by Michael Learmonth
Advertising Age
Even Strong Players Ready for a Rough Ride in '09
NEW YORK (AdAge.com) -- How bad is it in media? Even companies having a great year are shedding staff as they gird for what's around the corner. A&E Television Networks, home of A&E, History and the Biography Channel and, of course, "Ice Road Truckers," laid off 20 workers last week.
About half of the staff let go were freelancers working across the company; the others were permanent staffers largely from AETN's digital-media division.
That's not many in the grand scheme, particularly since AETN employs 650 across all three cable networks, but it's noteworthy considering AETN actually had a pretty good year.
"We're looking at ways to operate more efficiently, and looking to make the appropriate cuts for next year," said spokesman Michael Feeney.
Up from last year
Through 2008, A&E was the fifth-ranked cable network by adults 25-54, up from sixth last year, and is sixth among viewers 18-49, up from eighth place last year.
The company, a joint venture between Hearst Corp., Disney-ABC Television Group, and NBC Universal, is set to earn $1.4 billion from advertising, affiliate fees and international in 2008, a 7% increase from 2007, according to one insider.
In recent months, A&E has Dell by co-creating new reality shows for brands such as Dell and State Farm.
Friday, December 12, 2008
Tribune allowed to make payments after bankruptcy filing
Associated Press
Reporting from Wilmington, Del. -- Tribune Co. was authorized Wednesday to make certain payments to employees, vendors and others as it works through a Chapter 11 bankruptcy reorganization.
Judge Kevin Carey said the company, which owns the Los Angeles Times and other newspapers, could pay $74 million that was owed to employees before Monday's bankruptcy petition was filed. That total includes a cap of $10,950 per person but excludes payments for healthcare, long-term disability, reimbursable expenses, workers' compensation and retiree medical care.
Judge Carey also approved orders allowing Chicago-based Tribune to use its existing centralized cash management system during the reorganization and to continue a securitization arrangement with Barclays Bank that will allow it to access an additional $75 million, for a total of $300 million.
The judge also authorized Tribune to pay various other pre-petition obligations, including $20 million to vendors, and $18 million in tax, licensing and similar obligations.
Tribune attorney James Conlan said the company was forced to seek bankruptcy protection because of dwindling advertising revenue. "There has been, to say the least, a precipitous decline in the advertising business generally," he said.
Tribune, which also owns 23 television stations and the Chicago Cubs baseball team, is the first major newspaper publisher to file for bankruptcy protection since the Internet plunged the industry into a struggle for survival.
Conlan told the judge that with the exception of two stock pledges, the Tribune operating companies have no secured debt, which leaves the company in "a strikingly good position" to reorganize intelligently.
The bankruptcy case involves 111 of Tribune's 128 entities, with the others, notably the Cubs, not part of the proceedings.
In an interview on the CNBC financial news channel, Tribune Chairman Sam Zell described the bankruptcy filing as a "preemptive" action to preserve assets and allow for a reorganization.
"In the end, my responsibility is to preserve the value of the company and to make sure that it will go on into the future," he said.
Zell said Tribune already had laid off hundreds of workers at its papers and reduced the number of pages published. Bankruptcy protection will allow it to focus on broader issues, he added, including consolidation.
He said the bankruptcy filing should not impede the planned sale of the Chicago Cubs, Chicago's Wrigley Field and other sports properties, which Tribune had been looking to sell to generate cash for a $593-million principal payment due in June.
_______________________________
A mind-boggling deal, a company's collapse, Sam Zell's judgment day
By RICHARD SIKLOS
ReporOnBusinee.com
richard_siklos@fortunemail.com
LOS ANGELES -- 'How did you go bankrupt?" Bill asked.
"Two ways," Mike said. "Gradually and then suddenly."
"What brought it on?"
"Friends," said Mike. "I had a lot of friends. False friends. Then I had creditors, too. Probably had more creditors than anybody in England."
The familiar dialogue above is from Hemingway's The Sun Also Rises, but it rings apt for the plight of Tribune Co., which filed for bankruptcy protection this week under the weight of $13-billion (U.S.) in debts and amid a collapse in revenues at its vast newspaper and television operations.
By the way, in this literary analogy, "Mike" is not Sam Zell, Tribune's billionaire CEO, but rather the thousands of Tribune employees whose stock ownership plan was jerry-rigged to fund the company's buyout last year.
Mr. Zell was the architect of the deal, but put up only around $300-million of his own money as a kind of option to later buy financial control of the company for as little as $500-million more.
Under the mind-boggling structure Mr. Zell and his advisers came up with, the Tribune ESOP owns 100 per cent of the shares.
What happens to them?
The Chicago Tribune said it most starkly, quoting an employee conference call with Mr. Zell:
"The ESOP, which Mr. Zell said a year ago offered employee "owners" the chance to share richly in Tribune Co.'s eventual success, could be wiped out, leaving thousands of Tribune Co. employees with no company retirement plan besides what they elect to save in a 401(k)."
Even less clear is who will end up owning Tribune's nine daily newspapers, including the namesake Tribune and the Los Angeles Times, as well as its 23 TV stations. There's already been plenty of venom directed at Mr. Zell, both before and after Tuesday's bankruptcy filings, and the question of how much he deserves is worth pondering.
The argument against Mr. Zell: Journalists, by nature, are not likely to be endeared by someone who has dubbed himself "the grave dancer," who seemed to have little regard for journalism and journalists, and who relied heavily on radio industry hacks.
I was wary at the time of his initial investment in Tribune, because I felt that he wasn't straight up about his role in the company: Press releases played up the employee ownership angle, but you had to plumb through securities filings to understand that Mr. Zell would essentially control the company through a series of vetoes without owning any of its equity.
The only people whose votes counted in the Tribune buyout were those of the company's former shareholders who approved it - employees had no say over whether they wanted the ESOP, nor any role in overseeing the company once it was taken private.
It also wasn't particularly reassuring that, after saying he had no plan to sell any of the company's papers, he swiftly unloaded Newsday. All of this led to a sense that buying Tribune was a bit of sport for a restless billionaire looking for a new challenge.
Mr. Zell paid a lot of lip service to running a "non-business" as a business. During his brief time in charge, there was plenty of asset-selling, cost-cutting and cosmetic revamping at his papers, but little clear evidence of improving the company's products.
The argument for Mr. Zell: There's a long tradition of media bosses who are not always politic but who lead successful news organizations - think Ted Turner at CNN, or even Rupert Murdoch in his stewardship so far of The Wall Street Journal. (Conrad Black, the now-incarcerated former press baron, used to openly ridicule the journalistic profession despite owning hundreds of papers.)
So don't penalize Mr. Zell too much for being rich and eccentric. As for the structure of the deal, it's worth remembering that the ESOP is something that was created expressly for the buyout, and it doesn't directly impact any pre-existing employee pensions or benefit obligations.
So, yes, the ESOP as it exists today could get wiped out, but given that the deal only closed last December, it's not as though the employees had anything to show for their phantom "ownership" anyway. From their perspective, failing now is almost certainly better than failing later.
The one thing that can't be disputed is Mr. Zell's contention that the advertising market has collapsed far more quickly and deeply than he or anyone else in these businesses predicted a year ago.
At least Mr. Zell was willing to try to fix the company - which is more than you can say for Tribune's well-compensated former managers or the Chandler family, whose frustration with said managers forced the company's sale.
A final thought that could help determine how Mr. Zell is ultimately remembered in this mess: He has pitched the bankruptcy filing as a "pre-emptive" move to preserve assets so that the company can keep operating.
