Monday, April 28, 2008

Mr. Nice Guy Speaks, Again.

Zell urges "cleansing," not sympathy, on housing

by Peter Viles, The Los Angeles Times
Photo: Charles Rex Arbogast / AP

Jy3t8jncI now understand Sam Zell's strategy to revive newspapers: He's going to provide all the content himself. Here's Zell's analysis of the housing market today, filed by Tom Petruno on his Money & Co. blog:

"What this country needs is a cleansing" in the residential market, Zell said. "We need to clear out all of those people who should never have been in houses in the first place and who for sure shouldn't be getting sympathy."

He blamed another Sam -- Uncle in Washington -- for encouraging homeownership at any cost in recent years. The rise in the U.S. homeownership rate from 63% to 69% during the boom was totally unjustified, Zell said, other than by "the political impetus of, 'Let's put more people into homes they can't afford."


This is the same guy that bought the Tribune company with very little of his own money. In other words, he put very little down while utilizing creative financing to get the deal done. Now Sam's having trouble making the loan payments. Isn't this the same buying method that started the current housing crisis in the first place?

TV crew members still feeling effects of writers strike

Many can't find work with production down, and their bills are piling up. Some are facing foreclosure and bankruptcy.
By Richard Verrier, Los Angeles Times Staff Writer
April 28, 2008
The writers strike ended two months ago. But many in Hollywood remain on the brink.

Some are at risk of losing their homes. Some can't afford groceries. Others have filed for bankruptcy. Still others struggle to work enough hours to hold on to their health insurance.

Across Los Angeles, many crew members who work behind the scenes and on the sets of television shows and movies are still quaking from the temblor of the 100-day writers strike that shut down scripted TV production.

Blame the aftershocks. Networks have sharply curtailed the number of TV pilots this year, continuing a trend toward ordering fewer shows for the new season.

The shows that did return are filming 20% to 40% fewer episodes. And in Los Angeles County, location permits for sitcoms and dramas since the strike ended have plunged 51% and 35% from last year, respectively, according to FilmL.A., which handles film permits.

Although hard figures are not available, union officials say that thousands of crew members who normally would be busy at this time of year are still idled because of the sharp contraction in television production. Some union locals report a quarter of their members are sitting at home.

Karen Hartjen is one. She can't bring herself to open the utility bills lying on her kitchen table in Simi Valley.

The 53-year-old assistant prop master has been out of work since early November, when a string of jobs on TV shows such as "CSI: New York" and "Medium" came to a halt after the writers walked out.

Although Hartjen is accustomed to earning $100,000 a year, she is now $10,000 in debt and her home is threatened with foreclosure. She has turned to her church and the Salvation Army for help with groceries.

"I've been in this business for two decades, and I've never experienced anything like this," Hartjen said. "I'm just fighting for my life."

It will take several more months before TV production -- and the jobs that go along with it -- return to normal levels, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. And that's assuming there is no actors strike. "It's going to be a nerve-racking year for 'below-the-line' workers," he said.

Anxieties build

The downturn comes at a tough time for Hollywood's blue-collar employees, who are grappling with what many economists view as a nationwide recession, as well as a steady drain of film jobs to New Mexico, Louisiana and other states offering production incentives not available in California. Michigan upped the stakes recently by offering film producers 40 cents back for every dollar they spend shooting in the state.

Adding to the anxiety among so-called below-the-line workers -- such as technicians, carpenters and makeup artists -- are fears that they could suffer a double whammy if actors and studios fail to reach a new contract by June 30. Studios, which have spent months preparing for a walkout by actors, began negotiations with the Screen Actors Guild two weeks ago.

The parties a few days ago agreed to extend the talks an additional week. Nonetheless, each side remains far apart on a number of issues, including how much money actors should earn when shows are distributed online.

"Any possibility of an actors strike weighs heavily on the minds of our people," said Ed Brown, business agent for Local 44 of the International Alliance of Theatrical Stage Employees. The local represents set decorators, special-effects workers and prop makers who are among the more than 30,000 Hollywood workers represented by the union.

Brown estimates that about 25% of the local's 5,000 West Coast members are still looking for jobs -- double the normal level for this time of year.

Without any income, they've sought help from charitable groups such as the Writers Guild Foundation, which has raised money for crew members, and the Actors Fund, which provides financial help to economically distressed workers in the entertainment industry. The latter, with help from the Writers Guild Foundation, has provided more than $1 million in assistance to nearly 700 people since November. Recipients receive payments of $500 to $2,000 to help with car payments, mortgage payments or utility bills.

The Actors Fund has been getting about 20 calls a day for emergency help, double the usual volume.

"A lot of people are trying to dig themselves out of a hole," said Keith McNutt, western region director for the Actors Fund. "They're desperate."

The reason: Work has been slow to rebound.

Fewer shows, fewer jobs

Most TV shows couldn't return immediately after the writers reached a new contract with studios because of the four- to six-week period it takes for most shows to complete scripts, rehire crews and prep locations for shooting. When production did resume, there were many fewer shows and thus fewer job opportunities for crew members.

The downturn has been partially offset by a 50% upswing in feature film production, a possible sign that studios are ramping up production to complete films before June 30, when the actors contract expires. Studios have braced for a possible walkout by juggling their slates so that most films would wrap up by the contract deadline.

But the increase has not been enough to fill the paucity of jobs. Indeed, an actors strike would be more debilitating than a walkout by writers because it would shut down most production, a nightmare scenario for people such as Ed Lippman.

"I can't even think what might happen to me if SAG goes out," says Lippman, a location manager. The 16-year industry veteran has been unemployed since November, when his last show, the NBC cop drama "Life," shut down after filming only 11 episodes.

When the strike ended, Lippman figured he would return to work on "Life," but NBC chose not to resume filming until June. For the first time in his career, he wasn't getting any calls for pilot work, and neither were his colleagues.

After maxing out his credit cards, Lippman, 42, did something he never imagined he would do: He filed for personal bankruptcy this month.

"It was hard to accept. I thought, 'How could this happen?' " Lippman said.

Phillip Gordon has been wondering the same thing.

After four months of unemployment, the 38-year-old prop maker and general foreman returned to work a week ago, overseeing construction of the set for the comedy "Mostly Ghostly," an upcoming movie based on the R.L. Stine book series. The job pays $17 an hour, well below his usual rate, and requires a two-hour commute from his home near Palmdale to the set in Playa Vista.

Gordon has little choice. He's four months behind on his variable-rate mortgage. His payments ballooned to $3,700 from $2,700 a month in January, shortly after he lost his job on the set of the next "Star Trek" movie. To stay afloat, he's sold off tools at swap meets and mowed his neighbor's lawn.

"I don't know what else to do," Gordon said.

Benefits could cease

Many crew members are in a race against the clock to keep their health insurance. Union rules require that members work at least 300 hours every six months to maintain their benefits.

After a four-month hiatus, foley artist Dominique Tabach of Valencia recently returned to work part-time on the CBS drama "Numbers." But she has nothing else lined up.

Without additional work, Tabach, 43, is concerned that she won't accumulate enough hours to keep her union health insurance beyond September. The insurance covers Tabach, her 8-year-old daughter and her husband, a former TV executive who recently lost his job.

"There's just not enough TV work out there," Tabach said.

The End of Network News as We Know It?

