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

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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

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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

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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)

LinkedIn

(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

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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)

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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)

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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

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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)

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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)

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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)

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$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)

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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)

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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)

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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

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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.)

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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)

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