Posted on 01/22/2008 4:43:29 PM PST by abb
Topic: Memos Sent to Romenesko Date/Time: 1/22/2008 6:36:40 PM Title: Star Tribune publisher's memo Posted By: Jim Romenesko
Taking Charge of Our Future By Chris Harte, [Minneapolis Star Tribune] Publisher and Chairman
Last fall I told you I would write about our overall situation toward the end of the year. I waited before writing because November ad revenue was slightly better than recent months, and I hoped it was the start of a modestly better trend. But December was right back to the pattern of steep revenue declines that we'd seen since early in the year.
We have budgeted for another large revenue reduction in 2008, and we hope we won't be under budget again. What I'm hearing from other newspapers are similar expectations about further revenue declines.
I don't mean to be gloomy, because I'm basically an optimist. I believe strongly in newspapers and their Internet sites. I believe in the importance of what we do. I believe that we will not just survive but prosper. I believe in the power of the Star Tribune's people to make the business and cultural changes that will be necessary to right our ship and give our company a vigorous and successful future.
The current business realities are incredibly difficult, however, and I don't want to pretend they aren't. 2007 was far and away the worst year this industry has seen in anyone's memory, and it was also the worst for the Star Tribune. We were not the hardest hit large metropolitan paper in the country, but our overall revenue performance was well below the median for the industry.
A few numbers tell the story well, I think. Total revenue (print and internet advertising and circulation) is down almost $75 million in the last two years. Classified revenue has been the hardest hit part of our business, and our 2007 classified revenue was down over 50 percent from what it was at the start of the decade.
While our Internet revenue has risen substantially almost every year over the past decade, and is three times what it was at the start of the decade, it's not growing nearly fast enough to offset the declines in print advertising.
We reduced our costs substantially last year, some of it in easy ways but much of it with painful cuts. And we're already reducing 2008 costs several million dollars below our original 2008 budget.
Despite all the cost-cutting, our payroll and benefits in 2007 were actually $10 million higher than they were in 2000, while total revenue had declined over $90 million in the same period. Payroll and benefits are well over half of all our cash operating expenses; the remaining cash costs are newsprint and everything else. Newsprint is the only one of the three major categories where we've had a meaningful drop in expenses, and that's mostly because of a substantial drop in the price we pay per ton. Unfortunately, that price is going way up in 2008. All other cash expenses combined (utilities, office supplies, all the other things it takes to keep us operating) are at almost exactly the same level today as they were in 2000.
As a result of rapidly declining revenue - and expenses that haven't been cut anywhere nearly as fast - our operating cash flow has declined dramatically since 2000. Operating cash flow, which is the cash we have left after paying cash expenses, and which we then use to invest in everything from new equipment and computers to new products, and to pay our debt, has declined 50 percent in just the past two years and more than that since 2000.
Obviously, we cannot continue on this course. We need to deal with these challenges quickly and collaboratively, working together all across the company to find the best solutions.
As a first step toward finding these solutions, we have retained Restructuring Associates (RAI), a consulting firm headquartered in Washington, DC to help us work collaboratively throughout the Star Tribune to get our business on the right track to meet the significant challenges we face. RAI specializes in helping unions and management work together to improve performance.
Starting this week, representatives of RAI will begin interviewing Star Tribune managers and soon will interview others involved with the business to get a better understanding of what we are up against and how to frame our approach to finding solutions.
RAI expresses its basic philosophy this way: "We help our clients become high performance organizations and better places to work by engaging employees in solving organization problems and implementing their solutions. By involving people, we build internal commitment to change, generate real solutions, and facilitate implementation." I encourage you to visit their website at www.restructuringassociates.com for more information on how they work with companies to build high performance.
We selected RAI precisely because of its focus on a collaborative approach with strong involvement of employees and union leadership. We have been especially impressed that the firm doesn't have canned solutions or preconceived notions. But it does have an outstanding track record of successfully dealing with complex challenges at many companies across many industries.
Despite all our challenges - and they are huge and obvious - we still have some great competitive advantages and the ability to leverage them. We have a century and a half of powerful brand equity with our readers and advertisers. We are still by far the strongest media company in the market. We have many more journalists than any of our direct competitors - and probably more than all our local competitors combined. We also have more ad sales people and a stronger support infrastructure.
In the past year, we have invested strategically to make our business stronger. Some of these investments have been in new technology - like a state-of-the-art web order entry system, a single copy returns-management system, a predictive dialing system for our call center, and a new sales management and reporting system. Plus we have also invested in our core business, spending significant dollars rebuilding our circulation, adding additional sales reps and instituting a new sales training program. You may have seen my note a few days ago about what we were able to achieve in just a few months with our new Cars website. That's just the most recent example of our incredible capabilities, our competitive spirit and our ability to change quickly.
The fundamental change we are facing is not temporary. Yes, we will try to, and should, regain a portion of our lost revenue when the economy improves. But we don't know how much, and we don't know when that will be. What we do know for sure is that the competitive world has changed permanently and we will fail if we don't change much more than we have already. In today's jargon, we are going to have to reinvent our business.
And this is a matter more of attitude than of resources. Our intellectual capital is huge, and we need to draw upon it to find new ways of operating. I am absolutely confident we can do that.
I believe our future is bright, and I invested a substantial amount of my own money in the Star Tribune on that belief. I believe passionately in what we do, and I know a huge number of you do, too.
We absolutely have the passion, knowledge and resources to continue as the leading information company in the Twin Cities. But we won't do it by wishing we could go back to the way our business used to be. We must harness the passion that brought us all to the Star Tribune and point our efforts toward reinvention. We are all in this together. Thank you for helping move us forward.
ping
I don’t think he gets it...