Decreases in Ads and Viewers Mean Change Is in the Air for Big Three

NEW YORK ( -- The big three TV network newscasts lost about 1.2 million viewers last year, and advertising on their three big morning news shows fell to an estimated $1.03 billion. The average viewer is 60 years old, and the demographic marketers most want to reach is more likely to be facing a computer screen than a TV screen when the evening news comes on.

Collectively, ABC, NBC and CBS's network newscasts lost about 1.2 million viewers in 2007, according to an analysis of Nielsen data by the Project for Excellence in Journalism

Collectively, ABC, NBC and CBS's network newscasts lost about 1.2 million viewers in 2007, according to an analysis of Nielsen data by the Project for Excellence in Journalism
Photo Credit: John Paul Filo

Given that rather sobering picture, maybe the discussion shouldn't be over whether Katie Couric will last at CBS through the election. Maybe it should be whether we need network-TV news at all.

None of the networks was even willing to entertain the suggestion that it wasn't completely committed to its evening newscasts, so this isn't a story about how one or the other is about to close down its news division. But the economic incentive to reshape their news departments is pressing.

Collectively, ABC, NBC and CBS's network newscasts lost about 1.2 million viewers in 2007, according to an analysis of Nielsen data by the Project for Excellence in Journalism, a 5% drop from the year before. Even the audience for the morning news shows -- the most successful of the news departments' endeavors -- fell for the third year in a row, the PEJ study said, down 2% from the year before, its lowest point since 1999.

Not surprisingly, ad revenue has followed viewers elsewhere. Spending on the three major morning news shows -- ABC's "Good Morning America," NBC's "Today" and CBS's "Early Show" -- fell to about $1.03 billion in 2007 from about $1.05 billion in 2005, according to Nielsen Monitor-Plus. And ad spending on the three major-network evening newscasts tumbled to about $502.8 million from about $538.3 million in 2005.

Target is not at home
The audiences advertisers most want to reach -- upper-income consumers between the ages of 18 and 49 -- are still at work, not sitting in front of the tube, when the news comes on. The average age of the evening-news watcher is 60, according to media agency Magna Global.

"The people that you're after, they are not home watching the 5 o'clock news or the 5:30 news or the 6 o'clock news," said Debbie Basham, senior VP-director of negotiation and activation for Interpublic Group of Cos.' Mullen agency, who oversees local ad buying for the firm. "There are a lot of media plans that may not have news on there, because the people you are seeking are not out there."

Networks have already responded to the squeeze. Based on estimates, PEJ believes total network-news staffing declined 10% between 2002 and 2006, with the number of on-air journalists falling 7% and the number of producers off 12%. According to reports, between 100 and 160 employees at various CBS Corp.-owned TV stations recently were laid off as part of an initiative to meet budget requirements; several of those were high-profile on-air news personnel.

As a result, perhaps, subject focus has begun to shift. During the past several years, coverage of international stories has been scaled back, said Andrew Tyndall, whose Tyndall Report analyzes the content of network newscasts. Despite an initial rush to cover the war in Iraq, he said, that focus has begun to trail off. "Iraq has fallen off the radar" as the U.S. presidential campaign becomes a bigger story, he said. "That change, I don't think, is anything that would have happened 20 years ago."

Public-interest obligations

Optimism seems in short supply among financial analysts. Sharing news operations in far-flung parts of the world seems increasingly likely, said David Joyce, a media analyst with Miller Tabak & Co. News organizations that can amortize costs by creating stories for a number of outlets are probably best off, said Michael Nathanson, a media analyst with Sanford C. Bernstein. "You would think that NBC has a clear advantage because of their link with MSNBC, and CBS and ABC probably will have a harder time long term finding cost synergies," he said.

Digital technology could give these programs new access to younger crowds -- though it's not clear whether increased efforts in that area would ultimately bolster the economics of news-gathering by network or local-affiliate news departments. The belief is TV networks and stations will deliver news in a broader fashion, in a way that is not as heavily dependent on sitting in front of a screen at a certain time of day.

Even as the web beckons, broadcasters still have an obligation to act in the public interest as part of their licenses to use federally owned broadcast signals. Given the new-media landscape, is it possible the three networks eventually will be able to make the case to the Federal Communications Commission that their news divisions would be more effective on other platforms? Digital opportunities abound, including transmitting content across multiple TV channels and streaming reports online.

"One of the big questions will be: What are broadcasters' public-interest obligations in the digital age?" said Scott Cleland of Precursor Group, a media and technology consultancy.

That issue could be one to argue in the not-so-distant future. "I can say with no hesitation that we will see changes within the network-news paradigm over the next few years," said Debora Halperin Wenger, associate professor of convergence and new media at Virginia Commonwealth University.

Those stories aren't just for TV anymore

Even as support for their flagship newscasts gradually erodes, networks and local broadcasters are testing ideas designed to harness digital media's potential. Why wait for 6:30 p.m. to roll around when people are getting their news online all day -- and network-branded newscasts can insert themselves into the equation?

NBC News sees a future in distributing content around the clock, whether it be through online video, a blog written by anchor Brian Williams or its flagship newscast. The news-gathering operation has aligned itself so its work can be used by the evening broadcast, MSNBC or digital properties, said Steve Capus, president-NBC News. The operating idea these days, he said, is "bring it in once and use it as many times as humanly possible, and that is how our newsrooms are set up and ... how the business is set up."

At ABC, the news division can point to its "ABC News Now," which delivers news stories of various lengths to TV, the web and mobile devices. In September, the network deployed seven "digital reporters" in various places around the world, said Paul Slavin, senior VP-ABC News, who oversees its digital operations. These reporters may see their stories on the evening newscast but are focused on delivering content for multiple venues.

Digital distribution also means hunkering down more strongly on certain topics, Mr. Slavin said. "We can't be all things to everyone, but we can have the best investigative unit in the business. ... We can bring a level of reportage and quality to entertainment reporting, law and justice, politics."

CBS also sees a chance to try new things, said Sean McManus, president-CBS News and Sports. Streaming live events online has potential, as does soliciting opinion and user-generated content from viewers. Like ABC's Mr. Slavin, however, Mr. McManus sees a healthy future for the traditional evening news and said a big, recognizable network anchor continues to be an important part of the recipe.

The online business, however, is viewed as its own product when it comes to advertising, one that draws a higher cost per thousand given the difference in reach, though ads on the web versions of the news are much less expensive.

Saturday, April 26, 2008

Yikes! Tribune's debt way expensive to insure

TribCo debt expensive to insure

By: Ann Saphir April 25, 2008

(Crain’s) — Tribune Co. CEO Sam Zell last week told investors that despite “significant erosion” in the company’s financials, he’s confident he’ll make good on his $12 billion in debt.

But middlemen who provide these investors with a form of insurance against default — they aren’t buying it.

Bondholders who want to insure their investment in Tribune debt are being asked to pay among the highest rates in the country.

Sellers of so-called credit default swaps — used by bond investors to protect themselves in the event of a company reneging on its debt — are demanding an upfront payment of $6 million and $500,000 a year to guarantee $10 million of Tribune bonds for five years.

Those are “distressed levels,” says Matthew Mish, a credit strategist at Barclays Capital in New York, and they imply a 92% chance of default by 2013. That’s assuming bondholders would get 20 cents on the dollar if the company did default.

“Revenue trends this year to date are significantly worse than we expected,” Mr. Zell said last week on an hour-long call with 350 investors and other interested parties.