It will be interesting to see if his unusual non-ownership control of Tribune means that he will either prosper at the expense of the employees or even remain in charge of what's left of the business when it emerges from its nightmare.
Richard Siklos is an editor-at-large at Fortune Magazine
Reporting from Wilmington, Del. -- Tribune Co. was authorized Wednesday to make certain payments to employees, vendors and others as it works through a Chapter 11 bankruptcy reorganization.
Judge Kevin Carey said the company, which owns the Los Angeles Times and other newspapers, could pay $74 million that was owed to employees before Monday's bankruptcy petition was filed. That total includes a cap of $10,950 per person but excludes payments for healthcare, long-term disability, reimbursable expenses, workers' compensation and retiree medical care.
Judge Carey also approved orders allowing Chicago-based Tribune to use its existing centralized cash management system during the reorganization and to continue a securitization arrangement with Barclays Bank that will allow it to access an additional $75 million, for a total of $300 million.
The judge also authorized Tribune to pay various other pre-petition obligations, including $20 million to vendors, and $18 million in tax, licensing and similar obligations.
Tribune attorney James Conlan said the company was forced to seek bankruptcy protection because of dwindling advertising revenue. "There has been, to say the least, a precipitous decline in the advertising business generally," he said.
Tribune, which also owns 23 television stations and the Chicago Cubs baseball team, is the first major newspaper publisher to file for bankruptcy protection since the Internet plunged the industry into a struggle for survival.
Conlan told the judge that with the exception of two stock pledges, the Tribune operating companies have no secured debt, which leaves the company in "a strikingly good position" to reorganize intelligently.
The bankruptcy case involves 111 of Tribune's 128 entities, with the others, notably the Cubs, not part of the proceedings.
In an interview on the CNBC financial news channel, Tribune Chairman Sam Zell described the bankruptcy filing as a "preemptive" action to preserve assets and allow for a reorganization.
"In the end, my responsibility is to preserve the value of the company and to make sure that it will go on into the future," he said.
Zell said Tribune already had laid off hundreds of workers at its papers and reduced the number of pages published. Bankruptcy protection will allow it to focus on broader issues, he added, including consolidation.
He said the bankruptcy filing should not impede the planned sale of the Chicago Cubs, Chicago's Wrigley Field and other sports properties, which Tribune had been looking to sell to generate cash for a $593-million principal payment due in June.
_______________________________
A mind-boggling deal, a company's collapse, Sam Zell's judgment day
By RICHARD SIKLOS
ReporOnBusinee.com
richard_siklos@fortunemail.com
LOS ANGELES -- 'How did you go bankrupt?" Bill asked.
"Two ways," Mike said. "Gradually and then suddenly."
"What brought it on?"
"Friends," said Mike. "I had a lot of friends. False friends. Then I had creditors, too. Probably had more creditors than anybody in England."
The familiar dialogue above is from Hemingway's The Sun Also Rises, but it rings apt for the plight of Tribune Co., which filed for bankruptcy protection this week under the weight of $13-billion (U.S.) in debts and amid a collapse in revenues at its vast newspaper and television operations.
By the way, in this literary analogy, "Mike" is not Sam Zell, Tribune's billionaire CEO, but rather the thousands of Tribune employees whose stock ownership plan was jerry-rigged to fund the company's buyout last year.
Mr. Zell was the architect of the deal, but put up only around $300-million of his own money as a kind of option to later buy financial control of the company for as little as $500-million more.
Under the mind-boggling structure Mr. Zell and his advisers came up with, the Tribune ESOP owns 100 per cent of the shares.
What happens to them?
The Chicago Tribune said it most starkly, quoting an employee conference call with Mr. Zell:
"The ESOP, which Mr. Zell said a year ago offered employee "owners" the chance to share richly in Tribune Co.'s eventual success, could be wiped out, leaving thousands of Tribune Co. employees with no company retirement plan besides what they elect to save in a 401(k)."
Even less clear is who will end up owning Tribune's nine daily newspapers, including the namesake Tribune and the Los Angeles Times, as well as its 23 TV stations. There's already been plenty of venom directed at Mr. Zell, both before and after Tuesday's bankruptcy filings, and the question of how much he deserves is worth pondering.
The argument against Mr. Zell: Journalists, by nature, are not likely to be endeared by someone who has dubbed himself "the grave dancer," who seemed to have little regard for journalism and journalists, and who relied heavily on radio industry hacks.
I was wary at the time of his initial investment in Tribune, because I felt that he wasn't straight up about his role in the company: Press releases played up the employee ownership angle, but you had to plumb through securities filings to understand that Mr. Zell would essentially control the company through a series of vetoes without owning any of its equity.
The only people whose votes counted in the Tribune buyout were those of the company's former shareholders who approved it - employees had no say over whether they wanted the ESOP, nor any role in overseeing the company once it was taken private.
It also wasn't particularly reassuring that, after saying he had no plan to sell any of the company's papers, he swiftly unloaded Newsday. All of this led to a sense that buying Tribune was a bit of sport for a restless billionaire looking for a new challenge.
Mr. Zell paid a lot of lip service to running a "non-business" as a business. During his brief time in charge, there was plenty of asset-selling, cost-cutting and cosmetic revamping at his papers, but little clear evidence of improving the company's products.
The argument for Mr. Zell: There's a long tradition of media bosses who are not always politic but who lead successful news organizations - think Ted Turner at CNN, or even Rupert Murdoch in his stewardship so far of The Wall Street Journal. (Conrad Black, the now-incarcerated former press baron, used to openly ridicule the journalistic profession despite owning hundreds of papers.)
So don't penalize Mr. Zell too much for being rich and eccentric. As for the structure of the deal, it's worth remembering that the ESOP is something that was created expressly for the buyout, and it doesn't directly impact any pre-existing employee pensions or benefit obligations.
So, yes, the ESOP as it exists today could get wiped out, but given that the deal only closed last December, it's not as though the employees had anything to show for their phantom "ownership" anyway. From their perspective, failing now is almost certainly better than failing later.
The one thing that can't be disputed is Mr. Zell's contention that the advertising market has collapsed far more quickly and deeply than he or anyone else in these businesses predicted a year ago.
At least Mr. Zell was willing to try to fix the company - which is more than you can say for Tribune's well-compensated former managers or the Chandler family, whose frustration with said managers forced the company's sale.
A final thought that could help determine how Mr. Zell is ultimately remembered in this mess: He has pitched the bankruptcy filing as a "pre-emptive" move to preserve assets so that the company can keep operating.
It will be interesting to see if his unusual non-ownership control of Tribune means that he will either prosper at the expense of the employees or even remain in charge of what's left of the business when it emerges from its nightmare.
Richard Siklos is an editor-at-large at Fortune Magazine
Thursday, December 11, 2008
Zell Expects Tribune to Survive Bankruptcy Protection
CNBC.com
Investor Sam Zell expects Tribune Co. to survive bankruptcy reorganization as long as the company can find sufficient ways to consolidate and improve operations.
Zell also said he had been contacted by the FBI concerning the corruption investigation of Illinois Gov. Rod Blagojevich, who was arrested Tuesday for allegedly trying to sell President-Elect Obama's Senate seat.
Speaking on CNBC, Zell admitted that the company's problems were worse than he envisioned and he took responsibility for the necessary decisions that will have to be made as Tribune navigates through Chapter 11.
