Thursday, June 15, 2006

Troubling News about the News

I don't know that you can call it "Civil War," as some have, but it isn't a good thing that a major stock-holder in The Tribune Company, owner of the Los Angeles Times, start selling off chunks of the media giant:

In a letter addressed to the Tribune board of directors, the Chandler Trusts said that the company had not achieved its aims of boosting profits by owning complementary media outlets in major U.S. markets. They expressed fears the future would be no different unless it changes course.

"This strategy has failed," said the Chandler Trusts, which represents the Chandler family.
The Chandlers said the company should consider a tax-free spinoff as the most effective way to accomplish the split. It said Tribune's board has been considering such a move for "many months" but has taken no action.

Three Tribune board members representing the Chandler Trusts signed the letter. The Chandler family took a stake in Tribune as part of its agreement to sell the Times-Mirror Co., and its flagship Los Angeles Times newspaper, to Tribune for $8.3 billion in 2000.

Tribune had sought to build a stable of major newspapers -- including the Times, Chicago Tribune, The Baltimore Sun -- to work in tandem with its television and Internet holdings. It also owns the Chicago Cubs baseball team.

Part of the strategy, the letter said, anticipated changes in U.S. media regulations that would allow media companies to own multiple radio and TV stations, as well as print publications, in the same market. But an effort to relax those regulations has languished in a legal battle.
In the interim, Tribune has seen its stock fall nearly 38 percent during the past two years as many of its papers lost readers to the Internet, while newsprint costs rose and advertising dollars retreated.

However, publisher Jeff Johnson says the Times is not for sale:

Billionaire investor Ron Burkle, former Olympics organizer and Major League Baseball Commissioner Peter Ueberroth and philanthropist Eli Broad have indicated in recent interviews or in comments to others that they would like to buy The Times or see it in local hands.

"The L.A. Times is a world-class brand," Ueberroth, a financier and former travel entrepreneur, said in an interview this week. "We're always attracted to quality brands."

Though analysts estimate that The Times could sell for about $1 billion, Publisher Jeff Johnson said the paper was not for sale. With about $1 billion in annual sales, the paper accounts for about 18% of Tribune's revenue and about 17% of operating profit.

One deterrent would be the huge tax burden Tribune would incur in an outright sale.Yet investors and analysts said Tuesday that a rift between the paper's owner, Tribune Co., and its second-largest shareholder, the Chandler family of Los Angeles, had the potential to put The Times in play.

Hugh is a big proponent of blowing up the LA Times and starting over. His summary of this fight echoes that point of view:

This would be a great thing, as the rescue of any newspaper is a good thing, and the recovery of the Times' brand would not be that difficult after a round of tough cuts and the end of hard left agenda journalism.

Ron Burkle may be a FOB, but he's an extraordinary businessman who knows how to sell. Ditto Ueberroth and Broad, though the former Los Anegles Olympics chief is a GOPer, not a Dem like the other two. The three would not put up with the destruction of circulation in the service of politics.

I sometimes wonder if this view really understands the situation that newspapers find themselves in in our New Media environment. As one tasked with selling for one of only a handful of papers in the entire state of California that saw it's circulation increase in the last year, I'm obligated to point out to anyone wanting to make this argument that the situation is far more complex than simple editorial changes.

I don't doubt that the things that Hugh points to aren't contributors, but it's too simple an explanation. Back in March, Outsell had this to say about the just-completed sale of Knight Ridder properties to the McClatchy Co.: In Outsell’s opinion, the increasing uncertainties of market share and future revenue streams have caught up with news publishers. Those valuation questions will be further tested immediately. As the ink on the deal was barely dry, 12 of the KR papers – including flagships in Philadelphia (the Inquirer) and San Jose (the Mercury News) – learned that their buyer was putting them on the block. It was a rude interruption of their celebration. (Their surprise was shared by KR CEO Tony Ridder, who told the Mercury News that he was shocked that his hometown paper and 11 others would not remain in McClatchy’s fold.) The reason was clear: CEO Gary Pruitt had made good on his read-my-lips promise to his shareholders. As the KR auction moved forward, he told them that McClatchy would not waver from its relatively successful strategy of buying higher-margin properties in higher-growth markets. Philadelphia, San Jose, and others didn’t meet that standard. Not said but very much an issue: most of the 12 have unions, making cost savings more difficult and time-consuming to achieve. As Pruitt went on a whirlwind goodwill tour of media and analysts, he made the point that he wanted the deed done quickly. The 12 papers – currently producing 42 percent of KR’s revenues – were to be ready to be transferred to their eventual owners on July 1, when he takes ownership of KR. In Outsell’s opinion, Pruitt’s urgency makes sense. McClatchy is in the throes of all the same issues as its brethren companies. Those issues center on the disruptive effects of the Internet, as readers become online users and advertisers move to the seductive allures of measurable online reach.

If the shoe fits, wear it...and the LA Times' wears essentially the same size booties that prompted McClatchy to unload 12 of the higher-profile KR properties. It's not just a matter of not liking left-leaning editorial content.

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