Friday, July 18, 2008

Randy Michaels built a radio empire, but does he have a plan for newspapers?

By Carol Eisenberg

The latest wave of departures among Tribune top brass - Los Angeles Times Publisher David Hiller and longtime Chicago Tribune Editor Ann Marie Lipinski resigned this week - cast a pall over already-demoralized newsrooms, in part because they were not about anyone falling on their swords.

Hiller had just signed off on 250 layoffs at the Los Angeles Times, but appears to have been tossed under the bus despite his willingness to do the dirty work. Lipinski, who has been handing out dozens of pink slips herself at the Chicago Tribune, reportedly made her own choice to leave. “This position is not the fit it once was,” she told staff.

So where is all this heading? Does the brash Michaels have any vision of where he is taking the company - beyond bailing as fast as he can to stave off potential bankruptcy in the face of a $13-billion debt incurred by Sam Zell’s purchase last year?

Considered a genius by his admirers and a madman by critics, Michaels is a former radio executive and shock jock (who reportedly resorted to farting on air and fake-pureeing a frog to boost ratings), who was handpicked to run the Tribune by its new owner Sam Zell.

Like his boss, Michaels affects a profane, tough-guy style. He announced the arrival of the new regime to Newsday staff last January by saying, “The difference between then and now is we’re not having another meeting. . . . We’re Actually Fucking Doing It.”

Zell, nicknamed the “grave dancer” for his knack for pulling value from dying businesses, has been a true believer in Michaels since buying a string of radio stations called Jacor Communications in 1993, then headed by Michaels.

Michaels impressed Zell as an empire builder, riding the wave of government deregulation to make tons of money for Jacor and then, San Antonio-based Clear Channel Communications Inc. He took Jacor from 13 stations to 230 in five years, and helped engineer a merger with Clear Channel in 1999, according to a profile in Chicago Business. At Clear Channel, he led a strategy that made the company the biggest radio operator in history.

But despite his financial success, Michaels “became the poster child for what people didn’t like about corporate radio,” Sean Ross of Edison Media Research told TVNewsday.

Among his innovations was “voice tracking” in which ‘local’ radio shows were produced hundreds of miles away, eliminating the need for many jobs and homogenizing play lists across the nation.

And then there were stories about his pranks, like the day he roamed the halls at Jacor wearing a rubber penis around his neck, accosting female employees, according to allegations aired on ABC’s “20/20,” by former Florida disc jockey Liz Richards who sued the company, including Michaels, for sex discrimination. Richards’ suit was settled out of court in 1995, and the terms were never disclosed.

“Looking for classy radio programming?” wrote Eric Boehlert in a withering 2001 Salon profile. “Don’t look here. The company is known for allowing animals to be killed live on the air, severing longstanding ties with community and charity events, laying off thousands of workers, homogenizing play lists and a corporate culture in which dirty tricks are a way of life.”

Michaels has always insisted such criticisms were unfair, attributing them to resistance to change in a rapidly consolidating industry.

Regardless, the reception he got from Tribune employees earlier this year was hopeful in many quarters, especially when he seemed so emphatic that the solution to the industry’s woes was not further cost-cutting, but creating entirely new streams of revenue. “You think Amazon is worrying about selling ads? You think eBay is worried about selling ads?” he said in his remarks at Newsday. “In the interactive world, that’s the icing on the cake. Media companies have their head where it doesn’t smell good.”

Except that it hasn’t worked out that way. However paltry those advertising revenues may have seemed then, they have nose-dived since. And with new income streams yet to materialize, the company’s steep debt payments began to seem more and more onerous.

Despite Zell’s insistence that he planned to keep intact the company’s 11 newspapers and nearly two dozen television stations, the company sold off Newsday, one of its most profitable papers, borrowed $300 million against future earnings and began exploring the sale or lease of the landmark properties owned by the Chicago and Los Angeles papers.

By June, Michaels was assuring worried investors: “We are actively pursuing a program to right-size our newspapers.”

The definition of ‘right-sizing - was not spelled out.

“Sounds better than ‘panicking,’” suggested media consultant Ken Doctor on his blog. “To describe the current round of staff cuts, though, there’s a better word: Frightsizing.”

Another tip-off to the future was suggested earlier this week by Lipinski’s successor at the Chicago Tribune, Gerould W. Kern, who was the one who introduced metrics to measure reporters’ productivity. In an interview with his own paper, Kern said he planned to work closely with Los Angeles Times Editor Russ Stanton to see where resources could be shared.

The scope of that sharing was not spelled out, but that too might signal a page out of Michael’s playbook at Clear Channel.

“If Randy repeats what he’s done in radio, we’ll see a lot of newsrooms eliminated,” media consultant John Gorman told Chicago Business. Gorman, who remembered hearing a Clear channel DJ mispronounce the name of the Cleveland suburb from which he was purporting to broadcast, predicted a scenario in which local TV newscasts would be ‘video-tracked’ from a central studio to save money.

To be fair, no one else has hit on the solution to print media’s declining fortunes either. Nor has anyone else beat their chest in quite the same way as Michaels or Zell.

“The dearth of decent ideas designed to save newspapers - or reinvent them for the digital age in ways that preserve their crucial democratic functions - is curious and depressing,” wrote Eric Alterman in The Nation. “It’s curious because some of the smartest, most ambitious and most civic-minded people in America are deeply engaged with the problem. It is depressing because the only ones with the self-confidence to undertake radical measures appear to be completely off their respective rockers.”

As Michaels himself promised Tribune employees in January: It’s going to be a wild ride.

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Tribune Company (Tribune) is engaged in newspaper publishing, television, and radio broadcasting and entertainment. Tribune became a private employee owned company in December 2007 and Sam Zell, a real estate player, holds 40% common equity of the company on fully diluted basis.

The company primarily operates in the US. It is headquartered in Chicago, Illinois and employs about 19,600 people.

The company recorded revenues of $5,063 million during the fiscal year ended December 2007, a decrease of 7% over 2006.

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