A court on Wednesday granted the company approval for interim bankruptcy financing and said it can can pay pre-bankruptcy filing employee wages, taxes and insurance premiums.
"In the end my responsibility is to preserve the value of the company and to make sure that it will go forward into the future," he said. "Our action was pre-emptive in nature so as to preserve the assets of the company to create opportunities for reorganization."
Zell has come under fire as the company has trimmed its positions and laid off workers across its publishing empire that includes the Chicago Tribune and Los Angeles Times. The company also includes the Chicago Cubs Major League Baseball team, the sale of which he does not expect to be impeded by the bankruptcy filing.
"I think that we have been resizing the business all year long and I imagine that going forward we now have the time to really focus on what I call broader issues, issues of consolidation, taking advantage of the position we're in in various markets where we in fact can create an opportunity for one plus one equal three," he said.
On other issues, Zell said he expects a real estate turnaround by the middle of 2009 as excess inventory gets cleared up.
He said the freeing up of credit is vital, something he believes will happen as the various initiatives from the Treasury Department take hold.
As for his own business dealings, Zell said he's not focusing on mistakes made with the Tribune purchase.
"My head only functions looking forward. I'm not really any good at looking behind," he said. "Consequently, I don't reminisce or self-mutilate myself as the result of past decisions. I made the decision when I made it. I thought it was an appropriate investment at the time. Obviously circumstances have proven the opposite, but this too shall pass."
Concerning Gov. Blagojevich, Zell said he had no knowledge of accusations that Blagojevich tried to pressure the Chicago Tribune to fire editorial writers who were critical of the governor. Blagojevich allegedly hoped that he could leverage state help in selling Wrigley Field, the home of the Chicago Cubs, to pressure the Tribune.
CNBC.com
Investor Sam Zell expects Tribune Co. to survive bankruptcy reorganization as long as the company can find sufficient ways to consolidate and improve operations.
Zell also said he had been contacted by the FBI concerning the corruption investigation of Illinois Gov. Rod Blagojevich, who was arrested Tuesday for allegedly trying to sell President-Elect Obama's Senate seat.
Speaking on CNBC, Zell admitted that the company's problems were worse than he envisioned and he took responsibility for the necessary decisions that will have to be made as Tribune navigates through Chapter 11.
A court on Wednesday granted the company approval for interim bankruptcy financing and said it can can pay pre-bankruptcy filing employee wages, taxes and insurance premiums.
"In the end my responsibility is to preserve the value of the company and to make sure that it will go forward into the future," he said. "Our action was pre-emptive in nature so as to preserve the assets of the company to create opportunities for reorganization."
Zell has come under fire as the company has trimmed its positions and laid off workers across its publishing empire that includes the Chicago Tribune and Los Angeles Times. The company also includes the Chicago Cubs Major League Baseball team, the sale of which he does not expect to be impeded by the bankruptcy filing.
"I think that we have been resizing the business all year long and I imagine that going forward we now have the time to really focus on what I call broader issues, issues of consolidation, taking advantage of the position we're in in various markets where we in fact can create an opportunity for one plus one equal three," he said.
On other issues, Zell said he expects a real estate turnaround by the middle of 2009 as excess inventory gets cleared up.
He said the freeing up of credit is vital, something he believes will happen as the various initiatives from the Treasury Department take hold.
As for his own business dealings, Zell said he's not focusing on mistakes made with the Tribune purchase.
"My head only functions looking forward. I'm not really any good at looking behind," he said. "Consequently, I don't reminisce or self-mutilate myself as the result of past decisions. I made the decision when I made it. I thought it was an appropriate investment at the time. Obviously circumstances have proven the opposite, but this too shall pass."
Concerning Gov. Blagojevich, Zell said he had no knowledge of accusations that Blagojevich tried to pressure the Chicago Tribune to fire editorial writers who were critical of the governor. Blagojevich allegedly hoped that he could leverage state help in selling Wrigley Field, the home of the Chicago Cubs, to pressure the Tribune.
CNBC.com
Tuesday, December 9, 2008
Tribune Bankruptcy Snares Employees
By Emily Thornton
BusinessWeek
Real estate mogul Sam Zell built a complicated deal to take over Tribune Co., putting little of his own money at risk.
If there is one thing Sam Zell foresaw correctly, it is this: The day after Zell announced he was buying Tribune for more than $8 billion, the real estate tycoon told Chicago Tribune reporters the deal would not change his lifestyle no matter what happened. But, he said, "it's likely to change yours."
How right he was. Just one year after Zell bought the company (BusinessWeek, 7/30/08), Tribune announced on Dec. 8 that it is filing for bankruptcy. That means Zell could lose a small fraction of his estimated $5 billion fortune. The reason: The man who likes to call himself "the grave dancer" put very little of his own skin in the game. Instead, employees of the Tribune properties will bear the brunt of the pain, as they technically own the company and hold its $12.9 billion in debt. Tribune reported $7.6 billion in assets.
Tribune comprises eight newspapers, including the Chicago Tribune, Los Angeles Times, and Baltimore Sun; a 31% share of Food Network; two dozen TV stations, including outlets in the three biggest U.S. markets; and the Chicago Cubs baseball team. The Cubs franchise was not part of the bankruptcy filing.
ESOP Used to Borrow
Tribune's bankruptcy will be complicated. For starters, figuring out the value of Tribune in bankruptcy could be problematic. Every day brings a slew of steadily worsening statistics on ad revenue and circulation, pummeling newspaper valuations. On top of that, Zell used complex financing schemes predicated on tax advantages in structuring his deal. Those arrangements now raise thorny questions.
One of the trickiest issues will be how to handle a financing scheme Zell used to buy Tribune that relied on a tax-exempt employee stock ownership plan, known as an ESOP. Although employees had no say over how the ESOP was used, Tribune's board approved Zell's bid, which used the ESOP as a vehicle through which he borrowed hundreds of millions of dollars to tax-efficiently fund the transaction. The scheme allowed Zell to pony up just $315 million of his own cash to wrest control of the company and made employees technically Tribune's owners.
But ownership came at a price: Tribune cut back its 401(k) contributions and instead committed to use a portion of its payroll to pay down the hundreds of millions in debt that a trust set up for the ESOP used to buy Tribune shares, according to employee stock owner plan expert Corey Rosen. "It was like a mortgage that you use to buy a house with no money down," says Rosen, who wrote a report that goes into detail on Tribune's ESOP arrangements.
Tax Gains at Issue
Early on in the deal, Zell tried to motivate his troops by telling them the financing scheme would result in tax gains that would give Tribune a big advantage and could one day make employees rich. "This business lends itself to ESOPs because you have a lot of people, at least in theory, who are intelligent," he said in the Chicago Tribune interview in December 2007.
Now, the ESOP's equity stakes will likely be wiped out, and the handling of the tax gains will likely become an issue in the bankruptcy restructuring. "If a company goes bankrupt, the equity runs the risk of not being worth much," says Standard & Poor's analyst Emile Courtney. "They will probably lose everything" in the ESOP, predicts tax expert Robert Willens, who has closely studied the Tribune deal.
In a Dec. 8 note to Tribune employees, Zell still addressed them as "partners." He said their payroll, benefits, and 401(k)s would not be affected by the filing. As for the ESOP, Zell said, "it is part of the ownership structure, so its value and role long term will be determined in the restructuring. We believe the structure is a valuable asset to the company and that there are strong reasons to preserve it."
