It's a sad and painful thing, watching the slow-motion train wreck in Minneapolis. And for the passengers on that train, it must be bewildering and humiliating to be the utterly dominant newspaper in a market long considered solid gold, yet declare bankruptcy.
It seems like just yesterday when we were burying money in the basement. Not literally, of course, but there was a year at the peak of the Star Tribune's performance when the order went out: Stock up on supplies. We're making too much money. (Note: I was the founding editor in 1994 of Star Tribune Online, which was rebranded StarTribune.com. I left in 1999.)
It's not sustainable, we were told, and if we're going to deliver consistent growth numbers and keep our investors happy, we have to smooth it out. Suddenly we all got new Compaq desktop computers and threw out the old P-60 IBMs. New monitors. Anything that could be expensed was expensed. Anything that could be rapidly depreciated was welcomed.
Then the paper went on the block, and McClatchy snatched it away from the Tribune Company, which thought it had a winning bid, and the Washington Post, long an investor. At over a billion dollars, it was the richest newspaper deal in history, when market size was factored in. McClatchy used the paper to slingshot itself into the big leagues.
Who ever imagined the Star Tribune would be resold at half price, then declared bankrupt?
This is another example of what I've called the ownership crisis.
The Star Tribune is, strangely enough, still profitable as an ongoing business. Its print product is still profitable and is huge, with 522,000 Sunday circulation and 322,000 daily -- far ahead of the rival Pioneer Press at 246,000 Sunday and 184,000 daily. Its website utterly dominates a highly competitive, wired, highly educated marketplace and enjoys one of the highest market shares of any newspaper site in the world.
But in the face of a brutal recession that has dried up advertising revenues, it can't meet the payments on the loans its owners took out in order to grab control. It's not profitable enough.
Humiliating and offensive as it may seem to the newspaper staff -- who are among the victims in this soap opera -- the bankruptcy is probably a good thing. Some second-tier lenders who made poor risk evaluations are going to lose everything, but unless the recession turns even more ugly, it's likely that the paper will ride this one out. But will it be recognizable? Will the senior managers continue to gut the product and fire key staffers until it becomes a joke?
I can't imagine the Pioneer Press emerging a winner. Nobody in the bulk of the metro area reads the Pioneer Press. Its distribution on the west side is nonexistent, and it's effectively surrounded in the eastern suburbs by the Star Tribune.
But then, who in 1999 could imagine that the Strib would be bankrupt in 2009?