Still, he said, a slew of changes — from how ad sales people are compensated to newly hired key officers — are helping to right the ship. In addition, he said, Tribune is moving forward on its planned sale of the Cubs and is considering a sale of Newsday, assets that together are expected to bring in well more than $1 billion.

“From where we sit right now, it does not appear that we will have difficulty meeting our commitments going forward,” Mr. Zell said.

So far, the credit default market doesn’t reflect that optimism, with the cost of insuring Tribune debt hardly budging in the week since those comments.

The reason it’s so costly to insure Tribune debt against default is clear: The company, which took on most of its debt when Mr. Zell engineered a buyout in December, must pay more than $1.4 million in principal by June 2009, on top of an estimated $1 billion in interest expense. The company had $1.16 billion in cash flow last year.

Only a handful of other companies are in the same league, analysts say, and most of them were mired in the subprime mortgage crisis. Credit default swaps for ACA Financial Guaranty Corp. and Financial Guarantee Insurance Corp., both bond insurance companies, and subprime lender Residential Capital LLC, are trading at similar levels to Tribune. Just a notch below, credit traders say, are troubled amusement park operator Six Flags Inc. and Abitibi Bowater Inc., the biggest U.S. newsprint producer.

Friday, April 25, 2008

Abrams' rock and roll speech

Lee Abrams

Sam Zell's new innovation guru, Lee Abrams, uses a video on the company site to explain his vision of how the 1950s growth of rock and roll and reinvention of radio informs his dream of what the Tribune's newspapers, TV and websites could become. He says his first few public utterances were misunderstood, and says he's found more creativity in the Tribune's properties than he expected. Here's the Tribune email urging employees to give it a listen:

[STAGE DIRECTION: INVOKE BEST ANNOUNCER VOICE] What does an innovation officer do? What is our chief innovation officer like? Tribune never had one before. Why does it need one now? How is news & information the new rock & roll, really? Coming up next, shocking new video from Tribune Chief Innovation Officer, Lee Abrams.

Previously on LA Observed:
Radio vet reacts to Abrams

Wednesday, April 23, 2008

TV news stations try cooperation

NBC10 and Fox29 will, for a week, experiment with sharing video footage.

In an unusual experiment among network-owned local news stations, WCAU (NBC10) and WTXF (Fox29) are sharing some video footage this week.

The arrangement, acknowledging the economics facing media as well as the redundancies in some coverage, is a test to "see if we can cooperate on some newsgathering in the field," according to a memo circulated Monday to NBC10 staff by news director Chris Blackman.

The cooperation, which both stations will assess at the end of a week, extends to events such as news conferences and other planned events that both stations would cover anyway, Blackman said in his memo, adding that "helicopter resources" also would be shared.

An NBC10 spokeswoman said Blackman and general manager Dennis Bianchi were unavailable for comment.

"The last thing we want to do is reduce competition," Fox29 general manager Mike Renda said in a phone interview, adding that sharing non-breaking video would have a "viewer benefit" because it would allow each station to devote more resources to enterprise coverage.

"It's not unlike the pool arrangements that already exist at the network level," Blackman said in his memo.

In the most recent Nielsen ratings, both Fox29 and NBC10 were ranked behind 6ABC and CBS3.

Renda said the idea of cooperation stemmed from a story last month about a man who had stopped his vehicle on the Walt Whitman Bridge. "There were four helicopters up there, and they caused a safety issue," said Renda. This led to discussions between Renda and Bianchi.

Renda yesterday said that Fox29 gave NBC10 video of a fire in Juniata Park on Monday.

If a deal can be reached to make the experiment permanent, some technical issues have to be worked out, Renda said. Fox29, for example, broadcasts locally in high definition or HD; NBC10 does not yet. It also was not clear how the arrangement would affect WPHL (Channel 17), Tribune Broadcasting's outlet known as MyPHL, which gets its news from NBC10.

Paul Gluck, who spent nearly 30 years as a TV news executive in Philadelphia, said he did not think the viewer would lose from such a video-sharing arrangement.

Gluck said the arrangement - which he likened to some "pooling" at noncompetitive events by networks - appears to be "not so much of a news cooperative but a newsgathering cooperative."

"If these organizations are covering broad and general news, fine," said Gluck, executive director of the Rudman Institute for Entertainment Industry Studies at Drexel University. "Let's say they have video of a car on fire. It's incumbent of [each newsroom] to do the digging to the real story of why the car is on fire." The challenge, he said, would be to "manage the different cultures in the newsrooms."

Contact staff writer Michael Klein at 215-854-5514 or

Tribune snuffs out smoker's penalty

Tribune Co.'s new top managers on Tuesday ended a $100-per-month penalty for employees who smoke and enroll in the company's health plan, saying the fee is "inconsistent with the new culture."

"We'd rather you use your own judgment when it comes to tobacco use, not impose ours upon you," Gerry Spector, executive vice president and chief administrative officer, said in an e-mail to employees.

About 600 of more than 16,000 employees in the plan acknowledged smoking when they enrolled in October. The fee, effective Jan. 1, was adopted before Sam Zell, now chairman and chief executive, led the going-private transaction in December.

Spector's e-mail congratulated those who had quit and gotten their fees refunded.

"Quitting is one of the hardest things you'll ever do," he said. Others will be reimbursed in late May for any fees paid.

Tribune, which owns the Chicago Tribune, will continue to offer a free smoking-cessation program.

—Barbara Rose

Tuesday, April 22, 2008

Viacom, 5 Hollywood studios to create new TV channel


LOS ANGELES -- Viacom Inc. and five Hollywood studios are joining forces to create a television channel and video-on-demand service, the companies announced Sunday.

The venture, starting in fall 2009, will show movies and television series from Paramount, Paramount Vantage, MGM, United Artists and Lionsgate.

It could provide competition in both programming and viewers to Time Warner's HBO and CBS Corp.'s Showtime.

"This venture has the potential to be a game changer for the industry," Viacom president and CEO Philippe Dauman said in a statement. "We are building an innovative service that will use traditional and new digital distribution technologies to bring great film and television entertainment directly to the consumer."

Viewers will have pay-per-view access to big-budget releases from the studios, such as "Cloverfield," "Iron Man" and "Star Trek." Movies from the companies' archive libraries and new TV series created by the studios also will be featured.

The combined companies have a collection of thousands of films and hundreds of TV shows. MGM owns the world's largest modern film library, comprising titles from United Artists, Orion Pictures and other studios. Paramount has 3,500 motion pictures in its library, including recent blockbusters such as "Transformers" and "Beowulf" and Oscar winners "There Will Be Blood" and "No Country for Old Men."

Viacom owns the content of more than 100 television channels, including MTV, VH1, CMT, Nickelodeon and Comedy Central.

Viacom will provide marketing and other operational support through its MTV Networks division.

Murdoch Acquiring Newsday

Rupert Murdoch's News Corp. has an agreement in principle to acquire control of Tribune Co.'s Long Island, N.Y.-based daily newspaper, Newsday, sources said late Monday.

While the sources cautioned terms were not yet final, the complex transaction would have Tribune Co., led by Chairman Sam Zell, selling a majority of the paper to News Corp. for about $580 million, with the deal structured in a way designed to reduce Tribune's taxable capital gains.

Tribune Co. would retain a small stake in the Melville, N.Y., paper and "some of the pieces," including the paper's real estate, a source said.

One source said there was only "clean-up work" remaining and expected an official announcement soon. Another said it could be weeks before a contract is signed and was concerned about requisite regulatory approval, pointing out: "It's one thing for Rupert and Sam to work out an agreement. It's still up to the battery of lawyers to work out the finer points."

