Wednesday, January 12, 2011

Welcome to Tribune Company: Key advice for the next chief executive

By Charles M. Madigan
Columbia Journalism Review

Dear Sir or Madam: Your most important responsibility before you settle in as CEO is to make certain everyone knows you respect the institution, not just what its stately gothic tower represents, but also the mission of its embattled employees. It is likely that you are not from the world of news, but from the world of finance. I suspect your objective will be to make Tribune, once the gold standard for journalism in Chicago, a viable, respected company again.

A significant anniversary that nearly coincides with your arrival should not be allowed to pass without notice. Robert R. McCormick took control of the Chicago Tribune in 1911 after its owners had decided to shut it down as a lost cause. He would not allow that and spent much of his troubling, controversial life building a strong Chicago institution.
Your challenge is just as great as his was.

I most certainly believe that you can succeed. Of course, you know every business needs a central mission. Once that is identified, it knows what direction it should take, what objectives it should strive for, what behaviors it should reward, what measures it should apply to its own performance.

Your business is news.

But you are sitting now on top of a company that lost its way years before its troubles became apparent. It also faces perhaps decades of legal conflict over an array of disagreements among various creditors, employee groups, and former shareholders angered by the company’s ill-fated, debt-bloated restructuring. It would take pages just to list the plaintiffs.
Demonizing previous generations of executives serves no purpose. But in the interest of keeping you from repeating mistakes, a digression is in order for some important history about how such a promising enterprise fell into dire straits.

The Unraveling

Technology brought such sweeping change to newspapering in the 1970s and 1980s that publishers found themselves delightfully awash in profits. When hot type yielded to offset printing, several layers of costs were squeezed out of a business that was already profitable. The IRS noticed and publishers, eager to protect their fortunes, were quick to sell their family-owned operations to an emerging array of newspaper chains—Tribune among them—rather than to pass huge tax liabilities to the next generation.

It happened so quickly that within a decade or so, those chains controlled most of the nation’s newspapers, became media conglomerates, and were collecting capital in the public marketplace. That made newspapers flush for a while. They expanded everywhere. For Tribune, that meant taking on immense debt to buy the company that owned the Los Angeles Times and other papers.

It was an intriguing concept until the costs and conflicts were examined. At one point, there were almost enough Tribune reporters in Washington to give one to each member of the U. S. Senate. There were overlaps around the world when the Los Angeles Times foreign and national staffs and the smaller, but still aggressive, Tribune foreign and national staffs were joined.

Then it all unraveled.

The crushing burden of debt collided with Wall Street’s unyielding demand for increases in quarterly profits. That blasted a hole in the bottom of Tribune. The money started pouring out just as circulation and classified ads were shifting, eyes and dollars having been drawn to a new technology, the Internet.

The news “products,” all of them—from the graying eminences at the center of the business to the radio and TV properties—lost budget, lost staff, and lost, above all, reputation. The Chicago Tribune lost its foreign and national staffs, slashed deeply into its Washington presence, and began whittling away at its costly veterans back home.

With every act, the drama shifted ever closer to darkness.

The Los Angeles Times became a revolving door for editors and publishers. Not even modern legends could stop it. John Carroll and Dean Baquet were driven out in short order. James O’Shea followed. The Chicago Tribune’s institutional memory basically walked out, encouraged by buyouts and hints there would be few good jobs in the unhappy future.

Then, for Tribune, deus ex machina arrived in the form of a stubby, fabulously wealthy real estate baron with a taste for shocking quotes, big parties for his buds, and fast motorcycles: Sam Zell. He put $300 million of his own money on the table, cobbled together $12 billion in debt and bought out all the public shareholders.

It did not work.

Zell installed an array of former radio executives who seemed to take advice only from one another. The company was not producing enough cash to pay interest on its debts, so Tribune was in bankruptcy in short order, where it remained at the time of this writing. Zell’s minions have either been defenestrated after dubious behaviors of all kinds became public, or are on their way out. Morale, already shattered by rounds of buyouts and dead stock prices, fell into a pit.

We now know with certainty why publishing and broadcasting are such different creations, and why the clown pirates who do so well creating “morning zoos” and other entertainments for listeners on one side are such disasters on the other.

Perhaps worse, the Zell era sliced even more weight from Tribune’s reputation, already suffering as it pushed through the same staff cuts and budget slashes that hit the rest of the newspaper business. Zell has announced he will play no role in Tribune after it emerges from bankruptcy. People applauded this news.

Companies in bankruptcy rarely disclose much information on their condition. But what has been released shows that through mid-2009, Tribune did not do well. In the first half of that year, its cash dropped by $50 million and its revenue declined by about 23 percent. Circulation on the home front (and afar in Los Angeles, Baltimore, and elsewhere) continued its slide.

