The Media Equation: A Native Son Revitalizes His Paper

It was the only company that Mr. Klingensmith, an M.B.A. from the University of Chicago, had ever worked for. After three decades, including stops at Sports Illustrated and Time, he was on the short list to become the next chief executive. When the job went to Ann Moore, he hung in for a while as executive vice president in charge of strategy and acquisitions. “It was a real job, it just wasn’t a very fun one,” he said.

So in 2008 at the age of 55, he took early retirement. He could have gone to work at any publisher in Manhattan, but instead, after a short time as a consultant, he moved to Minneapolis to become the publisher of The Star Tribune.

It wasn’t a move to Mister Rogers’ Neighborhood. The newspaper had been through years of upheaval, churning through bankruptcy, publishers and lots of layoffs.

But what could have been a quixotic last fling has turned into something far more impressive: The Star Tribune is adding readers — the Sunday circulation grew 5.7 percent in the last audit and will most likely be up again a bit in the audit that will be out in few weeks — the business is making money and, get this, distributing money from its profit-sharing plan to its employees.

It helps that Mr. Klingensmith is a local boy. He grew up in “friendly Fridley,” a suburb of Minneapolis, and he is a serious Twins fan. He traded deeply paneled rooms with a view of Rockefeller Center and its fabled skating rink for a fourth-floor office festooned with Twins memorabilia and a view of the staff parking lots, one of which is decorated with a statue of Joe Mauer of the Twins, a local hero, and another of Lucy from Peanuts, reading a newspaper.

Even Lucy probably notices that it’s a smaller newspaper than it used to be. Once a reliable moneymaker for the Cowles family, The Star Tribune was sold to McClatchy for $1.2 billion in 1998. As the midsize newspaper business tumbled, The Star Tribune became a drag on earnings for McClatchy and it was sold to Avista Capital Partners for $530 million at the end of 2006.

The private equity firm loaded $500 million in debt on the property just before revenue dropped by almost half. There were extensive layoffs, interim publishers, and in January 2009 the newspaper, the nation’s 15th largest, filed for bankruptcy. Like Mr. Klingensmith, I grew up reading the newspaper and I found it gut-wrenching to watch.

The newspaper ended up in the hands of its creditors, including the investment firm Angelo, Gordon and Company, which also has stakes in the Tribune Company and Philadelphia newspapers.

By the time Mr. Klingensmith said yes to the publisher’s job at the start of 2010, $500 million in debt had been reduced to $100 million in the reorganization, costs were way down because of the cuts, and revenues from both advertising and circulation had begun to crawl back.

The reason the company had profits to share is that while ad revenue was down 9 percent in 2010, it was far less than the 15 percent that had been budgeted. According to David Brauer,? who covers the paper for MinnPost, a local news site, the difference yielded more than?$30 million in earnings before interest, taxes, depreciation and amortization in 2010. And daily circulation has remained essentially flat even though the price of the daily newspaper was raised to 75 cents from 50 cents in May. The Sunday newspaper, which did not increase in price, has gone from a low of about 477,000 in September 2009 to 504,600 in September 2010, according to audit reports.

“When I was talking to them about the job, I looked at the financials and thought it had a good shot,” Mr. Klingensmith said. “I actually thought that newspapers have a lot more life in them than they get credit for.”

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