A spokesman for Tribune Co. declined to comment. News Corp. spokesmen did not respond to inquiries. Murdoch, whose News Corp. holdƒรจ ings in the New York City market include the New York Post, The Wall Street Journal and two television stations, long has coveted the efficiencies that ownership or a partnership with Newsday would provide, predicting they would nudge the Post toward profitability.

Billionaire Zell, who became Tribune Co. chairman and chief executive late last year after engineering a highly leveraged $8.2 billion deal to take private the Chicago-based media concern, parent of the Chicago Tribune, has had to reconsider plans to keep the company's core assets intact in light of the company's worse-than-expected double-digit newspaper revenue declines.

Tribune has a $650 million debt obligation due Dec. 4, as well as about $250 million in medium-term notes due in 2008. The plan is to satisfy those obligations by drawing down a line of credit.

Zell said in a conference call with creditors last week he did not anticipate "trouble meeting our commitments going forward," but he also said the company was now "forced to consider the possible divestiture of some of our assets."

Previously published reports had identified Murdoch's News Corp. and Mort Zuckerman, owner of the New York Daily News, as among those interested in Newsday. Zell noted "keen" interest in the paper, and told the creditors Tribune Co. was still trying to determine whether a deal of any kind made sense.

Newsday had a paid circulation average of 387,563 weekdays and 454,194 Sundays for the six months ended in September, according to the Schaumburg-based Audit Bureau of Circulations. The Post averaged 667,119 weekdays and 405,486 Sundays.

The paper has been part of Tribune Co. since its 2000 acquisition of Los Angeles-based Times Mirror Co. It was cited at that time as integral to a national strategy that gave Tribune, which already owned New York's WPIX-TV, both newspapers and television outlets in each of the nation's three largest media markets.

Many of the anticipated benefits of that synergy were never realized, however.

Sunday, April 20, 2008

Working Life (High and Low)

Published: April 20, 2008

Working Life (Low): FedEx

WHEN Jean Capobianco was diagnosed for the second time with breast cancer, her doctors ordered a mastectomy. She first contracted the disease three years earlier and suffered through seven months of chemotherapy. After her cancer came back, her husband walked out on her. “He told me he wasn’t sexually attracted to me anymore,” she said.

For more than a decade, Jean and her husband had been a truck-driving team, driving hazardous waste. Now, with husband and truck gone, her career as a long-haul driver was gone as well.

After she recovered, Jean started looking for work. She spotted a help-wanted ad from Roadway Package Systems, which said it was looking for independent contractors to deliver packages.

“I needed a job,” said Jean. “They tell you, ‘You’ll make all this money working for yourself.’ ”

She soon discovered that her new employer had embraced a controversial strategy to squeeze down costs by millions of dollars each year: it insisted that Jean and the other drivers were independent contractors, not employees. The I.R.S., New York and many other states are investigating this strategy, convinced that many companies use it to cheat their workers and cheat on taxes.

Jean arrived at the Roadway terminal in Brockton, Mass., at 6 each morning and spent the next 90 minutes loading 100 to 140 packages into her truck. She usually left the terminal around 7:30 a.m. and returned after 6 p.m.

Jean had to leave her job for two years when she suffered a severe back injury while lifting a package. Before she could return to work, FedEx Ground, which had acquired Roadway, required her to purchase a truck. The list price was $37,800, with Jean having to make 60 monthly installments of $781.12 and a final, one-time payment of $8,000.

In Jean’s view, it was ludicrous for Roadway and FedEx to call the drivers independent contractors.

“We’re told what to do, when to do it, how to do it, when to take time off,” Jean said. “You have to wear their uniform. You can’t wear your hair certain ways. You have to deliver every single thing they put on the truck.”

Jean called it “a great deal for FedEx. They don’t have to pay for trucks, for the insurance, for fuel, for maintenance, for tires,” she said. “We have to pay for all those things. And they don’t have to pay our Social Security.”

By some estimates, this arrangement saves FedEx $400 million a year, giving it a significant cost advantage over U.P.S., which treats its drivers as regular employees. Moreover, FedEx Ground has sought to rebuff a Teamster organizing drive by arguing that its 15,000 drivers have no right to unionize because they are independent contractors.

“These drivers are more like business people,” said Perry Colosimo, a FedEx Ground spokesman. “They can set their own hours. They can buy routes. They can develop their business.”

In 30 lawsuits, FedEx Ground drivers have argued that they are employees, not independent contractors, and that the company should therefore pay for their trucks, insurance, repairs, gas and tires. In one lawsuit, a California judge ruled that FedEx Ground was engaged in an elaborate ruse in which FedEx “has close to absolute control” over the drivers.

Last December, FedEx acknowledged another setback: the I.R.S. ordered it to pay $319 million in taxes and penalties for 2002 for misclassifying employees as independent contractors. FedEx could face similar I.R.S. penalties for subsequent years. FedEx said it would appeal.

To attract drivers, FedEx Ground often runs ads claiming that its drivers earn $60,000 to $80,000 a year. Many drivers say those ads are deceiving. Gross income can exceed $60,000, but Jean, echoing many drivers, said she had to pay nearly $800 a month for her truck, $125 a week for gas, $55 a week for business equipment, $4,000 a year for insurance policies, plus outlays for tires, maintenance and repairs. Some years, Jean calculated, her net pay was just $32,000, amounting to $10.25 an hour.

Many drivers find it hard to walk away because they have invested so much in their trucks. If they leave, they might still be stuck with years of monthly payments and the final payment of $8,000.

One morning in August 2004, Jean doubled over in pain. Three days later, her doctor informed her she had ovarian cancer.

“The doctor told me to stop working immediately,” Jean said. She not only finished her route that Friday but worked the following Monday and Tuesday as she struggled to find someone to cover her route. Her terminal’s two replacement drivers demanded unrealistic amounts, she said. “They knew they had me over a barrel.”

On Aug. 21, 2004, surgeons removed a large, malignant tumor and did a hysterectomy. The next week the doctors told her she had Stage 4 cancer that had spread to her lungs. She would need chemotherapy through late December.

Jean had twice beaten breast cancer, and she was intent on beating this, too. She fully expected to return to her job in January, and called FedEx Ground’s headquarters to request a leave of absence. Weeks later, a letter arrived saying she was terminated.

“I was crazy with anger,” she said.

Fired and with no income, Jean stopped making payments on her truck. She had already paid more than $40,000 on it, but now she was powerless to prevent it from being repossessed.

“Ten years of beating my brains out for them, and they throw me away like I was a piece of garbage,” Jean said.

FedEx Ground officials said they had sympathy for Jean but had to terminate her under company rules, because she was no longer covering her route and she hadn’t found a replacement driver.

Company officials said they were free to terminate her because in FedEx’s view she was an independent contractor and therefore not protected by the Americans With Disabilities Act. That law requires companies to make reasonable accommodations to keep employees who have cancer or other disabilities. Jean has sued FedEx, asserting that it violated the act.

“To this day, I still can’t understand how they can get away with it,” Jean said. “You work for a company for 10 years and you give 150 percent. I used to go above and beyond. And then I get sick, something totally out of my control. And then to get fired.”

Her voice dropped off, then tears streamed down her cheeks.