Silver Lining for Employees
But the ESOP could raise governance issues about who should be in charge of reorganizing the company. As part of his financing scheme, Zell also obtained a warrant to buy 43% of the company. So, there's a question if it is "the ESOP trustees who preserve value for the ESOP itself? Or if it is Zell negotiating to protect his note?" says one bankruptcy expert who asked not to be named.
The bright side may be that Tribune employees didn't have a lot of time to put much money toward ESOP contributions. "In a weird way, the employees are better off that the company crashed today instead of seven years from now," says a banker familiar with the deal, who asked not to be named.
With reporting by Michael Arndt. Thornton is a senior writer for BusinessWeek.
_________________
Tribune Co. files for bankruptcy
The media conglomerate was smothered by a drop-off in advertising and a crushing $13 billion in debt from the company‘s takeover a year ago by Chicago real estate mogul Sam Zell.
"When you look at the near term, prospects for the company and the industry are certainly not very bright," said Dave Novosel, an analyst with the Gimme Credit research firm.
Tribune Co., which has 20,000 employees, owns baseball‘s Chicago Cubs as well as 10 daily newspapers, including The Hartford (Conn.) Courant and the Orlando (Fla.) Sentinel, cable channels and 23 TV stations. Its papers‘ total circulation of more than 2 million puts the Tribune Co. among the top three most-read newspaper groups nationwide.
"Tribune‘s debt was so outsized and so disproportional to its cash flow compared to these other companies that it can be the sore thumb sticking out rather than an example of the industry," said Ken Doctor, media analyst with Outsell Inc.
Although the Tribune Co.‘s next major debt payment is not due until June, the company was in danger of missing the financial targets set by its lenders. The bankruptcy filing could give the Chicago-based company some time to press its lenders to ease their targets.
"So, how did we get here? It has been, to say the least, the perfect storm," Zell, chairman and chief executive, wrote in a memo to employees. "A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt. All of our major advertising categories have been dramatically impacted."
Longtime Chicago Tribune reporter Maurice Possley, who resigned after winning this year‘s Pulitzer Prize for investigative journalism, said many talented people have left the paper in recent months, and he worries about the ones who remain.
Brent Jones, a Sun reporter and union leader, said the bankruptcy filing unnerved the newsroom and prompted questions about whether the company might cut more jobs or sell the paper.
Philip Gregory, a lawyer for a Times auto critic and five former newsroom employees who sued Tribune in September over Zell‘s takeover, said the bankruptcy filing was predictable.
"We knew he was going to take this business under," Gregory said. "Of course he‘s blaming the market, but it‘s really the $13 billion in debt that he brought into the business."
In filing for bankruptcy, the company reported $13 billion in debt and $7.6 billion in assets.
John Penn, a bankruptcy lawyer at Haynes & Boone, said decisions about whether to sell papers or other assets would boil down to this: "If it makes cash, keep it. If it loses cash, get rid of it. And that‘s either by selling it, closing it or whatever it takes to stop the bleeding."
Stephen Lubben, a bankruptcy professional at Seton Hall Law School in Newark, N.J., said Tribune employees are particularly vulnerable because they participate in an Employee Stock Ownership Plan. Stockholders are last to be paid in bankruptcy, and often end up with nothing, with the stock getting wiped out.
Employees will not see all of their retirement savings wiped out, though. The company has continued making contributions into traditional retirement plans that are not affected, and many employees have separate 401(k) programs, said Corey Rosen, executive director for the nonprofit research group National Center for Employee Ownership.
BusinessWeek
Real estate mogul Sam Zell built a complicated deal to take over Tribune Co., putting little of his own money at risk.
If there is one thing Sam Zell foresaw correctly, it is this: The day after Zell announced he was buying Tribune for more than $8 billion, the real estate tycoon told Chicago Tribune reporters the deal would not change his lifestyle no matter what happened. But, he said, "it's likely to change yours."
How right he was. Just one year after Zell bought the company (BusinessWeek, 7/30/08), Tribune announced on Dec. 8 that it is filing for bankruptcy. That means Zell could lose a small fraction of his estimated $5 billion fortune. The reason: The man who likes to call himself "the grave dancer" put very little of his own skin in the game. Instead, employees of the Tribune properties will bear the brunt of the pain, as they technically own the company and hold its $12.9 billion in debt. Tribune reported $7.6 billion in assets.
Tribune comprises eight newspapers, including the Chicago Tribune, Los Angeles Times, and Baltimore Sun; a 31% share of Food Network; two dozen TV stations, including outlets in the three biggest U.S. markets; and the Chicago Cubs baseball team. The Cubs franchise was not part of the bankruptcy filing.
ESOP Used to Borrow
Tribune's bankruptcy will be complicated. For starters, figuring out the value of Tribune in bankruptcy could be problematic. Every day brings a slew of steadily worsening statistics on ad revenue and circulation, pummeling newspaper valuations. On top of that, Zell used complex financing schemes predicated on tax advantages in structuring his deal. Those arrangements now raise thorny questions.
One of the trickiest issues will be how to handle a financing scheme Zell used to buy Tribune that relied on a tax-exempt employee stock ownership plan, known as an ESOP. Although employees had no say over how the ESOP was used, Tribune's board approved Zell's bid, which used the ESOP as a vehicle through which he borrowed hundreds of millions of dollars to tax-efficiently fund the transaction. The scheme allowed Zell to pony up just $315 million of his own cash to wrest control of the company and made employees technically Tribune's owners.
But ownership came at a price: Tribune cut back its 401(k) contributions and instead committed to use a portion of its payroll to pay down the hundreds of millions in debt that a trust set up for the ESOP used to buy Tribune shares, according to employee stock owner plan expert Corey Rosen. "It was like a mortgage that you use to buy a house with no money down," says Rosen, who wrote a report that goes into detail on Tribune's ESOP arrangements.
Tax Gains at Issue
Early on in the deal, Zell tried to motivate his troops by telling them the financing scheme would result in tax gains that would give Tribune a big advantage and could one day make employees rich. "This business lends itself to ESOPs because you have a lot of people, at least in theory, who are intelligent," he said in the Chicago Tribune interview in December 2007.
Now, the ESOP's equity stakes will likely be wiped out, and the handling of the tax gains will likely become an issue in the bankruptcy restructuring. "If a company goes bankrupt, the equity runs the risk of not being worth much," says Standard & Poor's analyst Emile Courtney. "They will probably lose everything" in the ESOP, predicts tax expert Robert Willens, who has closely studied the Tribune deal.
In a Dec. 8 note to Tribune employees, Zell still addressed them as "partners." He said their payroll, benefits, and 401(k)s would not be affected by the filing. As for the ESOP, Zell said, "it is part of the ownership structure, so its value and role long term will be determined in the restructuring. We believe the structure is a valuable asset to the company and that there are strong reasons to preserve it."
Silver Lining for Employees
But the ESOP could raise governance issues about who should be in charge of reorganizing the company. As part of his financing scheme, Zell also obtained a warrant to buy 43% of the company. So, there's a question if it is "the ESOP trustees who preserve value for the ESOP itself? Or if it is Zell negotiating to protect his note?" says one bankruptcy expert who asked not to be named.
The bright side may be that Tribune employees didn't have a lot of time to put much money toward ESOP contributions. "In a weird way, the employees are better off that the company crashed today instead of seven years from now," says a banker familiar with the deal, who asked not to be named.
With reporting by Michael Arndt. Thornton is a senior writer for BusinessWeek.
_________________
Tribune Co. files for bankruptcy
The media conglomerate was smothered by a drop-off in advertising and a crushing $13 billion in debt from the company‘s takeover a year ago by Chicago real estate mogul Sam Zell.
