Exactly what are those wacky Zell/Michaels guys thinking?
By Michael Malone -- Broadcasting & Cable, 4/14/2008
According to recent press releases from Tribune Co, new interactive president Marc Chase blackmailed his way into his new post, the company is changing its name to ZellCoMediaEnterprises, and new KSWB San Diego boss Ray Schonbak is adapting to Southern Cal climes by wearing a Speedo under his work clothes.
It's business as usual at the zany new Tribune, which has hinted at dramatic plans, including substantially boosting its syndication production, to reshape the TV industry since real estate mogul Sam Zell took the 160-year-old company private last December. Tribune's game plan will become clearer when chairman/CEO Zell and Interactive and Broadcasting CEO/EVP Randy Michaels discuss earnings and “an update on business trends in early 2008” on a conference call April 17.
Few station groups have garnered more attention lately, as the broadcast community wonders just what Michaels and Co. have planned for the dozens of stations, representing both Tribune and the separately-owned Local TV LLC, under his watch. “It's clear that with the team Sam has put together, it will not be a status quo broadcast company,” says NAB media relations E.V.P. Dennis Wharton.
“Mavericks,” “visionaries” and “total nut jobs” are but three of the phrases used to describe Michaels' crew. Tales abound of Zell's f-word tirades on YouTube, of Michaels dropping trou at an NAB Radio show years ago, and new pinball machines around the Tribune office.
It seems everyone is either amused, intrigued, bemused or all of the above by the team Michaels has assembled. A veteran of Clear Channel radio, Michaels has brought on a passel of pals from his past life. Among others, Clear Channel vet Sean Compton was tapped to be senior VP of programming earlier this month, XM Radio's Lee Abrams started as chief innovation officer April 1, and Clear Channel vets Jerry Kersting and Chase joined as well.
It is, by several accounts, a motley gang that's high on enthusiasm, if a bit short on television experience. “Other than [Tribune broadcast president] Ed Wilson, I just don't have a lot of experience with them,” says TVB president Chris Rohrs. “I haven't seen the scouting report.”
Tribune is carrying $12.8 billion in debt, and posted $1.14 billion in television operating revenues last year, a 3.6% drop from 2006.
But suddenly the expanded group is wielding considerable broadcast clout. Just last week, Michaels was named to the NAB TV board. In late March, CW outlet KSWB grabbed the Fox affiliation from longtime Fox affiliate XETV.
Late last year, Tribune announced it was partnering its 23-station group with Local TV, the broadcast arm of Oak Hill Capital Partners. Oak Hill bought nine former New York Times Co. stations, including WHO Des Moines, early in 2007, and is awaiting the close of a deal with News Corp. for eight Fox stations, including WJW Cleveland. Tribune and Local TV created “a third-party broadcast management company which will provide shared services to all of the stations Local TV and Tribune Company own.”
In Tribune's flippant fashion, the new company is officially known as “The Other Company,” and is headed by Michaels. The partnership was set up to combine functions such as IT and engineering, but is also shopping for syndication with all the buying power of a 40-station group—more stations than broadcast heavyweights such as Nexstar and Hearst-Argyle.
“Play to win,” reads Local TV's employee handbook. “[Broadcast] Shares add to 100%. We can't grow our share of revenue or audience unless someone else's goes down.”
While local marketing agreements between stations in the same market are commonplace, no one contacted by B&C could recall a previous example of two station groups joining forces to create virtual duopolies, such as Local's current one in St. Louis. (“I'm really not sure I understand [the intricacies of the arrangement],” admitted one Tribune insider.)
Some privately question whether the partnership skirts the FCC's ownership rules. (The FCC, which is reportedly set to rule on the Tribune-Local partnership any day now, declined to comment.)
As the conference call approaches, it's anyone's guess as to what Zell—who purchased Tribune a year ago—and Michaels will reveal. (Executives from both Local TV and Tribune declined comment, saying “all pertinent stuff will be covered” on the call.) With so many Clear Channel veterans on board, some expect Tribune to dramatically increase its radio holdings.
A well-placed insider sees The Other Company taking advantage of Tribune's production studios to resurrect its syndication outfit and both produce and distribute syndicated programming.
Some see more newspaper/TV partnerships in certain markets, such as last month's announcement that WSFL Miami would move into the South Florida Sun-Sentinel offices, and Zell hinting at a similar move for KTLA and the Los Angeles Times.
Others say the Local TV partnership may be extended to include more station groups. “There are a lot of mom-and-pops out there with substantial overhead,” said one TV executive with knowledge of the Tribune execs' thinking.
Whatever Tribune does, most everyone agrees that it will be anything but traditional broadcasting. “They feel the business is in need of new ideas, and they seem more willing to take calculated risks than some might be,” says Barrington Research analyst James Goss. “Maybe they feel broadcast-types are stuck in the past, when things were more simple.”
This could be great and/or awful depending on how valuable Sam and Co. decide their employees really are to their plans.
In the standard scenario, Local TV will be used to out source and consolidate Tribune engineering and IT functions to a central, non-union, lower paying, hub, creating massive layoffs of experienced TV professionals.
A more enlightened idea would be to re-task experienced engineers and IT staff to support increased in-house TV/multimedia production. More Tribune produced news, sports, educational, and entertainment shows could reduce program costs and create a new profit center for the company.
Based on Mr. Zell's actions so far, such as excluding the 70% of his employees that are union represented from the "partnership" that now owns Tribune through an ESOP and describing the veteran reporters at his Washington DC bureau as "overhead", I don't think there is going to be very much actual innovative, "out of the box" thinking, despite all the hoopla and funny press releases.
Still we live in hope.BD