Working Life (High): Patagonia

Just inside the door of the men’s room was a rack that held sweaty biking shirts, damp bathing suits and clammy running shoes. The aroma seemed to belong more to a high school locker room than to a corporate headquarters. But this was the house of Patagonia, the apparel company that prides itself on letting its employees take their play every bit as seriously as they take their work.

At lunchtime many days, Patagonia employees go surfing for two hours, while a half-dozen others take a 100-minute, 27-mile bike loop in the hills overlooking the Pacific.

One of the sweaty biking shirts belonged to Andy Welling, a sales manager at Patagonia’s headquarters in Ventura, Calif. At 41, Welling is a fiend about staying in shape — he bikes several days a week at lunchtime, and joins Patagonia’s weekly pick-up soccer game. He often makes up for his lunchtime cycling by working a few hours at home in the evening.

Patagonia is so mellow about flextime that the receptionist at headquarters, an 11-time world Frisbee champion, is allowed to take three months off each summer to run a surfing school. “I could make quite a bit more money working somewhere else,” Welling said. “But to have the quality of life and to remain physically fit, by cycling or going surfing, you can’t put a dollar amount on it.”

Welling has taken advantage of another Patagonia offering: the child care center at headquarters. He drops off his two boys, 5 and 3, at 9 and often has lunch with them. “Being able to have my kids a few feet away from me all the time is fantastic,” Welling said. “It is a bonding relationship I never would have had if I were working somewhere else.”

Patagonia is not like anywhere else. With 1,300 workers and $275 million a year in sales, it donates 1 percent of its annual sales to environmental groups. Four days a week at lunchtime, the company offers yoga and Pilates sessions; there are also occasional classes on fly fishing. Each year Patagonia lets 40 employees take paid two-month internships with an environmental group.

The best spots in the parking lot are reserved for the most fuel-efficient cars, and above dozens of parking spots are solar panels that supply all the power for one of Patagonia’s administration buildings.

Patagonia has 900 applicants for every job opening at headquarters. It sponsors civil disobedience training for employees who want to participate in environmental protests. Its mission statement calls for making the best outdoor products while doing the least damage to the environment. Its Synchilla fleece vests are made from recycled plastic bottles.

At headquarters, 20 surfboards are tucked under the stairs to the second floor, and employees often work barefoot. “When you walk through the front door, we don’t want you to stop being the person you are,” said Lu Setnicka, Patagonia’s director of training.

This unusual blend of work, play, family and environmentalism grows out of the philosophy of Patagonia’s founder and principal owner, Yvon Chouinard. Born in Maine and raised in Burbank, he felt passionate about just one activity in high school: the Southern California Falconry Club. He learned how to rappel down cliffs to visit falcon nests, and out of that grew a lifelong passion for mountain climbing.

Dissatisfied with the era’s soft-iron pitons — small spikes that climbers drive into rock and attach ropes to — Chouinard set out to produce stronger ones. He bought an anvil, taught himself blacksmithing, and made his first pitons out of an old harvester blade. For several years, he lived on less than a dollar a day, selling pitons out of his car and pursuing his passions by climbing in Yosemite and Wyoming.

As demand for his pitons grew, Chouinard rented a metal shed in Ventura and hired a small staff. By 1970, his company had become the nation’s largest producer of climbing equipment. During an excursion to Scotland, he purchased a rugby shirt and concluded that the thick, sturdy shirt was ideal for rock climbing. When he returned to California, his climbing friends asked for shirts just like it, and soon Chouinard expanded into the apparel business, importing rugby shirts.

As the company grew, it had one unbending rule — the business closed whenever the waves in the Pacific were running six feet high, hot and glassy. “Since none of us wanted to be in business, we wanted to blur the distinctions between work and play,” Chouinard said. “That meant we had to break a lot of rules of business.”

Chouinard often jokes about his M.B.A. philosophy: management by absence. Many years he disappeared for six months to go ice climbing in the Alps or surfing, skiing and climbing in South America. His was the ultimate flextime.

Chouinard has a simple philosophy that he says ensures that employees don’t abuse their flextime. “Hire the people you trust, people who are passionate about their job, passionate about what they’re doing. Just leave them alone, and they’ll get the job done.”

Shannon Ellis, Patagonia’s vice president for human resources, says the unusual flextime policies yield increased productivity. “A lot of people recognize that what they have here is unique, and I don’t think they want to jeopardize that,” she said.

In addition to the child care center, Patagonia offers other family-friendly benefits like eight weeks of paid maternity and paternity leave. It also pays 100 percent of the health insurance premiums for its workers, even part-timers. Chouinard says this helps attract the gung-ho outdoors types Patagonia wants — workers who test the company’s products as they climb and surf and convey their expertise and enthusiasm to customers.

“All of these things I’m doing are not to have a socialist birth-till-death utopia here,” Chouinard said. “Every one of these things is good business.”

Lisa Pike, who oversees Patagonia’s environmental grants, said: “He’s proving Wall Street wrong. You can do the right thing and still have an extremely profitable company.”



I'm glad you distributed this article. The disease of converting employees to I.C.'s is not confined to FedEx. Xerox did it with its sales staff years ago (and there's been plenty of litigation there, too). I've been buying office equipment elsewhere since.

For those who believe in buying American, it's true that many well known names (Minolta, Canon, Konica, etc.) are Japanese companies that build their equipment overseas. But so does Xerox now, so what difference does it make? At least you're dealing (or can deal) with company sales staff directly, and not with 3rd party contractors whose promises the ultimate vendor can disclaim. I suppose there's nothing wrong either with dealing with an independent dealer who sells multiple brands and can zig for you if zagging doesn't work.

Back to delivery. Few know that when you have something delivered by FedEx Ground, you're really dealing with the devil. These people have no company benefits, workers comp, disability (unless they buy it themselves), etc. If you have a serious road accident with a FedEx ground truck, you might think you're dealing with someone with deep pockets. Guess again. It's just like having an accident with a taxi in NYC. Even if fleet owned, each taxi is actually owned by a separate corporation, in order to limit liability.

For overnight delivery, particularly of documents, I recommend UPS and USPS Express Mail. With UPS you get excellent reliability and a Teamster workforce who all receive benefits, even if part time. Also, lots of drop-off points: along with UPS stores and drop boxes in building lobbies, every UPS truck will accept overnight envelopes (by handing to the driver or using the slot in the back of the truck)... and they're always happy to take it, because it's part of their job and they know it's a high-profit activity for their company. Express Mail is also an extremely reliable service, with weekend delivery optional (extra charge for Sunday, no extra charge for Saturday), and they're the only such service that delivers to P.O. Boxes.

Probably more information than you wanted to know... but you pushed one of my buttons.


Rich Gelber

Tribune Faces Default On Debt

Hartford Courant’s Parent Is Seen Flirting With Default


Tribune Co., a newspaper and broadcasting conglomerate whose holdings include the Hartford Courant, is perilously close to defaulting on its debt by the end of next year if it doesn’t access its bank credit lines.

Tribune, which also owns WTIC-TV61 in Hartford and WTXX-TV20 in Waterbury, currently doesn’t have enough money and previously approved credit to make debt and amortization payments of $1 billion due this year and another $850 million due in 2009, according to David Novosel, senior investment grade analyst at corporate bond research service Gimme Credit.

To avoid bankruptcy, owner Sam Zell, the billionaire investor who bought the media conglomerate for $8.1 billion in June, could extract Tribune’s entire $750 million credit line as well as sell a handful of its biggest properties. They include the Chicago Cubs baseball team and its Wrigley Field stadium, the Long Island newspaper Newsday, and its one-third ownership of the cable TV channel the Food Network.

