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The [Sunday] Papers

The Tribune continued this weekend to be the most aggressive outlet in town on the biggest business story around these parts - the state of the Tribune Company.

Kind of creepy, isn't it?

The company announced last week that it would cut costs by $200 million, which means a significant number of jobs will be eliminated; sell up to $500 million of assets, which means a handful of TV stations across America will have new owners soon; and repurchase up to 25 percent of its own stock - at a cost that could top $2 billion. The move is intended to mollify investors and keep Wall Street - and possibly takeover sharks - at bay. The company will be assuming such a heavy debt load that its credit rating will be downgraded to junk.

This is a big deal, bigger than many folks in Chicago may realize, because the Tribune Company is no longer just the pathetic hometown owner of the Cubs and the Tribune and good ol' WGN, but a national power whose media properties, company officials boast, reach 80 percent of U.S. households.

With two articles leading the paper's Sunday business section, the Tribune has now published five pieces on the company's latest gamble, including two analyses by business media columnist Phil Rosenthal. The Sun-Times, on the other hand, has been oddly AWOL, relying on wire stories from AP and Bloomberg to break the news and then pretty much giving up. Even Crain's, which predicted the company's sale of assets last October, settled for a couple non-consequential Web-only stories last week. There is no Tribune news in this week's new edition.

It's a sad state of affairs when the only local reporters covering the Tribune Company are from the Tribune Company.

At any rate, the great parlor game is now underway: Just what will TribCo sell?

Not the Cubs, nor Tribune Tower, says CEO Dennis FitzSimons.

So that takes most of the fun off the table from the start, but there is still business to be done. Will TribCo go so far as to totally unravel its disastrous $8.3 billion purchase of Times-Mirror in 2000? Is the company staving off a potential takeover attempt that could somehow land the Cubs and Trib Tower and the Chicago Tribune in the hands of outsiders and evildoers?

Will a leaner TribCo be a meaner TribCo? Will FitzSimons take the company private? All grist for the newsmill.

One thing seems clear: If you work at a Tribune-owned TV station that isn't in New York City, Chicago or Los Angeles, there's a decent chance you will soon work for a new company. And if you work for a Tribune-owned TV station that isn't in New York City, Chicago, Los Angeles or a market where the Tribune doesn't own a second TV station and/or a newspaper, chances are even better that you will soon have a new owner.

So long, WEWB-TV in Albany!

The Tribune Company owns 26 TV stations in all. If I ran WPMT in Harrisburg or WXMI in Grand Rapids, I'd be pricing new stationery, though those are among six Tribune stations carrying Fox programming, which, as mentioned in a conference call with analysts in April, are really cleaning up these days, in large part due to American Idol. The other four Fox stations are in Hartford (unlikely to be sold because the company owns a second TV station there as well as the The Hartford Courant, though maybe the whole kit-and-kaboodle could go); Indianapolis (also part of a broadcast duopoly); Seattle (ditto); and Sacramento (nice knowing you, KTXL!)

The irony, then, if the company retains some stations and doesn't just dump the whole division, as it has already done with its radio holdings outside of WGN-AM, is that the stations carrying the WB, which the Tribune has a 22 percent stake in, could be the ones to go. That means stations in Philadelphia, Boston, Dallas, Atlanta, Houston, Denver, St. Louis, Portland, and San Diego are good candidates for the chopping block. WBDC in Washington may go unless the company believes there are still synergies to be found with the nearby Baltimore Sun, or just wants a presence in the nation's capital, just as WBZL in Miami might be safe because of the company's ownership of the South Florida Sun-Sentinel, based in Fort Lauderdale. The company also owns two stations in New Orleans. Normally the advantages of a duopoly would protect those stations, but let's face it: TribCo would probably rather just pull out of an unstable New Orleans right now. It's the Tribune Company. It has no heart.

[MONDAY UPDATE: Tribune announced the sale of WATL in Atlanta.]

In fact, it's hard to see how the Tribune's stake in the WB is a core asset, though a new partnership is slated for fall that would combine the best, so to speak, of WB and UPN programming in a new network called the CW (apparently standing for Countrywide, not Conventional Wisdom). In April FitzSimons told analysts that the company foresaw ratings increases of up to 30 percent for shows such as Smallville, Gilmore Girls, and Everybody Hates Chris in the new set-up. Nonetheless, perhaps the company will buck the CW and unload its position in the WB. It may as well ditch its Tribune Entertainment division too. Get out of Hollywood. Not your style.