LMAO!!!
The Strib, one of the worst.
If they’d stick to reporting news instead of trying to shape it, they’d be printing the bottom line in black ink again.
“....Despite all the cost-cutting, our payroll and benefits in 2007 were actually $10 million higher than they were in 2000...”
So how does the headcount of 2007 compare to the headcount of 2000? I can’t believe payroll costs are up if they really made an effort to cut staff and increase efficiency.
Not many other "mainstream" papers were willing to tell their readers the damning facts about Kerry's effort to remake Apocalypse Now as a one-man stage show...
He sounds downright capitalist.
Too bad that doesn’t bleed through into how they cover the news.
Somebody ought to have a web site to archive these emails and opuses from newspaper editors in their papers’ dying days. Really funny and delusional stuff.
I always use the keyword “DBM” as in Drive-By Media when I post them.
Aren't those the guys in 'Office Space'?
Minnesota ping!
Reality can be such a cold b$tch.
Keep it up Nero!
[I believe in the power of the Star Tribune’s people to make the business and cultural changes. . .]
“Cultural changes.” He may have stumbled on the problem.
News flash: That ain't gonna happen if you keep pandering to the same illiterate left-wing crowd you've been courtin' for the last half a century. Then, when you go bankrupt, you can sit around sipping lattes, scratching your heads, and asking what went wrong?
Try reporting the truth for a change.
“I don’t think he gets it...”
......you got that right!....matter of fact, none of the MSM get it....they blame it all on the internet, the fact that people are too busy to read the paper, kids raised with a MTV mentality ect.ect....never, and I mean never will they consider that people are tired of the liberal propaganda they crank out...
Considering the fact that most of these newspaper people have master degrees, they’re clueless...
Door, ass, adios....
Starting this week, representatives of RAI will begin interviewing Star Tribune managers and soon will interview others involved with the business to get a better understanding of what we are up against and how to frame our approach to finding solutions.
http://www.poynter.org/column.asp?id=123&aid=136304
Poynteronline
The Biz Blog: Poynter Media Business Analyst Rick Edmonds tracks the latest industry developments.
WEDNESDAY, JANUARY 23, 2008
Posted at 5:48:03 PM
Labor Buy-In at the Strib?
In a reasonably candid memo updating staff on the (Minneapolis) Star Tribune’s business woes, publisher Chris Harte buried the lead at the bottom of the tenth paragraph.
He has retained Restructuring Associates, a firm, Harte wrote, that “specializes in helping unions and management work together to improve performance.” It is common for publishers to hire consultants, less common to announce it.
Harte comes close to saying out loud what management more often grumbles about in private — union work rules are a big impediment to the kind of fast organizational change any doctor would order for the ailing industry. We and others have observed that metros have taken the worst of it in classified advertising losses. Metros with strong unions in high-salary markets generally do worst of all. The San Francisco Chronicle, where management has said it is losing $1 million a week, comes to mind as an example.
When I worked as a summer intern at what was then the morning Tribune in 1968, we were ordered to vacate the newsroom promptly at the end of shift. My impression is that rigid workrules have not entirely left the building.
A glance at Restructuring Associates indicates an appetite for taking on tough cases. In 2002, the company helped arbitrate an accord in the long-running dispute Yale University had with its unions (persuading both sides, according to a New York Times report, to give a little). Its Web site also highlights work in 2005 with the mammoth Kaiser Permanente HMO and its 84,000 unionized workers.
This approach is not to be confused with union-busting aimed at heading off organizing campaigns or undermining unions at contract time, as MediaNews has done at its California properties.
Concessions may be part of the outcome achieved by Restructuring Associates, but the process apparently accepts that unions are here to stay, a process that starts by bringing everyone to the table for consensus on the nature of the business problem and the urgency of action.
Restructuring Associates’ tool bag includes the “whole system event,” a British consulting term for shaking things up in a structured way to align individual and organizational goals for the future.
Harte’s memo says bluntly what I had been told in confidence — that the Star Tribune’s margins have been on a fast path from healthy to negative territory. In fact, with recession further weakening the industry’s already bad hand, it’s looking like a “whole system event” is the kind of sweeping change that will be required.
* * *
UPDATE: In the two hours since this item was posted, Romenesko has reported that management at the Seattle Times and Philadelphia Inquirer are seeking concessions from their unions as a result of dismal 2008 prospects.
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Translation:
Since we have neither the balls or the brains to make any decisions and face the consequences of those decisions, we will spend several million dollars shifting those decisions and blame to someone else.
its funny because I moved back to Milwaukee after 12 years in MN 2 months ago. A telemarketer number had been calling my cell for a few weeks now and I finally had a chance to answer it. It was a guy peddling the Strib sunday paper for $1.25. I explained that I didn’t need the paper because I now lived in Milwaukee...he said they would be more than happy to send it to me! He finally gave up after I explained that I hadn’t had a subscription to the Strib for the last 4 years I was in Minneapolis.
Really trying to get their circulation up any way they can aren’t they? :)
Two things...union concessions and denial.
Union concessions in that every-time you enter into contract negotiations with these thugs, and if you don’t have a “set” in the first place, you’ll agree to huge wage and benefits increases and lose your shorts.
Denial, in that these folks obviously are still not seeing the writing on the wall and continue to hire right and left instead of looking at ways to operate differently and more efficiently.
Let ‘em bury themselves....they won’t even know they’re doing it until the last shovel of dirt is on them!
Militant
Ping me...
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