"When you look at the near term, prospects for the company and the industry are certainly not very bright," said Dave Novosel, an analyst with the Gimme Credit research firm.
Tribune Co., which has 20,000 employees, owns baseball‘s Chicago Cubs as well as 10 daily newspapers, including The Hartford (Conn.) Courant and the Orlando (Fla.) Sentinel, cable channels and 23 TV stations. Its papers‘ total circulation of more than 2 million puts the Tribune Co. among the top three most-read newspaper groups nationwide.
"Tribune‘s debt was so outsized and so disproportional to its cash flow compared to these other companies that it can be the sore thumb sticking out rather than an example of the industry," said Ken Doctor, media analyst with Outsell Inc.
Although the Tribune Co.‘s next major debt payment is not due until June, the company was in danger of missing the financial targets set by its lenders. The bankruptcy filing could give the Chicago-based company some time to press its lenders to ease their targets.
"So, how did we get here? It has been, to say the least, the perfect storm," Zell, chairman and chief executive, wrote in a memo to employees. "A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt. All of our major advertising categories have been dramatically impacted."
Longtime Chicago Tribune reporter Maurice Possley, who resigned after winning this year‘s Pulitzer Prize for investigative journalism, said many talented people have left the paper in recent months, and he worries about the ones who remain.
Brent Jones, a Sun reporter and union leader, said the bankruptcy filing unnerved the newsroom and prompted questions about whether the company might cut more jobs or sell the paper.
Philip Gregory, a lawyer for a Times auto critic and five former newsroom employees who sued Tribune in September over Zell‘s takeover, said the bankruptcy filing was predictable.
"We knew he was going to take this business under," Gregory said. "Of course he‘s blaming the market, but it‘s really the $13 billion in debt that he brought into the business."
In filing for bankruptcy, the company reported $13 billion in debt and $7.6 billion in assets.
John Penn, a bankruptcy lawyer at Haynes & Boone, said decisions about whether to sell papers or other assets would boil down to this: "If it makes cash, keep it. If it loses cash, get rid of it. And that‘s either by selling it, closing it or whatever it takes to stop the bleeding."
Stephen Lubben, a bankruptcy professional at Seton Hall Law School in Newark, N.J., said Tribune employees are particularly vulnerable because they participate in an Employee Stock Ownership Plan. Stockholders are last to be paid in bankruptcy, and often end up with nothing, with the stock getting wiped out.
Employees will not see all of their retirement savings wiped out, though. The company has continued making contributions into traditional retirement plans that are not affected, and many employees have separate 401(k) programs, said Corey Rosen, executive director for the nonprofit research group National Center for Employee Ownership.
Monday, December 8, 2008
Workers Pay for Debacle at Tribune
By ANDREW ROSS SORKIN
THE NEW YORK TIMES
Sam Zell acknowledged from the start that his deal for the Tribune Company was flawed.
“I’m here to tell you that the transaction from hell is done,” Mr. Zell said last December when he sealed his $8.2 billion takeover of the publisher of The Chicago Tribune and The Los Angeles Times.
But just how hellish this deal was, particularly for Tribune employees, became painfully clear on Monday when the 161-year-old company filed for bankruptcy.
There is a lot of blame to go around, and much of it will be directed at Mr. Zell, the real estate baron whose knack for buying when everyone else is selling earned him a fit sobriquet for the news business these days: The Grave Dancer.
Advertising is in a free fall, and every newspaper is suffering. But Mr. Zell literally mortgaged the future of Tribune’s employees to pursue what one analyst, Jack Newman, at the time called “a childhood fantasy.”
Mr. Zell financed much of his deal’s $13 billion of debt by borrowing against part of the future of his employees’ pension plan and taking a huge tax advantage. Tribune employees ended up with equity, and now they will probably be left with very little. (The good news: any pension money put aside before the deal remains for the employees.)
As Mr. Newman, an analyst at CreditSights, explained at the time: “If there is a problem with the company, most of the risk is on the employees, as Zell will not own Tribune shares.” He continued: “The cash will come from the sweat equity of the employees of Tribune.”
And so it is.
Granted, Mr. Zell, 67, put up some money. He invested $315 million in the form of subordinated debt in exchange for a warrant to buy 40 percent of Tribune in the future for $500 million. It is unclear how much he’ll lose, but one thing is clear: when creditors get in line, he gets to stand ahead of the employees.
Mr. Zell isn’t the only one responsible for this debacle. With one of the grand old names of American journalism now confronting an uncertain future, it is worth remembering all the people who mismanaged the company before hand and helped orchestrate this ill-fated deal — and made a lot of money in the process. They include members of the Tribune board, the company’s management and the bankers who walked away with millions of dollars for financing and advising on a transaction that many of them knew, or should have known, could end in ruin.
It was Tribune’s board that sold the company to Mr. Zell — and allowed him to use the employee’s pension plan to do so. Despite early resistance, Dennis J. FitzSimons, then the company’s chief executive, backed the plan. He was paid about $17.7 million in severance and other payments. The sale also bought all the shares he owned — $23.8 million worth. The day he left, he said in a note to employees that “completing this ‘going private’ transaction is a great outcome for our shareholders, employees and customers.”
Well, at least for some of them.
Tribune’s board was advised by a group of bankers from Citigroup and Merrill Lynch, which walked off with $35.8 million and $37 million, respectively. But those banks played both sides of the deal: they also lent Mr. Zell the money to buy the company. For that, they shared an additional $47 million pot of fees with several other banks, according to Thomson Reuters. And then there was Morgan Stanley, which wrote a “fairness opinion” blessing the deal, for which it was paid a $7.5 million fee (plus an additional $2.5 million advisory fee).
On top of that, a firm called the Valuation Research Corporation wrote a “solvency opinion” suggesting that Tribune could meet its debt covenants. Thomson Reuters, which tracks fees, estimates V.R.C. was paid $1 million for that opinion. V.R.C. was so enamored with its role that it put out a press release.
In some corners of the world, you could arguably applaud Tribune’s board for selling the company when they did. The Chandler family, which owned 12 percent of Tribune through its previous sale of Times Mirror, campaigned for a sale and eventually won, though the family accepted a much lower price than they had hoped.
You could even call them prescient, having sold before the financial crisis and economic downturn that has put so many companies in harm’s way. And at $34 a share, Tribune shareholders did well. The share price of the company’s closest rival, the McClatchy Company, has tumbled 84 percent since the Tribune deal closed.
But what about those employees? They had no seat at the table when the company’s own board let Mr. Zell use part of its future pension plan in exchange for $34 a share.
Mr. Newman, the analyst who predicted the trouble, said in an interview on Monday, “The employees were put in a very bad situation.” He added that while boards are typically only responsible to their shareholders, this situation may be different. “There has to be a balance,” he said, “to create sustainability for all the stakeholders.”
Dan Neil, a Pulitzer Prize-winning columnist for The Los Angeles Times, led a lawsuit with other Tribune employees against Mr. Zell and Tribune this fall. The suit contended “through both the structure of his takeover and his subsequent conduct, Zell and his accessories have diminished the value of the employee-owned company to benefit himself and his fellow board members.”
If the employees win, they will become Tribune creditors — and stand in line with all other creditors in bankruptcy court.
The latest news on mergers and acquisitions can be found at nytimes.com/dealbook.
THE NEW YORK TIMES
Sam Zell acknowledged from the start that his deal for the Tribune Company was flawed.
