star tribune business model: roundtable 2014 michael klingensmith
DESCRIPTION
Star Tribune Publisher/CEO Michael Klingensmith's presentation at The 2014 ROUNDTABLE in Vail, CO.TRANSCRIPT
Star Tribune Business Model Mike Klingensmith | August 20, 2014
Star Tribune business model strategy
• Diversify the revenue base: Core product
• Find new revenue streams
• Reduce legacy costs over time
2
Star Tribune business model strategy
1. Diversify the revenue base: Core product A. Increase contribution from reader
• Change the nature of the subscriber relationship
• Implement pay meter
• Use digital to support higher “all-access” subscription
pricing (added value, e.g., Washington Post digital)
• Introduce digital-only consumer revenue
• Raise single-copy prices on daily
3
Star Tribune business model strategy
1. Diversify the revenue base: Core product B. Shift in ad mix to digital and pre-print
• Let daily circulation migrate to digital without reducing ROP
rates
• Maintain print volume on Sunday paid through content
enhancements (Science + Health, Washington Post insert),
price caution and digital up-sells
• Add opt-in product to fill in print declines and augment
distribution
• Grow digital ad revenue through yield optimization,
audience extension, and third-party services
4
Unmatched reach online
MyFox29
(8)
City Pages
(2)
KSTP
ABC
(4)
Digital First
(TC.com)
(3)
CBS MN
(4) Kare 11
NBC
(3)
Yelp
(2)
Xfinity
(6)
CNN
(2)
Huffington
Post
(4)
Weather
Channel
(2)
ESPN
(8)
(4) Star
Tribune
(8)
167 181
249
364
394 413
514
588
621 648
725
751
774
843
•More reach in-market than any local site
•The most daily and monthly unique visitors
•Engaged readers spend more time with content
Monthly Uniques in NDM (000s)
2013 comScore, 6 Month Average (June – November).
(Minutes) spent per visit
5
Other local media
Star Tribune business model strategy
2. Find new revenue streams – Expand ad-driven niche products (Top Workplaces,
The Good Life, Best of MN)
– Ad-supported apps (HS sports, Going Out Guide)
– Third-party distribution and printing (Pioneer Press)
– Digital marketing services for SMB
(Star Tribune Radius)
6
Star Tribune business model strategy
3. Reduce legacy costs over time – Smaller, but higher priced daily print circulation
– Fill daily net paid gap with digital
– Leverage newsroom costs across multiple platforms,
including video
– Improve efficiency through technology (cloud-based
software, outsourcing)
7
Revenue component and trends
2010 2012 2014 2016
ROP Advertising 39.6% 31.4% 26.2% 24.1%
Pre-Print Advertising 24.5 23.0 20.7 19.3
Total Print 64.1 54.4 46.9 43.4
Digital Ad Revenue 7.5 9.0 11.0 12.7
Print & Digital Circ Rev 26.2 28.5 33.5 35.0
3rd Party Dist & Other 2.0 3.1 4.3 6.3
Total “Growth” Revenue 35.9 40.6 48.8 54.0
Total Revenue 100.0% 95.0% 95.6% 97.5%
All numbers indexed to 2010 Total Revenue
8
Circulation: Five-year financial summary
2010 2011 2012 2013 2014 est.
Y/Y Revenue Growth (1.3%) 5.3% 3.1% 6.6% 10%
Circulation Margin 62.7% 64.4% 64.9% 67.0% 67.5%
Circulation RevenueCirculation ExpenseEBITDA Contribution
($ in 000’s)
9
2010 2011 2012 2013 2014 est.