Zell already put up for sale the Cubs and Newsday — which has interested News Corp. chieftain Rupert Murdoch, owner of the New York Post and the Wall Street Journal, as well as New York Daily News owner Morton Zuckerman.

Trouble In 2009

But selling Tribune properties may not be enough to forestall a dire future beyond 2009 because of deteriorating economic conditions in the newspaper world.

“When he originally bid for Tribune, Chairman Sam Zell was adamant that he was not interested in selling assets other than the Chicago Cubs, its ballpark, and its 25 percent interest in a regional sports network,” Novosel said. “He has since changed his tune, lamenting that advertising declines are greater than the 2 percent to 3 percent drop he initially expected.”

Gimme Credit analysts were skeptical from the start.

“We questioned his optimism from the onset, as the company is facing pressure from both secular and cyclical trends,” Novosel said.

The sale of Tribune’s various properties may be only a stopgap measure, Novosel said.

As for Newsday, which has annual revenues of $500 million, Novosel said: “At estimated margins of about 17 percent and a multiple of slightly more than seven times, we estimate that Tribune could get roughly $600 million for the paper. Given the challenging operating environment for newspapers and TV stations, a higher multiple seems unlikely.”

Sale of the Cubs, along with Wrigley Field and naming rights and a sports network stake, could generate proceeds of as much as $1 billion, Novosel estimated.

Tribune also has sold its studio production lot in Hollywood for $121 million.

Gimme Credit estimates the combined value of those asset sales at roughly $1.72 billion. “Therefore the actual and rumored asset sales would not be sufficient to meet the debt maturities of $1.85 billion,” Novosel said. “That leaves free cash flow.”

Gimme Credit expects Tribune to generate revenue of $4.9 billion this year, a 3 percent decrease versus last year.

Circulation Trends Down

“We expect continued weakness in the classified advertising category, while circulation continues its downward trend,” Novosel said. “We project earnings before interest, taxes, depreciation and amortization to be slightly lower than last year at just under $1 billion.

“Our forecast for interest expense, which is benefiting of late from the steady decline in rates but could easily reverse itself, is nearly identical,” he added. “Consequently, it appears that coverage will be extremely tight, with little margin for error.”

Since the proposed asset sales and free cash flow are not enough to meet outflows, Novosel said, Tribune will need to look for other asset sale opportunities. He listed Tribune’s stake in the Food Network, estimating the valuations of Tribune’s interest from $500 million to $1 billion.

Tribune’s other newspaper holdings include the Los Angeles Times, Chicago Tribune, Baltimore Sun, and the Orlando Sentinel. Its broadcast properties include TV stations in New York, Chicago, Los Angeles, Seattle, Philadelphia, Washington and St. Louis.

Reducing staff is another option for Zell, according to Novosel. “He has made some headcount reductions, but Tribune has already been through this process, so further gains will likely be minimal,” Novosel said.

Internet advertising with its current growth spurt is a benefit, but, Novosel said, it “is not nearly robust enough to cover the shortfall in print advertising.”

One problem, he said, is that the trading levels for Tribune’s 2015 bonds suggest “the company is on the verge of bankruptcy.

“We think asset sales will provide sufficient coverage of interest and principal this year, but 2009 could be more problematic,” Novosel added.

From Hartford

Friday, April 18, 2008

Tribune Broadcasting Names Group Vice Presidents

Tribune Company Promotes John Reardon and John Vitanovec

Vinnie Malcolm Appointed Vice President/General Manager of KTLA-TV

CHICAGO, March 16, 2004 -- Tribune Broadcasting, a division of Tribune Company (NYSE:TRB), today appointed John Reardon and John Vitanovec as group vice presidents, giving each executive oversight responsibilities for additional stations in the company’s television group. Reardon most recently served as a regional vice president and general manager of KTLA-TV (WB5), Los Angeles, and Vitanovec was a regional vice president and general manager of WGN-TV (WB9), Chicago. The promotions, effective immediately, were announced by Patrick Mullen, Tribune Broadcasting president.

"John Reardon and John Vitanovec are proven leaders who will guide Tribune’s 26 television stations to even greater success," said Mullen. "Each has demonstrated strong operational skills and has been highly successful in a variety of management roles at Tribune."

Reardon will be responsible for Tribune stations in Los Angeles, Dallas, Houston, Miami/Ft. Lauderdale, Denver, Sacramento, St. Louis, Portland and San Diego, as well as the company’s two-station clusters in Seattle and New Orleans. In addition, he will oversee the sales function for all Tribune television stations.

"Tribune’s station group is one of the strongest in the country," said Reardon. "I’m proud to be a part of it and look forward to the new challenges presented by this promotion."

Vitanovec will be responsible for Tribune stations in Chicago, Philadelphia, Boston, Washington, Atlanta, Grand Rapids, Harrisburg and Albany, plus the company’s two-station clusters in Indianapolis and Hartford. He also will oversee management of Superstation WGN as well as creative services operations for the full station group.

"The keys to successful television stations remain great people, popular programs and creative promotions," said Vitanovec. "I’m excited to be working with our station general managers in pursuing excellence in these critical areas."

Vinnie Malcolm has been promoted to vice president/general manager at KTLA, effective immediately. He succeeds Reardon, who had led the station since 1996. As KTLA’s station manager since January 2002, Malcolm has overseen the sales, production, news, engineering and creative services departments, and developed the station’s strategic and operating plans.

About Reardon: John E. Reardon was named West Coast regional vice president in March 2001, responsible for KTLA-TV, Los Angeles; KCPQ/KTWB-TV, Seattle; KWGN-TV, Denver; KTXL-TV, Sacramento; KWBP-TV, Portland; and KSWB-TV, San Diego. Reardon was appointed vice president/general manager of KTLA in 1996 after serving as vice president/station manager since 1992. Before joining KTLA, Reardon was director/sales at WGN-TV, Chicago, from 1989 to 1992. He joined WGN in 1985 as an account executive, was promoted to regional sales manager in 1986, and became local sales manager in 1987.

About Vitanovec: John J. Vitanovec was named regional vice president in February 2003, adding to his role as vice president/general manager of WGN-TV, Chicago, which he assumed in 1999. As regional vice president, he held oversight responsibility for the operations of WXIN/WTTV-TV in Indianapolis, and WXMI-TV in Grand Rapids, Mich. From 1997 to 1999, Vitanovec was vice president/director of operations for Tribune Broadcasting, where he oversaw various corporate functions as well as Tribune’s West Central WB station group. The previous two years he was vice president/general manager of WLVI-TV, Boston. Prior to leading WLVI, Vitanovec held several management positions at WGN and Tribune Broadcasting. He joined Tribune in 1984.

About Malcolm: Vincent A. (Vinnie) Malcolm was named station manager of KTLA-TV, Los Angeles, in January 2002. He was appointed general sales manager at KTLA in 1998, responsible for the station’s sales and marketing functions, including local and national sales and research. He served four years as KTLA’s local sales manager after spending nine months as regional sales manager upon joining the station in 1994.

Tribune Broadcasting owns and operates 26 television stations concentrated in major markets and Superstation WGN on national cable. The group’s combined reach is more than 80 percent of U.S. television households. Tribune Broadcasting also includes Los Angeles-based Tribune Entertainment, a developer and distributor of first-run television programming for the Tribune station group and for national syndication; Chicago’s WGN-AM; and the Chicago Cubs baseball team. Investments include The WB Television Network (22% owned) and TV Food Network (31%).

