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May 1, 2012, 2:32 p.m.

A Twin Cities turnaround? The Star Tribune carves a path back through growing audience

Out of bankruptcy, Minnesota’s largest newspaper is starting to see some light at the end of the tunnel.

In 2009, the Star Tribune found itself on a dubious list: The 10 Most Endangered Newspapers in America. That was the year Minnesota’s largest daily entered into bankruptcy after rounds of cost-cutting couldn’t help the company ease its debt load. It wasn’t particularly unusual to see a newspaper company enter into Chapter 11 in those dark days. But as someone who grew up reading the Star Tribune — I still have the front page from when the Twins won the World Series in ’87 — the thought of my home paper going under was frightening.

The Star Tribune today, four years later, seems to have lifted itself off the endangered list — although, to extend the species metaphor, it still has work to do before its survival becomes a matter of Least Concern. It’s out of bankruptcy; its debt has been reduced from around $500 million to $100 million. And, maybe most importantly, it’s growing its readership in print and through digital and keeping an eye towards growing consumer revenue.

Publisher Michael Klingensmith tells me the paper’s first-quarter revenue was up over the same period last year — a claim not many papers its size have been able to make since the mid-2000s. According to freshly released Audit Bureau of Circulation numbers, Sunday circulation is up about 4 percent in the most recent reporting period, while daily is up around 1 percent. They also saw a jump in single copy sales for Sunday in the second half of 2011, up to 120,000 from 115,000. Since launching digital subscriptions in fall 2011, the Star Tribune now has 18,000 digital subscribers. (The Star Tribune has a meter model that allows 20 free stories a month.) Overall subscription revenue is up 7.5 percent in the first half of this year from a year ago, Klingensmith said.

On the advertising side, Klingensmith would not provide specific data, but he said declines in ad revenue are shrinking: “Total advertising revenue declines have shrunk to the low single digit range in this year, to the order of magnitude that can be offset by increases in consumer revenue.” On top of all that, for two years in a row, the company has been able to cut employees a check as part of the paper’s profit-sharing agreement.

That’s a good story, but there’s a difference between turning the ship around and charting a new course. Klingensmith, a Minnesota native himself, wants to push the paper into new territory by meeting people where they are (or where they read) and by co-mingling the value of print and digital products.

“We’re trying to transform the nature of the subscriber relationship,” he said. “You no longer subscribe to the paper or an app. You subscribe to the Star Tribune brand.”

Bundling and the case for protecting print

The Star Tribune, like so many papers with digital subscriptions, wants to protect its print base from eroding. Seven-day print subscribers get digital access included in their subscription, as do readers who get the paper more than more than 2 days. But Sunday-only? You pay an incremental 99 cents a week to get digital access. So instead of the Frank Rich Discount of The New York Times — using digital subscriptions to push Sunday print — the Star Tribune wants to push readers to pick up more than just the Sunday paper.

“We want to control the subscriber relationship and want people to have a subscription through out system”

In other words, the Star Tribune wants you all-in, across platforms. While some media outlets are content to offer a menu of apps at various price points (the sports app, the entertainment app, the politics app), Klingensmith said he thinks that approach has a limited ceiling for revenue. Rather than break up your audience and allow them to have dissociated relationships with your company, create a product that appeals to various parts of your audience while giving them a door to the rest of your work.

“Pieces that appeal to segments, like entertainment apps or high school sports, if you put enough in a package I think you can charge more for the entire package,” he said. “My back of the envelope math says, so far, that’s the way to go.”

One complicating factor in their digital growth has been the hand-off between Apple’s App Store and the Star Tribune’s own subscriber system. The Star Tribune is not a part of Apple’s Newsstand, so in order for readers to connect their app access to their account they have to work through the Star Tribune’s own authentication system. “It’s not about the 30 percent we’d have to pay Apple. That would be fine,” he said. “We went to a lot of pain and effort to build a system that is customer-centric.”

