Going bankrupt might almost be the best thing that ever happened to the Star Tribune.
I say "almost" because of course it would be nice if the newspaper were cruising along like it was a decade ago, bringing in more than $400 million a year and running a profit margin somewhere in the 30 percent range. Instead, both its revenue and profit margin have been cut at least in half.
But the McClatchy Co. may have unwittingly done Twin Cities news consumers a favor when it sold the paper five years ago to a bunch of Wall Street sharks who thought they were the smartest guys in the room — but actually picked precisely the worst time in history to buy a newspaper.
Avista Capital Partners rode the downward spiral that ravaged the entire industry, filed for bankruptcy and turned the paper over to a different group of money men. For starters, bankruptcy allowed the Star Tribune to shed nearly $400 million in debt, saving about $25 million a year in interest payments.
As a stand-alone company, no longer part of a national chain, the Star Tribune loses some of the advantages that come with being part of a larger operation. But after seeing what's happening at the remaining chains, I'm becoming convinced that standing alone gives the Strib a better long-term chance at success.
Being part of a publicly owned newspaper chain carries a financial penalty. Corporate managers set profit goals to please Wall Street analysts and then mercilessly bleed their properties dry. Any profits generated in Oshkosh or Wichita go directly to the corporate bean-counters.
Centralizing every function
In their drive to stay alive, newspaper chains are also looking to save money by centralizing every function they can. Gannett, the largest newspaper company, is in the process of creating five "design hubs" that will produce all 80 of its newspapers. Local designers and copy editors are being let go. When the system is fully up and running, stories about the school board in St. Cloud will be edited and laid out on the page by someone in Des Moines.
Ad services are being consolidated, either in the United States or abroad. If you're a local advertiser and there's a problem with your ad, you're likely to be referred not to your local rep, but to someone in a call center.
Newspaper chains are also centralizing printing and circulation. Increasingly, newspapers are being printed in far-flung cities and then trucked two or three hours back to the places that once produced them. This creates a need for earlier deadlines, meaning that print editions will offer ever-staler news in an era where freshness matters.
Corporate ownership also stifles innovation. Look at what's happened over the last 20 years: the mighty newspaper chains had the highly paid management talent, but they got their lunch eaten by a bunch of guys working out of basements. Newspaper chains grope for the latest corporate initiative while the innovators are building entire new companies and even industries.
The Star Tribune appears to be in the hands of smart managers on both the news and business sides. The money men who actually own the paper seem content to stay in the background and let the managers run things.
All of this may not matter in the face of the wrenching changes besetting the traditional news business. It may be, in fact, that the daily metropolitan print newspaper is destined to die out with the rapidly aging generations that grew up with it.
But stripped of the encumbrances that come with being part of a corporate structure, the Star Tribune may stand a better chance of surviving than its chain-store peers.
By John Reinan
Published, Monday January 23, 2012