Tribune Forecast: Broadcast Does Well, Print Tanks

by David Goetzl, Friday, Apr 18, 2008 7:30 AM ET headshotDespite offering a dour view of the economy's impact overall, Tribune Co. chief Sam Zell said the broadcasting group is performing better than expected. Zell said that so far in 2008, the 23 local stations are "ahead of our projections for this year and (are) outperforming the industry average."

This was in sharp contrast to the outlook he painted for the publishing business, where "revenue trends ... are significantly worse than we expected," resulting in a major hit. In the first quarter--final results have not been reported yet--print ad dollars are expected to fall by double digits, compared to the same period a year ago.

The principal hurdle: the continued flow of classified ad dollars to the Internet, an issue all newspapers face. An even more particular trouble spot comes from the papers in Ft. Lauderdale and Orlando, Florida, where the economic problems in the state contributed sharply to the classified decline.

Zell, who took over the company a year ago in an $8.2 billion transaction, said his intention from the get-go was to drive growth of the company's existing portfolio, but the climate has changed.

"Our goal was to keep everything together and to preserve the ownership of all of the assets," he said on a conference call Thursday. "The significant erosion in the first quarter has certainly put that plan into some question. We are forced to consider the possible divestiture of some of our assets."

That was not a total surprise, since the company has been approached and is considering selling Newsday in the New York area.

One asset Zell has always said would be sold is the Chicago Cubs baseball team. Financial deal books will be sent to potential Major League Baseball-approved buyers in the next 10 days, he said.

Zell said that he and the newly hired members of his management team have focused on re-engineering Tribune's culture, looking to give more autonomy to managers at the local papers and stations.

"We've made significant strides in transforming the kind of culture, but we certainly have a lot of work left to do," he said, adding that the company needs to be "faster and leaner."

He has made efforts to engage in discussion and solicit ideas from employees at all levels, via a Web site. Some 2,000 e-mails came in within the first month--with "a very large number of these giving us insight into opportunities to dramatically improve the company going forward."

"Employees are starting to take initiative--something that had never happened before--and to launch revenue-generating projects and programs," he said.

One initiative that Tribune has launched is combining the operations of the company's CW station in South Florida with its Fort Lauderdale-area paper. The publisher of the paper is now overseeing operations at both, with a general manager doing the same for sales.

Among the broadcast group are CW stations in six of the company's top 10 markets. The company recently switched its San Diego station's affiliation from CW to Fox, which the company said added some $150 million in value for the station. The company also said it hopes to squeeze more revenue from its six Fox stations.

Among the papers it operates are the Los Angeles Times and Chicago Tribune, its cornerstone assets.

In 2007, publishing ad revenue was $2.9 billion, down 9%; and the broadcasting TV group brought in $1.1 billion in revenue, down 2%.

CEO Sam Zell, of the newly private Tribune Company, told investors that he is reconsidering his plan to keep the media company intact because of a "significant erosion" in revenue.

Zell says he expects double-digit declines in print advertising this quarter. Zell confirmed that he's considering selling more of the company's properties including Long Island-based Newsday. The Times badly missed analysts earnings estimates, swinging to a net loss of $335,000, or less than a penny per share.

Classified ad revenues, the most vulnerable to economic shifts and competition from the Internet, were the worst-hit category, dropping more than 22 percent.

Thursday, April 17, 2008

Zell: Eroding Tribune Co. Revenue May Force Sell-Off Of Newspapers

By Mark Fitzgerald


Published: April 17, 2008 2:55 PM ET

CHICAGO Tribune Co. revenue is down significantly so far this year, and may force the Chicago media giant to sell off newspapers and other properties, Chairman and CEO Sam Zell said in a conference call Thursday afternoon.

"When we got into this, our goal was to keep everything together, and to preserve the ownership of all the assets," Zell said. "The significant erosions of the first quarter has certainly put that plan into some question, and we are forced to consider the divestiture of some of our assets."

A Tribune spokesman said operating results for the first quarter are still being compiled, and would be released in mid-May when they are filed with the Securities and Exchange Commission.

But Zell said the preliminary results show "double-digit declines in print" for the quarter, largely on big dips in classified ad revenue. Real estate and recruitment classified are down "significantly" ahead of other ad categories, he added.

Classified is about one-third of total print ad revenue, and was responsible for nearly three-quarter of the decline in revenue during 2007, CFO Chandler Bigelow said.

Zell said broadcasting results are running ahead of 2007 results, and ahead of the company's projections for the year.

Zell also said talks to sell Wrigley Field, home of the Chicago Cubs baseball club, are "making progress." Tribune wants to sell the ballpark separately to an Illinois public agency. Zell said offers books to sell the team will be sent out in 10 days.

Mark Fitzgerald ( is E&P's editor-at-large.

Newsday Publisher Says Zell Conference Call 'Creates Uncertainty'

by John Koblin | April 17, 2008

Since Sam Zell acknowledged for the first time today that there are outside parties asking about Newsday, the paper's publisher, Tim Knight, was forced to acknowledge it as well. He has just sent a memo out to his staff, explaining that he knows "this creates uncertainty." The memo is revealing since it seems to show that Mr. Knight knows as much as we know: not much.

Dear fellow Newsday employee,

Sam Zell hosted a conference call with Tribune lenders today. In the course of taking questions, he acknowledged that he has received inquiries about Newsday.

As we all know, Newsday does an excellent job of serving a very desirable marketplace of people who are highly valued by advertisers. It is not surprising that the possibility of acquiring Newsday would generate a lot of interest. Whether anything will ultimately happen as a result of these expressions of interest is not known at this time.

I know this creates uncertainty; however, the people of Long Island are depending on us to stay focused on delivering them local, unique and useful news and information, such as our important investigative coverage of LI school districts' pension scandal.

If and when there is something tangible to report, I will let you know.

Tribune may sell more assets but expects to meet short-term obligations

Given the deepening financial downturn in the newspaper sector, there has been speculation of late that the heavily leveraged Tribune might encounter difficulty making good on the hundreds of millions of dollars in debt obligations that are scheduled to come due late in 2008.

But Zell, when asked directly about Tribune's liquidity, responded by saying he expects the company to be able to meet its payments.

In response to a question about the status of Tribune's Newsday newspaper, Zell said only that "when we originally entered into (the buyout) our goal was to keep everything together," but the subsequent erosion in revenue "has certainly put that plan into question," and obliged Zell's management team to consider a number of potential divestitures in addition to the cost-cutting and revenue-enhancement measures they have put in place to date.

Thursday's conference call was designed, officials said, to discuss progress at the company" since the going-private transaction and to provide an update on trends in early 2008.

From the start, Zell has envisioned selling Tribune's Chicago Cubs baseball team and using the proceeds to pay down some of the LBO-related debt. But the sale plan has moved more slowly than expected, in part because of Zell's desire to sell the team separately from Wrigley Field, where the Cubs play.

On Thursday, he signaled that the process is regaining its momentum: the company now intends to issue offering documents to potential buyers under two formats -- with the stadium and without.

Zell also told the creditors that he and his management team have made "considerable strides" in altering the culture at Tribune, which he has characterized as conservative and overly bureaucratic.

"We've raised the bar against which success will be measured," Zell said. Tribune officials described experiments under way at the media chain's smaller newspapers, including more performance-oriented compensation packages for sales people and a heightened focus on local news.

