Friday, April 18, 2008

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.

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