Strib Hailed as "Most Likely to Survive Apocalypse"
By Brian Lambert
Having stuck my wattled neck out with the prediction that the Twin Cities could be a paper-free newspaper metropolis by The Ides of March '10, I have to pass on this (sort of) counter prediction from something called The Silicon Alley Insider, which was waggled in my face by a Strib pal.
The piece uses an anonymous investor to cite ten papers worth buying even in the current meltdown. He thinks there's money to be had in our inky white elephants.
The mystery tycoon explains his thinking:
- For most of their existence, newspapers were steady sources of revenue that required little management -- "cash cows that you put your brother in charge of."
- This led to bloat at the large, public conglomerates that now own many of our best local newspapers.
- Then came the Internet. It brought some competition yes, but more devastatingly it brought the perception of a paradigm shift. Suddenly, the bloat-tolerant managers at the top of the newspaper chains couldn't turn left without hearing from an equity analyst threatening to slap their company with a "sell" rating if it didn't invest enough in the Internet.
- After a decade of investing in the Internet -- but doing little to fight the bloat -- the conglomerates are collapsing under a weight of debt.
- This debt remains and online ad revenues aren't helping reduce it. The LA Times claims its online ad revenues pay for its newsroom, but our source doesn't buy it. "You had to pull out the duct tape and rubber hoses to make [their formula] work," he says
The guy's basic view is that there is a lot of fat to be carved out of your average big city paper. I don't doubt that. There is always a good 20 percent boob/incompetent factor in any office/newsroom. Those folks probably should leave sooner rather than later and start super-sizing your fries.
But no one is going to convince me that either paper here in the Twin Cities is over-staffed. Under-talented in many key places, under-resourced on almost every beat, and further diminished by constant anxiety, yes. But over-staffed? No way. There aren't even 200 full-time reporters between the two papers . . . for a metro area of 3 million and a region of close to 6 million.
Anyway, this guru explains how he'd bottom feed in Minnesota:
"The Twin Cities are a "good market" with "good demos," says our investor source. The idea here would be to wait for the Star-Tribune to come out of bankruptcy, snatch the Pioneer Press from Media News and then combine the papers and "get rid of a huge amount of costs in the combination, pulling employees and warm bodies."
Our buyer says after combining the two, he'd raise subscription and ad rates."
Hmmm. "Wait for the Star Tribune to come out of bankruptcy . . . ." So, what are we talking after Avista Capital Partners at long last takes a Ray Liotta-in-Hannibal-like haircut? $50 million? $30 million?
And then we "snatch the Pioneer Press . . . ." at a cost of . . . $20 million? $10 million?
(I'm tossing out what I consider absurdly low numbers but still beyond what anyone is currently willing to pay for papers in markets at least as fertile and hip as ours.)
And then we flush out the deadwood, which both papers have already done aggressively, the Pioneer Press to the point of dessication.
This, if I'm tracking, leaves such an appealing, relevant product that "we" turn to advertisers, who are well aware how little time anyone under the age of thirty and everyone moderately blessed with curiosity and a computer is spending with paper, and we tell them, "You're going to have to pay us more . . . to reach all those people who don't give a damn whether we live or die."
I like a good list story almost as much as I like my own harebrained predictions. I mean, let's have a good brawl over this stuff. It's fun!
But the survival scenario of this anonymous investor is not much different than what Dean Singleton has already done in St. Paul and what most publishers, bloated with debt or not, are doing everywhere in the country. That is to say dramatically reduce the content of the product and assume that advertisers, which presumably means big traditional advertisers such as department stores and car dealers, two categories that I seriously doubt are ever coming back, don't notice.
I'm sticking with my scuffed and scarred imitation faux crystal ball.
© 2008 MSP Communications, Inc. All rights reserved
You also have to remember the real estate value. Please write more.
LAMBERT: Somehow I expect the real estate to end up in the hands of those boys from Wayzata.
Please pay more.
Posted by: dan buechler on March 27, 2009 at 8:39 AM
So basically this guy thinks that McClatchy and Avista weren't agressive enough in gutting the staff, and he will find a few million dollars move in savings? He must think he can put a paper out all by his lonesome self.
LAMBERT: Hey, two interns, a web nerd and ten sales guys on straight commission. It's simple.
Posted by: Gardog on March 27, 2009 at 9:25 AM
Very funny. These are probably all the same bullet points from Avista's presentation to their banks way back when. This guy defines greater fool.
LAMBERT: I thought the same thing. The whole attitude defines the LBO years.
Posted by: Henry Wolff on March 27, 2009 at 11:22 AM
I too love a good conspiracy theory. However - I think the scenario that MediaNews Pi Press) ends up with the Strib after they sell off anything not nailed down with value (ie the Real Estate)is more realistic.
As a former sales manager at a newspaper - the idea that any newspaper in this town could "raise rates" right now is absurd. Rates are based on circulation growth, number of pairs of eyes reading the paper and demand. None of these things are going in the right direction.