Those efforts, said Dave Novosel, of the credit-analysis firm Gimme Credit, promise to be "helpful, but certainly not transformational."

"Overall, we didn't hear anything to change our negative view of Tribune" debt as an investment, Novosel said.

Tribune expects to pay a $650 million debt obligation that comes due Dec. 4. In addition, about $250 million in medium-term notes come due in 2008, and Tribune intends to satisfy those obligations by drawing down a line of credit established under what is known as a "delayed draw facility." That money will be available, the company said, because officials don't expect they will need to tap into it to fund working-capital requirements.

SAG signs interim pact with Indies

Guild aims to pact with indies

By Dave McNary

After two days of contract negotiations with the majors, the Screen Actors Guild is looking to put some pressure on the studios by signing interim deals with indie feature producers that would allow actors to continue working on select projects even if a strike occurs.

SAG announced late Wednesday that it had reached pacts for nine pics with the Film Department, Mark Gill and Neil Sacker's year-old shingle.

But the majors are unlikely to react to SAG's maneuver, as Alliance of Motion Picture and Television Producers member congloms have been steadfastly holding off on starting any projects until after a deal with the guild is clinched.

SAG's guaranteed completion contracts are available only to independent feature productions that have neither financing nor distribution deals with any AMPTP-repped company.

The Film Department pics include writer-director Bart Freundlich's romantic comedy "The Rebound," starring Catherine Zeta-Jones and Justin Bartha. Production starts next week in New York City. Others are "Law-Abiding Citizen," a thriller starring Gerard Butler, which starts production Aug. 11; WWII thriller "Brothers in Arms," directed by Marcel Langenegger and set for late summer/early fall in the Czech Republic; "The Other Side of Paradise," the story of Zelda and Scott Fitzgerald, with production in late summer/early fall; and romantic comedy "Earthbound."

"We're thrilled to have reached these agreements with SAG, with every indication of significant benefit for their members and for our filmmakers who have worked so hard to get their movies ready for production," Gill said. "Effectively, this allows our films to proceed into preproduction in April, May and June against production starts in July, August and September -- a time during which production volume looks likely to be down by at least 50 films, as the studios are currently unable to proceed."

The signing of the "guaranteed completion contracts" signals that SAG's not expecting a quick resolution to the talks. The negotiations began Tuesday at AMPTP headquarters in Encino and continued Wednesday with minimal public disclosure as to the substance of the bargaining.

SAG and the AMPTP plan to negotiate every day -- except for Sundays -- through April 26. The majors will then launch talks with rival actors union AFTRA on April 28.

The guild's decision to pursue interim agreements is a strong indication that the sides have considerable ground to cover before a new three-year contract is reached. However, reps for SAG and the AMPTP have so far refrained from the kind of public criticism of each other that characterized the AMPTP's early bargaining seshes with the WGA last fall. Plans are for the sides to issue a joint statement at the end of each day; after the first day of talks on Tuesday, SAG and the AMPTP said only that initial proposals were exchanged.

SAG first announced in early March that it was offering the contracts to independent feature producers, under which producers would agree to observe the terms and conditions of any SAG interim deal that would be offered during a strike. By signing such a contract, indie producers would not have to worry about a strike shutting down their productions.

The prospect of an actors strike hitting after the current SAG contract expires June 30 spurred a ramp-up in feature production at the majors last year and earlier this year. Production schedules have been designed so that shooting's completed by mid-June -- with insurers insisting they won't issue completion bonds for projects that can't be completed by that deadline.

The WGA signed more than 20 interim deals during its strike as a way of gaining leverage over the congloms. Companies agreed in advance to adhere to terms of the guild's final contract agreement.

The first WGA interim pact was signed in late December by David Letterman's Worldwide Pants. The guild eventually signed Lionsgate, RKO, Marvel, Weinstein Co., United Artists, Sidney Kimmel Entertainment, Spyglass Entertainment, Media Rights Capital, Jackson Bites, Film Department, Intermedia. and Mandate.

Management-Labor Cooperation Increases Profits

Okay, I know SCA Tissue North America is not a Film/TV/Theatre/Print/Media company, but I thought their example worth sharing. The employees are every company's most valuable asset. When Employers recognize and embrace this concept, profits increase.


SCA Tissue North America

From American Rights At Work

scalogo.jpg Partnering with its workers' unions enables this trend-setting paper firm to develop an efficient and environmentally-sound manufacturing system.

In Partnership With: USW

Worker collaboration translates into higher profits

SCA Tissue North America began U.S. operations six years ago and quickly established itself as a leading producer of paper towels, napkins, and bath and facial tissues used in the "away from home" market. SCA's success comes, in part, from the company's strategic business decision to establish a cooperative relationship with its workers and their union, the United Steelworkers (USW).

At a Glance

SCA Tissue North America is one of the largest producers of "away from home" tissue products in North America. It is a subsidiary of Sweden-based Svenska Cellulosa Aktiebolaget, founded in 1929.

Philadelphia, PA (US)


Paper manufacturing and tissue products

Union Employees
1,600 production and maintenance workers

Total Employees

Annual Revenues
$1 billion (US)

8 locations in AL, AZ, IL, NY, and WI

Office buildings, industrial sites, healthcare facilities, and food service establishments

Upon entering the U.S. paper market, SCA bought several paper mills from Georgia-Pacific. Workers at several of these locations were already affiliated with the USW, and initial contract negotiations between SCA and the union started out as shaky and contentious. But during the heated negotiations, SCA and USW realized that an adversarial labor-management model harms both the company and the workers. A partnership emerged out of that initial struggle that promotes cooperation over conflict.

One of the first initiatives of the partnership was the adoption of a neutrality agreement between SCA and the union. This voluntary pact established a code of conduct prohibiting either party from disparaging the other, or using intimidating or coercive tactics on employees. The agreement at SCA's Barton, AL, operation also set rules to ensure workers have the ability to freely decide to form a union, and if so, by which process: a National Labor Relations Board election or majority sign-up. In 2003, workers chose to organize through majority sign-up and SCA abided by their agreement to recognize the union.

An integral component of the labor-management partnership is the Joint Advisory Committee comprised of company executives and union leaders. The committee meets quarterly to address challenges in the workplace and highlight successes. Joey Weston, a converting technician at the Barton facility and president of the local union, speaks to the value of having an employer who respects workers' rights, "It gave me the feeling they were truly concerned about their employees and willing to listen to them."

Another notable program that emerged from the partnership is the work system redesign of three key manufacturing facilities. The program aims to use worker input to create a more efficient and worker-friendly production process.

The company's steadfast commitment to employee collaboration is already reaping rewards: the employee turnover rate decreased by 29 percent in one of SCA's high turnover locations, and the company boasts one of the best safety records in the industry. Confirms Chuck Gintz, Director of Employee Relations, "Overall productivity has improved as a result of the joint partnership and labor-management work system redesign process and programs."

SCA touts more than a cooperative labor-management model. The company has an exemplary environmental record and invests in sustainability efforts worldwide. This paper manufacturer deserves praise as a forward-thinking, socially-responsible employer.

Selection Criteria

> Free and fair chance to form a union

> Collaborating as equal partners with workers and their unions to craft innovative strategies on compensation, performance, and productivity to meet business goals and address challenges

> Creating new jobs and implementing employee retention strategies

> Offering training and professional development opportunities

> Protecting workers' safety and health