“I’m here to tell you that the transaction from hell is done,” Mr. Zell said last December when he sealed his $8.2 billion takeover of the publisher of The Chicago Tribune and The Los Angeles Times.
But just how hellish this deal was, particularly for Tribune employees, became painfully clear on Monday when the 161-year-old company filed for bankruptcy.
There is a lot of blame to go around, and much of it will be directed at Mr. Zell, the real estate baron whose knack for buying when everyone else is selling earned him a fit sobriquet for the news business these days: The Grave Dancer.
Advertising is in a free fall, and every newspaper is suffering. But Mr. Zell literally mortgaged the future of Tribune’s employees to pursue what one analyst, Jack Newman, at the time called “a childhood fantasy.”
Mr. Zell financed much of his deal’s $13 billion of debt by borrowing against part of the future of his employees’ pension plan and taking a huge tax advantage. Tribune employees ended up with equity, and now they will probably be left with very little. (The good news: any pension money put aside before the deal remains for the employees.)
As Mr. Newman, an analyst at CreditSights, explained at the time: “If there is a problem with the company, most of the risk is on the employees, as Zell will not own Tribune shares.” He continued: “The cash will come from the sweat equity of the employees of Tribune.”
And so it is.
Granted, Mr. Zell, 67, put up some money. He invested $315 million in the form of subordinated debt in exchange for a warrant to buy 40 percent of Tribune in the future for $500 million. It is unclear how much he’ll lose, but one thing is clear: when creditors get in line, he gets to stand ahead of the employees.
Mr. Zell isn’t the only one responsible for this debacle. With one of the grand old names of American journalism now confronting an uncertain future, it is worth remembering all the people who mismanaged the company before hand and helped orchestrate this ill-fated deal — and made a lot of money in the process. They include members of the Tribune board, the company’s management and the bankers who walked away with millions of dollars for financing and advising on a transaction that many of them knew, or should have known, could end in ruin.
It was Tribune’s board that sold the company to Mr. Zell — and allowed him to use the employee’s pension plan to do so. Despite early resistance, Dennis J. FitzSimons, then the company’s chief executive, backed the plan. He was paid about $17.7 million in severance and other payments. The sale also bought all the shares he owned — $23.8 million worth. The day he left, he said in a note to employees that “completing this ‘going private’ transaction is a great outcome for our shareholders, employees and customers.”
Well, at least for some of them.
Tribune’s board was advised by a group of bankers from Citigroup and Merrill Lynch, which walked off with $35.8 million and $37 million, respectively. But those banks played both sides of the deal: they also lent Mr. Zell the money to buy the company. For that, they shared an additional $47 million pot of fees with several other banks, according to Thomson Reuters. And then there was Morgan Stanley, which wrote a “fairness opinion” blessing the deal, for which it was paid a $7.5 million fee (plus an additional $2.5 million advisory fee).
On top of that, a firm called the Valuation Research Corporation wrote a “solvency opinion” suggesting that Tribune could meet its debt covenants. Thomson Reuters, which tracks fees, estimates V.R.C. was paid $1 million for that opinion. V.R.C. was so enamored with its role that it put out a press release.
In some corners of the world, you could arguably applaud Tribune’s board for selling the company when they did. The Chandler family, which owned 12 percent of Tribune through its previous sale of Times Mirror, campaigned for a sale and eventually won, though the family accepted a much lower price than they had hoped.
You could even call them prescient, having sold before the financial crisis and economic downturn that has put so many companies in harm’s way. And at $34 a share, Tribune shareholders did well. The share price of the company’s closest rival, the McClatchy Company, has tumbled 84 percent since the Tribune deal closed.
But what about those employees? They had no seat at the table when the company’s own board let Mr. Zell use part of its future pension plan in exchange for $34 a share.
Mr. Newman, the analyst who predicted the trouble, said in an interview on Monday, “The employees were put in a very bad situation.” He added that while boards are typically only responsible to their shareholders, this situation may be different. “There has to be a balance,” he said, “to create sustainability for all the stakeholders.”
Dan Neil, a Pulitzer Prize-winning columnist for The Los Angeles Times, led a lawsuit with other Tribune employees against Mr. Zell and Tribune this fall. The suit contended “through both the structure of his takeover and his subsequent conduct, Zell and his accessories have diminished the value of the employee-owned company to benefit himself and his fellow board members.”
If the employees win, they will become Tribune creditors — and stand in line with all other creditors in bankruptcy court.
The latest news on mergers and acquisitions can be found at nytimes.com/dealbook.
Sam Zell's memo to Tribune Company employees
Los Angeles Times
On Monday Dec. 8, 2008, Zell announced that Tribune Company has sought bankruptcy court protection from creditors amid declines in advertising sales.
Here is his memo to the Tribune staff:
Partners,
We just announced that Tribune is restructuring its debt under Chapter 11 protection. I'm sure you saw the speculative coverage last night and this morning. I would have preferred everyone get the news from me first, but since our debt is publicly traded, we had to keep this decision confidential until we had a formal board decision. The Cubs franchise is not part of the filing.
Most importantly, I want to stress that we will continue to operate our business as usual. That includes meeting payroll and covering benefits (such as healthcare, disability and others), and paying vendors for all goods and services they provide to us going forward.
As is routine with Chapter 11 filings, we have filed "First-Day Motions" to get court approval on these and many other programs that are essential to continuing our businesses without disruption. We expect to get approval on these motions within the next few days.
You are also most likely wondering about the other aspects of your compensation. The 401(k) is unaffected by the filing, and in general, the existing benefits in the pension and cash balance plans are also unaffected by the filing. The ESOP is part of the ownership structure, so its value and role long-term will be determined in the restructuring. We believe the structure is a valuable asset to the company and that there are strong reasons to preserve it.
So, how did we get here? It has been, to say the least, the perfect storm. A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt. All of our major advertising categories have been dramatically impacted.
By restructuring our debt, we will reduce the pressure on the company's operating businesses, enabling us to pursue our vision of creating a sustainable, cutting-edge media company that is valued by our readers, viewers, and advertisers, and that plays a vital role in the communities we serve.
This filing should not impact the way you do your jobs on a day-to-day basis. We will continue to operate responsibly in a challenging environment – aggressively managing costs and maximizing revenue opportunities. These are all things we would do whether or not we were restructuring our debt.
Our challenges are consistent with those facing all media companies, and an increasing number of companies across a variety of industries today. The reality is that we – along with the rest of the country – have very little visibility on where the economy is headed and how our businesses will perform given the recession.
The good news is that we have great brands, and we produce great products every day. It's up to all of us to continue to focus on what it is we do best.
As your Chairman and CEO, I will continue to be actively engaged in the business and I remain committed to the company, to you and to our lenders. Randy, Gerry and the rest of the management team are equally dedicated to moving this company forward.
I'm sure you have a lot of questions that this email doesn't cover. I encourage you to visit TribLink where we've posted some anticipated Q&A, or call the toll-free number we've established – 888-287-7568. We'll also have information posted on Tribune.com. But, recognize that there is quite a bit we don't know – or that we cannot confirm – at this point.
I am proud of the work we have done at Tribune in the last year. I've seen strong determination to take hold of this company and put it on a new course. As a result, we've reduced costs, gained market share, and laid the groundwork for creating a new business model out of traditional media. This restructuring will give us the time we need to build that model, to secure sustainable and growing cash flow, and to achieve the success the talented partners in this company deserve.
