May 19, 2016

Does the Star Tribune of Minneapolis have a secret formula for outperforming the rest of the newspaper industry?

I have been puzzling over that for years. After two run-ins at the Newspaper Association of America annual conference last month in Washington, D.C., I think I may have finally cracked the code.

Marketing chief Steve Yaeger wrapped up an NAA presentation on non-traditional revenue streams with this eye-opening statistic: Those activities generated 5 percent of income three years ago, 10 percent now and will grow to 15 percent in another three years.

If he had to place one big bet for the future, a questioner asked, what would he pick? Yaeger diplomatically replied that he would think that one over. But, in fact, the Star Tribune’s approach has been the antithesis of such silver-bullet thinking; instead the company mounts a lot of timely small and mid-sized initiatives.

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Earlier, I sat with CEO and Publisher Mike Klingensmith the day before as he took meticulous notes at a session on design ideas that works well both for audience and for advertisers. Conversationally, he let drop that Star Tribune revenues are up slightly so far this year. That was after a small decline last year and holding even in 2014 and 2015.

Whoa. That’s not a trajectory that will provoke envy at Google or Vox. But by my calculations, running fast to avoid big revenue losses, and now posting some growth, is cumulatively at least 20 percent better than the industry norm.

Impressed yet? The Star Tribune also has 47,000 paid digital subscribers. By comparison, Tribune Publishing, which has 11 major dailies including the Chicago Tribune and Los Angeles Times, reported 101,000 earlier this year.

Subsequent conversations with Yaeger and Klingensmith fortified my conclusion. “What we do is a little boring,” Klingensmith said in a phone interview Monday. “Mainly we try to execute very well.”

Not that there isn’t some bigger strategy at work. When he came to the job in January 2010, Klingensmith was already sure of several things.

“We needed to diversify the revenue stream,” Klingensmith said. “…And we needed to keep executing well in print. I think others have been too quick to quit on or abandon the print edition. If you keep making the product better, people will react positively.”

Klingensmith, who had taken early retirement after a long run as a high-level business-side executive at Time Inc., will concede now that he had “a pretty good background” for the challenges Star Tribune faced.

“(Magazines are) similar enough that you can jump in and do the job from day one.” But not being steeped in newspaper culture, he viewed audience and advertising practices with fresh eyes. “There are a few key differences.”

“The way newspapers had looked at circulation was as a device to prop up the numbers as high as you can for advertisers,” he said. “Magazines look at it as a profit center.”

“They had done a pretty good job, but circulation was whatever number you wound up with.” Magazines, Klingensmith said, have been more disciplined about managing to a specific target number — since delivering on a guaranteed rate base is essential to getting full price payments from advertisers.

On advertising, Klingensmith said, he thought not enough was being done to sell adjacencies (like outdoor stores to outdoors content). A strong sales development function, he said, was also lacking.

Another part of Klingensmith playbook is to move fast on issues and opportunities. The Star Tribune was early with a home-built paid meter model for digital subs in November 2011. “We took a public relations hit,” he said, moving away from free, but the rate structure and technology interface have proven durable. After an introductory offer, the Star Tribune charges $200 a year for full access.

Even with success, Klingensmith, like most publishers, is seeing subscribers plateau. “We’re working on the 2.0 version,” he said. With more marketing and other refinements, he said, “I want us to get to 100,000 digital subscribers.”

He and his team also could spot the rise of programmatic buying coming in 2011 and embraced it as an opportunity while others were wringing their hands about dirt-cheap rates they got from remaindered inventory.

They put together “a combination of off-the-shelf solutions” and some of their own. That resulted in a much better than normal cost-per-thousand rate for programmatic and a business, two years later, fulfilling those ads for other publishers and local corporations like General Mills.

In a more recent instance, the Star Tribune experimented with asking readers to disable ad blockers last October. Klingensmith is rueful about the results. “We wanted to be first, and 23 percent of those (who got the notice) white-labeled us.” But within 24 hours, the ad blockers had successfully countered. “Now we are working on a new-generation response. We have been pretty conservative on pop-ups and overlays and don’t do auto-play at all.”

Among other revenue prospects, Klingensmith said, Star Tribune has built up “the super old-fashioned” business of printing contracts. It now prints both crosstown rival, the Pioneer Press, and USA TODAY and announced a major investment in upgrading its presses. “It’s been like doing your work on a Mac IIe,” he said.

For a contemporary example of striking a print-digital balance, Klingensmith volunteered the recent death of Prince, a huge local story. Star Tribune’s site had a dozen stories within hours and saw visits spike to 1.5 million that day compared to 800,000 typically.

The next day’s paper sold 50,000 copies versus the normal 30,000. A 16-page commemorative section the next weekend carried seven pages of advertising. Sales of posters and back issues have continued.

“That’s not going to make or break the year,” Klingensmith said, “but it’s pretty significant.”

Besides playing his cards well, Klingensmith entertains the notion that he was dealt a comparatively good hand.

Soon after McClatchy had overpaid for Knight-Ridder in 2006, it sold Star Tribune to a Houson-based private equity group that also overpaid. A year of disastrous management was followed by more than a year of interim management. In 2009, with the worst of the recession hitting, the paper filed for bankruptcy.

So when a new set of creditor-owners hired Klingensmith in early 2010, the books had been cleared of unmanageable debt. The creditors group sold to local billionaire Glen Taylor in 2014 for $100 million.

A strong editor — Nancy Barnes — was in place when Klingensmith arrived, and he left her there until she was hired away by the Houston Chronicle and succeeded by her managing editor, Rene Sanchez. The Star Tribune has won several Pulitzers during Klingensmith’s six-year tenure and had two finalists in the most recent edition of the awards.

Like me (though he is a spring chicken six years my junior) Klingensmith grew up in the Twin Cities, always a healthy news climate. The market is on a good path, he told me, with several new grocery chains and the metro’s usual mix of lively politics, philanthropy and Fortune 500 businesses.

In town for a high school reunion last fall, I noticed the Star Tribune even has a fat Saturday print edition. “That’s a great program that pre-dates me,” Klingensmith said, “You don’t see a lot of it at other papers, and I don’t know why.”The Sunday news content waits until Sunday, but Sunday advertising sections are tucked in Saturdays, driving 45,000 in single-copy sales that get attributed to the Sunday paper.”

A plus to the newspaper business, Klingensmith has discovered, is a relatively free exchange of information with other independent regional papers. Lately, the Star Tribune’s example also has started to get international attention. The day we spoke, he received an effusive letter of thanks from a group that had visited from Austria’s Russmedia.

Klingensmith will become chairman of the NAA a year from now. So I asked the requisite question about both his company’s and the industry’s future and got a predictably tempered response.

“We have a deeply established footprint here and are working to extend it,” he said. “But we play it a couple of years at a time — our strategic plans only reach out 24 months. What can you really know beyond that point?”

Correction: An earlier version of this story mistakenly said that the 2006 buyers of the Star Tribune were locally based. We apologize for the error.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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