Tribune Co. Eyes Major Changes Under Pressure
Saturday, September 23, 2006; D01
Tribune Co., under pressure from shareholders to boost its stock price, is signaling that it is considering a sale or breakup, or going private.
The owner of the Chicago Tribune, the Los Angeles Times, the Baltimore Sun, television stations and the Chicago Cubs is targeting potentially transforming changes by the end of the year after a five-hour meeting of its board of directors Thursday.
Under chief executive Dennis FitzSimons, the struggling media company is moving quickly beyond the plan it outlined in May calling for a combination of select asset sales, a $2 billion stock buyback and further cost cuts. Since then, revenue has continued to decline, and the stock price has not increased as much as the company had hoped.
To enable the upcoming changes, Tribune needed to restructure two complex partnerships with the Chandler family that were a legacy of its takeover of the parent company of the Los Angeles Times in 2000. That cleared the way for a new board committee of seven directors to work with FitzSimons on the makeover plan.
The Chandlers will retain 95 percent interest in the partnerships and will increase their holdings of Tribune common stock to approximately 48.7 million shares from approximately 36.9 million.
The partnerships contain some $3.5 billion in assets and have hampered Tribune's ability to make transactions because of major tax consequences.
A rift surfaced in the spring when the Chandlers, who hold three board seats, criticized the stock buyback strategy and called for the company's breakup. As evidence that those differences have been patched up, Warren Williams, chairman of the Chandler Trusts, said Thursday night that the trusts would "now work collaboratively with management and the board to build value for all shareholders."
Tribune's holdings include 11 daily newspapers, 25 television stations and Internet ventures as well as sizable stakes in the Food Network and the online classified advertising venture CareerBuilder.
The company said it expected to record a one-time gain of approximately $45 million because of the transaction.
Wall Street reacted positively yesterday. A day after Tribune shares rose more than 4 percent, they gained $1.94, or 6 percent, to close at $33.99 on the New York Stock Exchange.
But Standard & Poor's lowered its credit ratings on Tribune to the "junk" category. The ratings agency said the possibility of another stock buyback or sale of parts of the company suggests Tribune won't be focusing on reducing its huge debt, which totaled $4.9 billion as of July.
REGARDING MEDIA / TIM RUTTEN
Absentee owners skew the coverageTIM RUTTEN
September 23, 2006
WHATEVER the ultimate results of Thursday's extraordinary meeting of the Tribune Co.'s directors in Chicago, it is clear that the experiment in corporate ownership of high-quality American newspapers is disintegrating.
Tribune, the publicly traded company that owns The Times and 10 other newspapers as part of a diversified media and entertainment portfolio, announced Thursday evening that it has established a committee of independent directors to weigh proposals for the company's future and to reach decisions by the end of the year.
The group is expected to consider spinning off various Tribune divisions, taking the company private through a leveraged buyout or selling it whole or in parts.
This news follows reports last week that The Times' publisher, Jeff Johnson, and editor, Dean Baquet, had rejected Chicago's demands that the newspaper further reduce its staff and the budget that supports its journalism. Since then, Johnson and Scott Smith, who heads Tribune's publishing division, have met and "reached an understanding" concerning the company's commitment to strong journalism.
Does all this point to a sale of The Times — which one analyst this week referred to as Tribune's "squeaky wheel" — and, perhaps, a return to local ownership?
Tribune Chairman Dennis FitzSimons told the Wall Street Journal that "the L.A. Times is part of Tribune and not for sale." He also refused to respond to the New York Times' questions about Johnson and Baquet. That said, once a publicly traded company puts itself in play, the outcome often is unpredictable.
The real question at issue is whether the Los Angeles Times' readers and their communities will be better served by a paper under corporate direction or one that is privately and locally owned.
Following the breakup of Knight Ridder — the nation's second-largest newspaper chain — earlier this year and, now, Tribune's difficulties, the experiment in corporate conglomeration, with its ephemeral promises of economies and synergies, is coming to a close, at least where it comes to operating high-quality urban newspapers.
Michael Massing writes America's most trenchant media analysis for the New York Review of Books, and that was one of the points he made Friday in an interview with the Huffington Post.