Sam
---------------
Tribune bankruptcy may trigger $1.5 bln in CDS payments
Reporting by Karen Brettell, Reuters
NEW YORK (Reuters) - Payments of around $1.5 billion will likely need to be made to settle credit default swaps on Tribune Co's debt, after the newspaper publisher on Monday filed for bankruptcy protection.
The privately held publisher of the Chicago Tribune and Los Angeles Times, which took on about $13 billion of debt when it went private last year under a deal led by real estate mogul Sam Zell, filed for bankruptcy after struggling with its heavy debt load.
Around $20.5 billion of credit default swaps on Tribune's debt are outstanding, though this number falls to around $1.5 billion after netting down redundant exposures, according to data by the Depository Trust and Clearing Corp, which confirms the majority of credit derivative trades.
Credit default swaps are used to protect against a borrower defaulting on their debt, or to speculate on their credit quality.
When a borrower defaults protection buyers are paid the full amount insured in return for the defaulted debt, or cash equivalents.
Tribune's bonds traded between 3 and 6 cents on the dollar on Monday, indicating protection sellers are unlikely to recover much from the contracts.
Tribune had $11 billion in outstanding long term debt as of Sept 28, according to a regulatory filing.
______________________
Tribune files for Chapter 11 bankruptcy
By David B. Wilkerson, MarketWatch
CHICAGO (MarketWatch) -- Tribune Co. said Monday that it filed for Chapter 11 bankruptcy protection to restructure its nearly $13 billion debt load, a move that dramatically underscores the dire circumstances clouding the near-term future of the newspaper industry.
The owner of the Chicago Tribune, founded in 1847, said that its operations would continue during the restructuring, allowing it to keep running its newspapers, television stations and interactive properties, and that it currently has enough cash to fund them.
The Chicago Cubs franchise, including Wrigley Field, is not included in the Chapter 11 filing, Tribune added. The company will continue to look for ways to "monetize the Cubs and its related assets."
Real-estate investor Sam Zell, who acquired Tribune last December, commented that "factors beyond our control have created a perfect storm -- a precipitous decline in revenue and a tough economy coupled with a credit crisis that makes it extremely difficult to support our debt."
The financing of Zell's $8.2 billion transaction involved the creation of an employee stock program that incurred a significant amount of debt.
Prior to Monday's filing, there had been concerns that the company might not be able to come up with more than $1 billion in interest payments due in 2008, and could default on a payment of more than $500 million due by June.
Last month, Tribune reported a third-quarter loss of $121.6 million. A year earlier, it had posted earnings of $152.8 million. Advertising plunged 19% at its newspapers, which include the Chicago Tribune, the Los Angeles Times and the Baltimore Sun.
At the Times, which has been hemorrhaging readers and advertisers in recent years, an employee who did not want to be identified said the staff already has endured severe cuts and that company executives are saying no further reductions are planned.
The bankruptcy filing didn't come as a surprise to the staff, since the company has said it needs to restructure its debt, the individual said, but employees are still sorting out what it will mean.
To pay down its debt, Tribune has declared itself willing to sell many of its assets. The company earlier this year agreed to sell a 97% stake in Long Island, N.Y., newspaper Newsday to Cablevision Systems Corp. (CVC:Cablevision Systems Corporation
Writing on the wall
For several years, newspapers have seen precipitous declines in print-advertising revenue, as traditionally heavy buyers of print ads such as automakers and airlines have experienced problems of their own.
Classified advertising, which has long been the main source of income for newspapers, has declined calamitously in step with the real-estate downturn, decreased demand for help-wanted ads and the defection of many transactions to Craigslist and other competing Web-based services.
In 2005, angry newspaper-company shareholders began to make vocal demands for spin-offs or sales. During the summer of 2006, the Chandler Trusts, Tribune's largest shareholder, demanded that the company make a major shift to revive its stock, which had lost nearly half its value since early 2004. Within weeks, the company said that it would pursue strategic alternatives, including a possible sale of some or all of the company's operations.
David B. Wilkerson is a reporter for MarketWatch in Chicago.
On Monday Dec. 8, 2008, Zell announced that Tribune Company has sought bankruptcy court protection from creditors amid declines in advertising sales.
Here is his memo to the Tribune staff:
Partners,
We just announced that Tribune is restructuring its debt under Chapter 11 protection. I'm sure you saw the speculative coverage last night and this morning. I would have preferred everyone get the news from me first, but since our debt is publicly traded, we had to keep this decision confidential until we had a formal board decision. The Cubs franchise is not part of the filing.
Most importantly, I want to stress that we will continue to operate our business as usual. That includes meeting payroll and covering benefits (such as healthcare, disability and others), and paying vendors for all goods and services they provide to us going forward.
As is routine with Chapter 11 filings, we have filed "First-Day Motions" to get court approval on these and many other programs that are essential to continuing our businesses without disruption. We expect to get approval on these motions within the next few days.
You are also most likely wondering about the other aspects of your compensation. The 401(k) is unaffected by the filing, and in general, the existing benefits in the pension and cash balance plans are also unaffected by the filing. The ESOP is part of the ownership structure, so its value and role long-term will be determined in the restructuring. We believe the structure is a valuable asset to the company and that there are strong reasons to preserve it.
So, how did we get here? It has been, to say the least, the perfect storm. A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt. All of our major advertising categories have been dramatically impacted.
By restructuring our debt, we will reduce the pressure on the company's operating businesses, enabling us to pursue our vision of creating a sustainable, cutting-edge media company that is valued by our readers, viewers, and advertisers, and that plays a vital role in the communities we serve.
This filing should not impact the way you do your jobs on a day-to-day basis. We will continue to operate responsibly in a challenging environment – aggressively managing costs and maximizing revenue opportunities. These are all things we would do whether or not we were restructuring our debt.
Our challenges are consistent with those facing all media companies, and an increasing number of companies across a variety of industries today. The reality is that we – along with the rest of the country – have very little visibility on where the economy is headed and how our businesses will perform given the recession.
The good news is that we have great brands, and we produce great products every day. It's up to all of us to continue to focus on what it is we do best.
As your Chairman and CEO, I will continue to be actively engaged in the business and I remain committed to the company, to you and to our lenders. Randy, Gerry and the rest of the management team are equally dedicated to moving this company forward.
I'm sure you have a lot of questions that this email doesn't cover. I encourage you to visit TribLink where we've posted some anticipated Q&A, or call the toll-free number we've established – 888-287-7568. We'll also have information posted on Tribune.com. But, recognize that there is quite a bit we don't know – or that we cannot confirm – at this point.
I am proud of the work we have done at Tribune in the last year. I've seen strong determination to take hold of this company and put it on a new course. As a result, we've reduced costs, gained market share, and laid the groundwork for creating a new business model out of traditional media. This restructuring will give us the time we need to build that model, to secure sustainable and growing cash flow, and to achieve the success the talented partners in this company deserve.
Sam
---------------
Tribune bankruptcy may trigger $1.5 bln in CDS payments
Reporting by Karen Brettell, Reuters
NEW YORK (Reuters) - Payments of around $1.5 billion will likely need to be made to settle credit default swaps on Tribune Co's debt, after the newspaper publisher on Monday filed for bankruptcy protection.
The privately held publisher of the Chicago Tribune and Los Angeles Times, which took on about $13 billion of debt when it went private last year under a deal led by real estate mogul Sam Zell, filed for bankruptcy after struggling with its heavy debt load.