In any case, I pray we can keep one of the papers going - reading them on my Kindle or Computer is not nearly as satisfying as getting the cheap ink on my fingers and besides... what would you guys take in the bathroom?
LAMBERT: As long as I've still got "Guns and Ammo" and "O", I'm fine.
Posted by: Stephanie Hansen on March 27, 2009 at 11:35 AM
WSJ headline:
"Movie Bears" article saves Strib from bankruptcy, 'leather guys at Home Depot' and "twinks at downtown happy hour' next in hard hitting 'Lifestyle' series".
LAMBERT: "It Ain't Just Horsies Prancing in Medina".
Posted by: bertram jr. on March 27, 2009 at 11:58 AM
Sounds like the anonymous writer thinks the big problem is bloat, as you point out. Isn't the real problem the shift of advertisers to other places? And the absurd amount of debt that was taken on?
Also, the writer seems to think the paper's investment in the online edition was significant. Is that really a big factor here?
LAMBERT: No. But his attitude that anything spent on the web is misspent. I've worked for guys like him.
Posted by: Karen on March 27, 2009 at 1:48 PM
This is all well and good but, you know the Jayhawks play tonight right?
LAMBERT: Talk to your mother.
Posted by: Nick Lambert on March 27, 2009 at 3:11 PM
This investor might want to research the facts before spouting his analysis. Like on how hard it is to combine two newspapers due to anti-trust laws. He might be able to get away with it if he only lowered costs, but hiking advertising prices will only incite lengthy legal battles with advertisers. My bet is they probably wont be taking out full-page ads while duking it out in St. Paul either.
LAMBERT: In the current climate I don't think the Feds are going to make too much of a stink over anti-trust issues. That's just guessing, of course. But I think first you have to find someone to buy advertising before you raise the rates on them.
Posted by: Research Before Buying on March 27, 2009 at 4:30 PM
You wrote, to quote:
"...everyone moderately blessed with curiosity and a computer is spending with paper and we tell them 'You're going to have to pay us more ..."
To underline your point: I've been searching in vain for any copy on the landing of the Space Shuttle this afternoon. Nada. If I'm going to renew the Strib at any price, I guess I should stop being curious.
LAMBERT: I believe they did cover Madonna's latest adoption plans. And there was a big feature on Britney in Sunday's paper.
Posted by: Mark Durenberger on March 28, 2009 at 8:09 AM
The problem with the "just cut out the deadwood" argument is that usually it's the deadwood that gets to do the cutting; similarly the windbags calling for accountability never get it applied to themselves.
I've never understood the argument that the way to make a media product more marketable is to make it crappier. If you're going to produce something that isn't any better than a suburban weekly shopper, you better be prepared to give it away.
On the other hand the WAPO did a story on NPR a couple of days ago pointing out that Morning Edition was hosing the t.v. morning shows and that the audience had gone up 40% since 2000 and 7% in the last year.
As a resident of Moorhead, I have an instructive story about local radio. The best coverage by far of the flood in any of the media is KFGO, and that's because they have a staff--people who know the area and the people. Because they are giving the best coverage, they get the appearances when Dorgan, Pomeroy, Peterson or Klobuchar come into town.
This contrasts instructively with the train derailment in Minot which spilled chlorine gas in the middle of night. When the cops went to the local Clear Channel station to get the word out for an emergency evacuation, they discovered nobody there; it was a robo station with programs produced somewhere else.
I suspect that KFGO will retain listeners and advertisers in a way that stations which are essentially repeaters won't.
LAMBERT: I hope it goes without saying that an actual, true revolution in news gathering and dissemination is going to have to be managed by people far, far more talented than the types identified as most amenable to protecting corporate/private equity investor value.
And stay dry up there.
Posted by: john sherman on March 28, 2009 at 9:49 PM
Came across this, and had to add my two cents...
People need to look at the competition of newspapers, and ask themselves "Who will be around in 3-4 years?"
Radio: Clear Channel hemorrhaging revenue and lost $3 billion in 2008. Will respond by dumping Barreiro and focusing on national DJs. Much cheaper
Local tv news: viewership down 15% in 2006, 15% in 2007 and 12% in 2008. Nuff said. Like my Blackberry too much
Cable: When are people going to realize they don't need Comcast for $90/month
RedPlumb (shared mail): Stock down from $45 in 2007 to $1.80 today. CEO couldn't guarantee they will be around by the end of summer. In a death battle with Rupert Murdoch's NewsAmerica.
Weeklies: The Sun newspaper network is on life support - value has shrunk from $130 million to $3 million
So - where does that leave the Strib and PP? The only mass media option in 3-4 years with a digital component and a weekend newspaper.
Ha ha!
LAMBERT: And that's the upside.
Posted by: Lou Sheridan on April 14, 2009 at 3:26 PM