"I think the financial pressures — the structural economic circumstances — in which not just particularly newspapers but the news media in general finds itself, are the great concern," he said. "The pressures from Wall Street on the press remain extraordinary and continue to have a very debilitating effect on the ability of journalists to do their job — that I think, overwhelmingly is the main problem.
"One of the things that's interesting is that people are talking about new ownership structures," said Massing, who regards the New York Times, Washington Post and Los Angeles Times as the country's leading papers.
People, he said, "realize that the situation is getting desperate, and that the pressure from Wall Street is so constant and insistent that they're looking for new ways to structure ownership. One of the most interesting developments is at the L.A. Times, which of all papers has perhaps been under the most pressure, from the Tribune Company. There's a movement afoot among a number of very wealthy people — Eli Broad and David Geffen and others — to buy the paper, and for them it would be a very comfortable revenue stream; they would not have to answer to Wall Street."
Not just a numbers game
WHAT has answering to Wall Street meant for the Los Angeles Times and its readers?
It's more than just the number of journalists who provide the paper's readers with news and photographs in a well-designed package, though that is a major issue. Since acquiring The Times, Tribune has reduced the staff from about 1,200 to 940 and now would like to see it decline further to around 800. That's one of the causes of the standoff between Johnson and Baquet and their bosses in Chicago.
But another — and equally important — issue is what those journalists will do and where that will be decided.
For example, it is an article of faith among corporate media managers that all news, like politics, is local. They insist that the vast majority of readers — and, therefore, advertisers — are highly interested only in local news and that foreign and national reporting are "commodities" readers obtain from television, if at all. No sense in expensive duplication of effort, or so the argument goes.
Thus, since its acquisition of The Times, Tribune has applied steady pressure on editors here to reduce the number of journalists who cover foreign and national news and the attention to which the paper gives such news.
As an operating theory, it's a good example of what's called crackpot realism — something that sounds like a hard-headed, real-world truth, but is, in fact, dead wrong.
Los Angeles Times editors long have known that the majority of the papers' readers say their greatest interest is in foreign news. It's one of the things that is distinctive about Times readers, and decades of research conducted by the paper confirmed that fact.
Nothing about it surprised editors or executives who live here, but since it differs, historically, from the facts on the ground in other parts of the country, it's not as clear to managers elsewhere.
Moreover, it's legitimate to ask: What about Southern Californians who don't already read The Times? Perhaps they're not interested in, even turned off, by foreign and national news.
Recently, a firm used by all Tribune papers conducted a survey of adults in the five-county area served by the Los Angeles Times.
What it found is that 52% listed foreign news as their top interest. Nearly half, 46%, said they are very interested in news of Washington and the federal government, while 44% said they placed a high value on news of the nation outside of Washington. What's more, even among Times readers who had seen a news story on television, roughly 80% said they still were likely to read it, if it appeared on this paper's front page. In fact, there's hard evidence to show that readers across the country are becoming more like those of The Times rather than less. Since 9/11, the percentages of Americans who say they are highly interested in foreign and national news have nearly doubled.
Editors who live and work in Los Angeles and Southern California understand these things about their readers. So too would owners and managers who live here.
If you want a particularly clear-cut example of what the aggregation of American newspapers into corporate-controlled chains has meant to the flow of information that makes responsible citizenship possible in this country, you need look no further than the war in Iraq.
During the conflict in Southeast Asia, most American newspapers still were in private or family hands and nearly every urban paper maintained a bureau, or at least a resident correspondent, in Saigon. Many posted several reporters and photographers there, and major newspapers also had bureaus in Cambodia and Thailand with paid stringers in Laos.
Today, with the United States at war in the Middle East and American casualties mounting by the day, only three U.S. newspapers have bureaus in Baghdad with full-time staffs. They are the New York Times, the Washington Post and the Los Angeles Times. The first two are family-controlled, and this paper continues to conduct its journalism as if it were, which is the source of its ongoing conflicts with Chicago.
The ability to read the kind of journalism that flows from a commitment to cover vital stories — however dangerous or expensive, however long it takes, however controversial the result — is what the people of Los Angeles and Southern California really have at stake, as Tribune's directors weigh their "strategic options."