Though Newsstand can provide visibility and discoverability, that’s not as critical for a local paper like the Star Tribune. Klingensmith said their audience is the within the boundaries of the state of Minnesota and anyone who grew up there, and that audience already knows about the Star Tribune. The more important issue is creating a deeper connection with readers — and, not incidentally, holding onto the valuable data each reader brings with it. “We want to control the subscriber relationship and want people to have a subscription through our system and have those people in our database,” he said.

Changing the Sunday paper

Before he came to the Star Tribune, Klingensmith was at Time Inc. for over 30 years, working at places like Time, Sports Illustrated, and Entertainment Weekly (which he co-founded). So the narrative goes that Klingensmith, with his years in the magazine business, saw the appeal of reader research — surveys and focus groups — and applied it to the daily newspaper. It’s not like audience research was foreign to newspapers — but considering how tight budgets have become at most papers, they haven’t been top priority either. Star Tribune editor Nancy Barnes said it had been at least four years since the paper undertook any significant research, so it was time for some fresh insights from readers. Barnes said they tested readers on everything from the design of the paper to its digital offerings. That work helped influence the redesign of and changes to the print product, Barnes said.

“You have to have an ongoing dialogue with consumers because things are changing”

It also directed changes to the Sunday paper. If there’s a conventional wisdom in newspapers about Sundays, it goes like this: Sundays are for the takeout pieces, the long features, the narratives, and other elements that don’t fit in the shrunken daily news hole. But that wasn’t what Star Tribune readers had in mind for their paper: “We heard over and over, ‘Features are nice, but we want the hard news,'” Barnes said.

More specifically, readers wanted hard news and investigations on A1, along with a mix of national and international reporting. It wasn’t that readers didn’t enjoy features; rather, their Sunday news diet gave them time to ingest more serious news along with features, and they prefer the news at the top of the meal. Klingensmith said readers believe the front page is the chief indicator of a story’s importance and set a high bar for what is placed there. They adjusted the Sunday edition and now have more news up front, which Klingensmith thinks is one of the reasons single-copy sales increased.

“You have to have an ongoing dialogue with consumers because things are changing,” he said. “It’s important for us to understand where people want to get what sort of news.”

What comes next?

Klingensmith is quick to not take too much credit for the Star Tribune’s turnaround. He came to the paper after it came out of bankruptcy in 2010. While Klingensmith didn’t set the table, he shaped what happened next. (He was named Editor & Publisher’s 2011 Publisher of the Year.) The outlook for the paper is much improved from a few years ago, but both Kilingensmith and Barnes say they have plenty of work to do.

One area of focus is their iPad app, which they say has underperformed since its release last year. Putting aside the issue of authenticating subscriptions, the content on the app itself could be more dynamic and take better advantage of the tablet’s features, Barnes said. They plan — no surprise — to do research on it. “I think there is an appetite for work we are doing on the iPad — I don’t think we’ve nailed the right approach to it yet,” she said.

Klingensmith had his sights set on evening out the revenue picture, bringing the advertising revenue and consumer product revenues into closer balance. That would mean an increase from the consumer side of things, which Klingensmith estimates sits around 43 percent at the moment. He said it wouldn’t be out of the question to raise the price of the paper again. He doesn’t expect they would reduce the number of free stories in their meter, as the Times has, but he won’t rule it out either. “Generally speaking, over time, the print product in particular will have to carry a higher price. For the continuance of the enterprise, consumers are going to have to carry the cost,” he said.

Fortunately, Klingensmith has some perspective. Yes, the Star Tribune is caught up the same uncertainty that all newspapers around the country are facing. But Klingensmith’s happy for the ability to focus. Instead of a stable of magazines, he’s just got one title. Instead of multiple audiences, he’s just got one state-sized market. “We just have one little newspaper to run here, and that simplifies things,” he said.

Image of the Star Tribune building from Matt Green and Star Tribune newspaper box from smcgee used under a Creative Commons license.

POSTED     May 1, 2012, 2:32 p.m.
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