People who are aware of Tribune newspaper culture put great significance in the number 500,000. Not too many decades ago, that was the measure beneath which daily circulation would simply never be allowed to drop. Now the Chicago Tribune has to look up to see the bottom of it. In the past year, daily circulation declined 5.2 percent, to 441,508, and Sunday circulation dropped 4.4 percent, to 768,073.

All of this transpired while the media world was mutating its business models. Tribune was actually far ahead of the curve in the world of Internet news, but turned its back on the idea of maintaining a robust website when it became clear it wasn’t going to provide much revenue very quickly. Instead, the company pushed a collection of Web-based products that were more about marketing than about news. That changed later, but not quickly enough at any of the Tribune properties.

Everything about the news playing field changed while Tribune was wrestling with its own budget and profit pressures, first, and Zell and his unusual executives and the bankruptcy, second. The distractions over a period of four or five years were severe and disruptive.

Where to Go From Here?

Start with that simple question, “What is Tribune about?”

The answer should be, “Tribune is about news.” Every one of your thoughts should flow from that conviction. To be sure, top executives in the pre-Zell era were not (with a couple of noteworthy exceptions) from the world of news. But they didn’t hate it. They were always willing to listen to it. Most of them understood it was important. The public need and right to know were not viewed as quaint, outmoded ideas.

They were aggressive.

In quick order, you must revive that aggression and rebuild that connection with news. That notion is not romantic. It is a business proposition constructed on one assumption: people still want to know what is happening, perhaps not the way Tribune told them in the past, but they still want to know. Almost everyone else in traditional media is abandoning the idea of serious news coverage. Local TV budgets are squeezed. Radio is almost totally talk. A wide and promising field is opening up where competition used to be.

But you need to know more than that to set the strategy. Amid the handwringing and keening about the decline of media, an array of interests is measuring the field and toying with “products” that are all basically news based. These range from simple community websites to vast social networking products like Facebook. Yahoo, AOL, Google, countless independents and experimenters are looking for what will become the new model for news media.

It’s time to revisit that old story about Colonel McCormick. He was not born with newspaper instincts. He honed his knowledge of Chicago while he was reforming the Metropolitan Sanitary District. In his head, he had a central piece of knowledge that was important to the fortunes of media in his day; he knew where development was going to be in Chicago because he knew where water was going to go.

If you want to win the war this time around, you need to know where technology is going to go, where demographics are going to go, where people are going to go for news, and you need to put everything you can muster in front of them.

You want a plan for the future? Go get the news business.

As CEO, you will be picking the people who run the institutions that fall under Tribune’s umbrella. Like a missionary, you must create converts to the news cause. You must explain to them that technology and change are not enemies, but opportunities.

You must develop a much deeper awareness of customers. It was a mistake to think of a customer as a shareholder. It was a mistake to think of success as increasing quarterly performance. It was a huge mistake to think of print as a near-dead medium (embracing the rhetoric of people whose own fortunes were connected to its failure) just as it was a huge mistake to think of the Internet and technology as enemies. The “either/or” model was just flat wrong. It’s time to transform thought about this.

You must start on two levels. One level is about customers and the second is about repairing damages of the recent past. The latter, which will be hard, costly, and painful, should come first.

Get Smaller Fast

There is no plausible reason anymore for Tribune to be running publications in Los Angeles, Baltimore, Florida, Pennsylvania, or anywhere but Chicago. The arguments about synergies and efficiency and gigantic advertising footprints have all collapsed. They were strategies that made sense in an era that ended a decade ago.

People in those places despise you. They cannot wait for you to fail. They wish you only ill. No one can be a worker focused on customers in that atmosphere. Their days will be consumed by rumors of cuts to come and resentments of cuts already accomplished.

Recall that when Tribune owned the New York Daily News (and there were historic reasons for that relationship that transcended shareholder value) the buzz in New York was that all of the Daily News profits were shipped to Chicago and dumped into Lake Michigan.

The atmosphere has changed so radically that an argument can be made that only local markets in advertising and news can help news companies return to stability for the long term.

What is certain is that Chicago can never care as much about Los Angeles, Baltimore, or anywhere else as it cares about itself. And caring about one’s self is a crucial component of success. All great news companies deserve local ownership.

In this process, avoid the creative debt nightmares that wrecked the company the last time around.

All of those decisions are “inside the Tower” decisions for Tribune. What comes next is not.

A New News Universe

Nothing changes all at once. Readers will tell you when they no longer want a print product. Don’t rush them.

In this era in which we all anticipate living to, say, ninety-five years of age, an institution that has a readership that averages someplace in the forties or fifties could well have thirty to forty more years of loyalty to tap. A desperate rush to get teen and young readers now is unlikely to change anything. In my lifetime, I have not found more than a handful of people who read the newspaper regularly as teenagers. Not in any generation.

Of course, the younger generation will age. (OMG! No!) It may well mature into newspaper readership, or at least a part of it. This doesn’t warm the hearts of investment counselors, but then it doesn’t have to if you are no longer publicly held.