The company's 31 percent stake in the Food Network isn't a core asset either, but FitzSimons has said the channel's cash flow is so good that he would sell only if an absolutely huge offer lands on his desk. It just might.

There hasn't been much talk of selling newspapers, but I'd be a little nervous (or hopeful) if I worked at The Morning Call in Allentown, Pa., or even the longtime Tribune-owned Daily Press in Newport News, Virginia.

I bet some execs down deep would like to unload the headache that is Newsday, but the company's (failing) strategy demands a presence in New York City, and the Long Island-based paper is the best they can do.

Which brings us to that strategy. It sucks. The idea of owning newspapers and TV stations in New York City, Chicago, and Los Angeles in order to synergize locally and sell advertising across a national platform of affluent metropolitan markets may have sounded good when the company made its big move six years ago and swallowed Times-Mirror, but corporate strategies built on imagined synergies have a stinky history of failure. Like the Cubs, they are built on fantasies about all of the great things that might happen should a bunch of other things fall into place, with no regard for the true vagaries of both the known unknowns and the unknown unknowns, as former Tribune Company director Don Rumsfeld would put it.

Instead, mergers of giants introduce that which is the enemy of business: Instability. Much less a reckless disregard of how customers, clients and markets really behave, nor proper respect or understanding of both the impediments and benefits of varying organizational cultures forced to mesh into an artificial whole. Inevitably, the impediments win out, and the benefits are crushed.

Not only that, but if FitzSimons were a visionary he would acknowledge the company lost the gamble and move on. Betting the company could beat a tax rap inherited from Times-Mirror that looks to cost it $1 billion is not sound corporate decision-making, nor is overconfidence in friendly FCC rulings. The Tribune Company got ahead of itself.

So what should Tribune do?

FitzSimons was asked by an analyst in April if he planned to take the company private. FitzSimons didn't directly answer the question, seemingly leaving the option on the table. Here's one better. Put the company under the non-profit aegis of the McCormick Tribune Foundation - following the model established by the Poynter Institute and St. Petersburg Times.

Be a hero. Make Tribune Company about civic leadership and stewardship, not ego and greed. That would be visionary, and if the Tribune Company did it, the rest of the industry just might be inclined to follow.

Trib Notes: If the credit of the Tribune Company is downgraded to junk, does that mean they are finally mismanaging the rest of the company the way they do the Cubs?

I know there's a better Cubs joke vis a vis junk in there, I just couldn't find it.

* Jim "Mad Money" Cramer isn't impressed. "Something doesn't add up with this Tribune self-tender," he wrote last week on RealMoney.com. "It just makes no sense. The company, which has declining fundamentals and no hope for a turn, save Career Builder - which is really second-rate versus Monster - suddenly decides to lever up?

"To me, this is just blatant entrenchment. It reminds me of when Dayton Hudson was trying to fend off takeover bids in the 1980s, and it went out and did the wrong thing, buying some dog of a retailer to keep the pirates away. I look at this move and I think: Hold up here; Tribune's been cutting costs for years. If it hadn't, its cash flow would be downright ugly - and now it is borrowing cash to buy stock? Does the company really feel its stock is undervalued? Does anyone think its stock is undervalued?

"We buy stocks for growth, not for self-tenders and not for cost cuts. There's no growth here. I'd tender pronto."

* "[F]itzSimons on Friday staged a 'town hall' meeting for the benefit of the company's 20,000 or so staffers, answering questions about the strategy and its ramifications. But he announced at the start that what he and his top lieutenants said therein would be off the record, a curious move for the head of a company that - for now at least - owns 11 daily newspapers, 26 television stations, a radio station, several Internet sites and various other media entities all dedicated to communicating with the public at large."

- Phil Rosenthal, Tribune

Most reporters put off-the-record in one fell swoop ever?

* The strategy of borrowing heavily and selling assets sounds familiar. Since when did Gov. Rod Blagojevich start running Tribune?

* FitzSimons says he is committed to Tribune remaining independent. That's a relief. Think about how weird it would feel if, say, the Chicago Tribune were owned by a company based in, I don't know, Los Angeles. Independence is in the eye of the owner.

The Beachwood Tip Line: I'll keep your town hall meeting reports off the record too.



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Posted on June 5, 2006


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