such a bargain for so long, only charging a nickel or a dime or a quarter for single copies and a relative pittance for home delivery subscriptions. 

In the internet age, business mergers and the loss of classified advertising stripped newspapers of valuable revenue. That’s why you pay more at the newsstand and for subscriptions, though ad revenue continues to decline at a rate subscription revenue can’t make up for. 

Doctor believes uncertainty over when, or if, distressed newspapers might qualify for federal small business loan programs forced the hand of many companies. “With Forum and others in the Midwest, their answer is, ‘We can’t afford to wait,’” Doctor said. 

Klingensmith said the Star Tribune draws about 45 percent of revenue from ads, 50 percent from circulation (print and digital subscriptions plus single-copy sales) and five percent from its printing business. (The Strib prints the Pioneer Press and regional editions of the Wall Street Journal and the New York Times.)

“The newspaper’s advertising base is almost 100 percent retailers,” Klingensmith said. “The fact that almost all retailers are shut down is a devastating blow to advertising.

“I know we’re going to lose 40 percent of our ad revenue for April, May and June. There’s just no avoiding it. But I don’t know what to expect about the third quarter. There are still a wide range of outcomes possible. The best case is something like only 20 percent of our ad revenue being gone. I think it will be a little better now that we’re in this total nonessential business shutdown.”

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So Strib management and Newspaper Guild representatives met to negotiate cost reductions. The rank and file agreed to delay scheduled raises and take eight unpaid furlough days, four in each quarter, between now and Sept. 30. That represents a 6.15 percent reduction in annual salary. (The last four furlough days will be canceled if the Strib gets within 10 percent of its third quarter budget, something Klingensmith considers unlikely.) Meanwhile, Klingensmith, editor Rene Sanchez and the Strib leadership team will take 12.5 percent salary cuts. Guild members overwhelmingly approved the deal. (Disclosure: My wife, Rachel Blount, writes for the Star Tribune and belongs to the Guild.)

“They wanted to make sure this was company-wide and not just targeted for Guild members, who had taken the brunt of the cuts over the years,” said Guild co-chair Kelly Smith. “We talked to them about how this is a shared sacrifice among the entire company to preserve jobs and hopefully ensure that this company is able to survive the next six months. Personally I’d much rather take a pay cut than lose jobs.”

Dave Orrick
Pioneer Press
Dave Orrick
Over in St. Paul, Guild unit officer Dave Orrick said Alden Global Capital LLC, its vulture hedge fund owner, asked for a yet-to-be-determined number of buyouts to save money. Already, the PiPress runs with a skeleton crew; the newsroom is down to 44 people from a pre-Alden of 276 in 2010. “The Guild is discussing the matter with management,” Orrick wrote in an email.

No one knows how long the current stay-at-home orders will last, or how fast the economy will recover. Either way, Doctor believes more papers will cut back on print days, while other small dailies and many alt-weekly papers will not survive. (Klingensmith expects the Strib-owned City Pages to make it through, though its entertainment-driven advertising revenue took a big hit.) And, Doctor said, many more small communities will become “news deserts,” without a local newspaper or website. 

That continues a grim trend from the Great Recession which saw newspaper newsroom employment decline 47 percent between 2008 and 2018. In 2019 alone, newsrooms lost more than 3,000 jobs. And according to University of North Carolina professor Penny Muse Abernathy, since 2004 about 2,100 newspapers have gone out of business, 70 of them dailies.

“This was true in January before hell broke loose globally: There are no solutions being proposed, or anywhere close to becoming reality, that deal with the tremendous loss of growth in newspapers,” Doctor said. “Now the problem has been advanced four years.”

Klingensmith noted one silver lining in the COVID-19 crisis: an uptick in digital subscriptions. Klingensmith said the Strib has been selling 200 digital subscriptions a day, four times the usual rate, though the heavily discounted introductory rate means it hasn’t significantly affected the bottom line. Klingensmith said the paper began the year with 92,000 digital subscribers and hoped to hit 100,000 by Dec. 31; now they’ve upgraded the target to 110,000. Web traffic doubled through early April, and last week remained up by 50 percent. 

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“On the haves side of things, I’m sure the New York Times is selling vastly more digital subscriptions — as if they didn’t have enough already — and the Washington Post the same thing,” Klingensmith said. “They got the Trump Bump. Now they’re getting the COVID bump. Those papers are going to come through in great shape.

“The stronger independent newspapers, like Seattle, ours, the Boston Globe — another one with massive subscription numbers at very high rates — they’re going to come out fine. When you get to the medium newspapers that are struggling …I ’m sure you’ll see an acceleration of print days being canceled and newsrooms reduced, and so on and so forth.” 

The Star Tribune has also consolidated some sections, and Klingensmith said “the full robust paper” will be back once arts, entertainment, sports and travel return to normal. But don’t expect the Strib to cut print days. “Newspapers are a habitual and continually served product,” Klingensmith said. “To interrupt that … I’m still looking for the data point where that has been put in place and been successful. I’ve seen plenty of data points where it’s been put in place and been unsuccessful.”