Meanwhile, you must demand that all of your customers be treated with respect, including people over fifty. People should not be viewed as declining assets. They are living customers, voting every day with their purchase of the paper. It is an important demographic. This number is easier to understand once you realize that the biggest magazine in America is the one produced by the AARP, the advocacy group for people over fifty, which has a circulation of 24.4 million.

Granted, newspaper circulation numbers have been falling for years, but there are decades left of potential business for print products. Writing print readers off now would be foolish. They are also your most solid revenue producers.

Newspaper readers tend to be traditional. They expect a complete package. Opening an array of foreign bureaus would be prohibitively expensive. Presenting creatively collected foreign news, from carefully selected stringers, wire services, and other publications would be efficient. The important part of the formula would involve thought, which gets back to the people who will report to you. No one should present an argument that readers who want something more complete should turn elsewhere. Don’t give people reasons to leave!

The ‘It’ Media in Chicago

The tension remains palpable in journalism between those who want the future to be electronic and those who want it to be the way it has been for a long time. The debates are about nothing more complicated than how to present the news product. I have run operations on both sides of this divide. I found that the ethics and values involved in collecting information don’t change for journalists.

They are looking for the truth. The product they collect just moves to the public through a different set of filters and a different set of skills. But that does not change the truth. These entities are not in competition with one another. They live in symbiosis. You need to get everyone on board with that thought.

You also need to embrace that the challenge you face is today, not a year from now, not ten years from now, not in some perfect digital future. If your business is news, and everyone agrees it is news, then how it moves to the public really doesn’t matter. What matters are how good it is, how broad it is, how aggressive it is, and how complete it is.

I believe there is great fortune and opportunity in news, and most of it is local, but not “local” in the way news companies have traditionally viewed local news.

The Internet has eliminated geography as a measurement of what kind of news you receive. News from Moscow can come to you in an instant. News from down the street can come to you in an instant. The question is, Who will collect it and how will it be delivered? The “local, local, local” I would emphasize would not be focused on stories occurring within a 200-mile radius of Tribune Tower.

Instead, “local” would mean your ad market, your news market, your challenge, which is Chicago, Cook County, Illinois, and the Midwest. Provide the people who live there and the businesses operating there with the news coverage they need. Don’t leave an opening for a national or international newspaper or website to become a necessary “second read,” to supplement incomplete Tribune coverage, because then they also become a necessary “second advertising venue,” hurting your business. You can make this work by reasserting Tribune’s place as the gold standard for news.
Most of all, you have to learn how to win again.

You should own news in Chicago, no matter what development it covers.
This will take a commitment to be so connected to the strengths of technology and what it can do for news that Tribune becomes a test bed for innovation and product creation. Your news websites should be constantly evolving creatures, full of interactivity, video, and the certainty that if something happens, it will show up on one of your websites first.

Where will the revenue come from? It is by no means clear that the sale of Tribune’s assets will add money to the news pot. There are creditors lined up from Chicago to the moon waiting to get cash once the company emerges from bankruptcy. It will take a powerful vision and strong execution to become a news leader given that reality.

Think of your company as a great vertical machine. News is poured in the top by aggressive staffs on all your media platforms and then tailored for customers on each level as it moves toward the ground floor. In the process, it goes everywhere and it carries your brand.

Don’t make the mistake of thinking there is a single source solution to the challenge you face. People are not yet born with iPads. Your news customers live in a variety of worlds easy to reach with old and new technology. That being the case, make certain you are on the cutting edge, even as you pay close attention to existing customers.

What you are telling them is more important than how you reach them.

Don’t make the mistake of asking the question, “What do people want?” at your level. The answer is “Everything.” There are two more important questions:

“What is news?” and “How do I become the dominant source of that news?”
First, embrace perhaps the biggest change in the news landscape of them all. “News” used to be whatever You said it was. Now “News” is whatever the People say it is.

The “Gaza versus Gaga” argument is another false either/or that you should reject. Editors need to be smart about both Middle East news and pop culture sensations. You have to create news products that recognize that fashion, music, art, culture, food—an array of subjects that were once thought of as “features”—are now actually news to the people who want to know about them.

To be the dominant source of that news, you have to put it where people want to find it: newspapers for people who want their news that way. Internet for people who want it that way. Television for people who want it that way.

Radio for people who want it that way. Each option presents a great array of revenue potentials, but only as long as you send the message to everyone in Chicago that Tribune is the place for news again. 


Charles M. Madigan

About the Author:

Charles M. Madigan is Presidential Writer in Residence at Roosevelt University. He worked for wire services and newspapers for forty years, the Tribune among them. Among his books is 30: The Collapse of the Great American Newspaper.


One small note: In my understanding, Sam Zell did not "cobble together $12 billion" to leverage his purchase of Tribune; he borrowed $12 billion from employees' retirement funds in an ESOP arrangement. If I am wrong on this, please correct me.

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