Home Delivery Volume (print)
Daily volume (5-day) 190.9 183.1 173.8 165.5 154.9
Daily YOY volume decline -4.1% -5.1% -4.8% -6.4%
Sunday volume 356.9 350.7 344.2 334.8 318.4
Sunday YOY volume decline -1.7% -1.9% -2.7% -4.9%
Home Delivery Prices by Year
Seven Day Price $4.33 $4.75 $5.25 $5.75 $5.75 YOY change 9.7% 10.5% 9.5% 0.0%
Sunday price $1.90 $2.07 $2.30 $2.55 $2.55 YOY change 8.9%
(April)
11.1% (October)
10.9% (October) 0.0%
Circulation: Home delivery revenue & volume
Revenue
Delivery expense (contra rev)
Net Revenue
($ in 000’s)
10
Circulation: Digital subscriber volume & revenue
16,233
26,192
33,371
8,712 14,705
19,451
-
10,000
20,000
30,000
40,000
2012 52 wks 2013 2014 est.
Daily non-replica
Up 61% 2013 YOY
Up 27% 2014 YOY
Sunday non-replica
Up 61% 2013 YOY
Up 32% 2014 YOY
Digital subscription volume has increased each year
Total digital subscriber revenue has increased each year
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
2012 52 wks 2013 2014 est.11
Circulation: Single copy revenue & volume
2010 2011 2012 2013 2014 est.
Single Copy Volume (print circ) Daily volume (5-day) 51.6 47.7 43.8 39.5 35.9 Daily YOY volume decline % -9.5% -6.2% -9.7% -5.9%
Sunday volume 122.4 121.8 118.7 109.6 100.2 Sunday YOY volume decline % -0.5% -2.6% -7.7% -8.6%
Single Copy Price Increases by Year 2010: Metro - Daily & Early Sun 2012: Metro - Daily & Early Sun 2013: Sunday Final
RevenueDelivery expenseNet Revenue
($ in 000’s)
12
$0.50 to $0.75 $0.75 to $1
$1.75 to $2
Daily circulation: Print vs. digital
2011 2014 est. CAGR
Home Delivery 189.7 160.5 (5.5)%
Single Copy 48.9 40.3 (6.2)%
Verified Print 8.6 7.6 (4.0)%
Total Print 247.2 208.4 (5.6)%
Digital Subscriptions 8.0 33.7 61.5%
eEdition 38.6 30.0 (8.2)%
Verified Digital 4.3 26.0 na
Total Digital 50.9 89.7 21.0%
AAM Daily Avg Circ 298.1 298.1 n/c
(circulation in 000’s)
13
Sunday circulation: Print vs. digital
2011 2014 est. CAGR
Home Delivery 354.2 314.2 (3.9)%
Single Copy 129.5 112.4 (4.5)%
Opt-In (StribExpress) 25.8 79.1 46.5%
Verified Print 7.6 13.6 22.0%
Total Print 517.1 519.3 0.1%
Digital Subscriptions 8.6 20.3 33.5%
eEdition 15.1 29.3 24.0%
Verified Digital 3.0 18.7 na
Total Digital 26.7 68.3 37.0%
AAM Sunday Avg Circ (Exc. Opt-In) 518.1 508.6 (0.5)%
(circulation in 000’s)
14
Distribution Revenue
Distribution Expense
Circulation: Alternate products distribution
2010 2011 2012 2013 B2014
EBITDA Impact YOY growth -6% 19% 11% 6%
Margin 68% 67% 64% 65% 65%
($ in 000’s)
15
Does not include EBITDA impact from Pioneer Press production
Launch objectives
• Protect and grow pre-print revenue
• Provide additional & non-duplicated HH penetration
in key advertiser ZIPs
• Reduce footprint of expensive USPS-distributed
opt-out program
• Act as a feeder program to convert into paid
readers
17
Advertiser participation & financials
• Nearly 60% of our largest pre-print accounts are in
the product (and 42% of revenue per copy)
• Majority of major retail brands across all top
categories utilize routinely
• Revenue – 2012: $2.1MM
– 2013: $2.5MM
– 2014: $3.0MM (est.)
18
Sunday StribExpress financials
2011 2012 2013 2014 est.
Margin 57% 44% 49% 49%
Year-Ending Weekly Volume
30,000
65,000
65,000
85,000
Pre-Print Revenue
Total Expense
Contribution to EBITDA
($ in 000’s)
19