Around $20.5 billion of credit default swaps on Tribune's debt are outstanding, though this number falls to around $1.5 billion after netting down redundant exposures, according to data by the Depository Trust and Clearing Corp, which confirms the majority of credit derivative trades.
Credit default swaps are used to protect against a borrower defaulting on their debt, or to speculate on their credit quality.
When a borrower defaults protection buyers are paid the full amount insured in return for the defaulted debt, or cash equivalents.
Tribune's bonds traded between 3 and 6 cents on the dollar on Monday, indicating protection sellers are unlikely to recover much from the contracts.
Tribune had $11 billion in outstanding long term debt as of Sept 28, according to a regulatory filing.
______________________
Tribune files for Chapter 11 bankruptcy
By David B. Wilkerson, MarketWatch
CHICAGO (MarketWatch) -- Tribune Co. said Monday that it filed for Chapter 11 bankruptcy protection to restructure its nearly $13 billion debt load, a move that dramatically underscores the dire circumstances clouding the near-term future of the newspaper industry.
The owner of the Chicago Tribune, founded in 1847, said that its operations would continue during the restructuring, allowing it to keep running its newspapers, television stations and interactive properties, and that it currently has enough cash to fund them.
The Chicago Cubs franchise, including Wrigley Field, is not included in the Chapter 11 filing, Tribune added. The company will continue to look for ways to "monetize the Cubs and its related assets."
Real-estate investor Sam Zell, who acquired Tribune last December, commented that "factors beyond our control have created a perfect storm -- a precipitous decline in revenue and a tough economy coupled with a credit crisis that makes it extremely difficult to support our debt."
The financing of Zell's $8.2 billion transaction involved the creation of an employee stock program that incurred a significant amount of debt.
Prior to Monday's filing, there had been concerns that the company might not be able to come up with more than $1 billion in interest payments due in 2008, and could default on a payment of more than $500 million due by June.
Last month, Tribune reported a third-quarter loss of $121.6 million. A year earlier, it had posted earnings of $152.8 million. Advertising plunged 19% at its newspapers, which include the Chicago Tribune, the Los Angeles Times and the Baltimore Sun.
At the Times, which has been hemorrhaging readers and advertisers in recent years, an employee who did not want to be identified said the staff already has endured severe cuts and that company executives are saying no further reductions are planned.
The bankruptcy filing didn't come as a surprise to the staff, since the company has said it needs to restructure its debt, the individual said, but employees are still sorting out what it will mean.
To pay down its debt, Tribune has declared itself willing to sell many of its assets. The company earlier this year agreed to sell a 97% stake in Long Island, N.Y., newspaper Newsday to Cablevision Systems Corp. (CVC:Cablevision Systems Corporation
Writing on the wall
For several years, newspapers have seen precipitous declines in print-advertising revenue, as traditionally heavy buyers of print ads such as automakers and airlines have experienced problems of their own.
Classified advertising, which has long been the main source of income for newspapers, has declined calamitously in step with the real-estate downturn, decreased demand for help-wanted ads and the defection of many transactions to Craigslist and other competing Web-based services.
In 2005, angry newspaper-company shareholders began to make vocal demands for spin-offs or sales. During the summer of 2006, the Chandler Trusts, Tribune's largest shareholder, demanded that the company make a major shift to revive its stock, which had lost nearly half its value since early 2004. Within weeks, the company said that it would pursue strategic alternatives, including a possible sale of some or all of the company's operations.
David B. Wilkerson is a reporter for MarketWatch in Chicago.
Tribune Files For Bankruptcy Protection
The Associated Press
NEW YORK — Media conglomerate Tribune Co. has filed for bankruptcy protection.
The owner of the Chicago Tribune, the Los Angeles Times, the Chicago Cubs and other properties has $13 billion in debt.
Severe reductions in advertising this year because of the recession has put pressure on the company. Most of its debt comes from the complex transaction in which the company was taken private by real estate mogul Sam Zell last year.
Although the next major principal payment isn't due until June, analysts say Tribune has been in danger of missing lender-imposed financial targets.
Tribune made the filing Monday in bankruptcy court in Delaware.
Tribune Co. files for bankruptcy protection
By James Rainey and Michael A. Hiltzik, Los Angeles Times Staff Writer
The Chicago-based media company — whose properties include the L.A. Times, KTLA and the Chicago Cubs — wants to restructure payments on $12 billion in debt.
The company that owns the Los Angeles Times, KTLA Channel 5 and the Chicago Tribune filed for bankruptcy protection today, seeking relief from $12 billion in debt that largely stems from last year's leveraged buyout of the media firm.
Tribune Co. directors approved the action to seek Chapter 11 protection in a meeting today, saying they want to restructure payments to banks and other creditors, following real estate magnate Sam Zell's purchase of the company last year.
The Chicago-based company had roughly $300 million cash on hand, more than enough to make a $70-million payment due today. But executives reportedly were unable to persuade lenders to undertake a broader restructuring of the debt.
Among other obligations, a $512-million principal payment related to Zell's leveraged buyout is due in June.
Money for that payment was to come from asset sales, particularly the sale of the Chicago Cubs baseball franchise. That sale, originally expected to take place earlier this year, has been delayed in part because of the credit crisis and is now expected to take place in 2009.
Some analysts had previously set the value of the Cubs at more than $1 billion.
Tribune's debt has become more burdensome over the last six months as advertising revenue at its eight daily newspapers and 23 television stations has fallen sharply. Industry projections are for further declines over the next six months to a year.
The company said it plans to file in Delaware, where it is incorporated.
Rainey and Hiltzik are Times staff writers.
james.rainey@latimes.com
michael.hiltzik@latimes.com
NEW YORK — Media conglomerate Tribune Co. has filed for bankruptcy protection.
The owner of the Chicago Tribune, the Los Angeles Times, the Chicago Cubs and other properties has $13 billion in debt.
Severe reductions in advertising this year because of the recession has put pressure on the company. Most of its debt comes from the complex transaction in which the company was taken private by real estate mogul Sam Zell last year.
Although the next major principal payment isn't due until June, analysts say Tribune has been in danger of missing lender-imposed financial targets.
Tribune made the filing Monday in bankruptcy court in Delaware.
Tribune Co. files for bankruptcy protection
By James Rainey and Michael A. Hiltzik, Los Angeles Times Staff Writer
The Chicago-based media company — whose properties include the L.A. Times, KTLA and the Chicago Cubs — wants to restructure payments on $12 billion in debt.
The company that owns the Los Angeles Times, KTLA Channel 5 and the Chicago Tribune filed for bankruptcy protection today, seeking relief from $12 billion in debt that largely stems from last year's leveraged buyout of the media firm.
Tribune Co. directors approved the action to seek Chapter 11 protection in a meeting today, saying they want to restructure payments to banks and other creditors, following real estate magnate Sam Zell's purchase of the company last year.
The Chicago-based company had roughly $300 million cash on hand, more than enough to make a $70-million payment due today. But executives reportedly were unable to persuade lenders to undertake a broader restructuring of the debt.
Among other obligations, a $512-million principal payment related to Zell's leveraged buyout is due in June.
Money for that payment was to come from asset sales, particularly the sale of the Chicago Cubs baseball franchise. That sale, originally expected to take place earlier this year, has been delayed in part because of the credit crisis and is now expected to take place in 2009.
Some analysts had previously set the value of the Cubs at more than $1 billion.
Tribune's debt has become more burdensome over the last six months as advertising revenue at its eight daily newspapers and 23 television stations has fallen sharply. Industry projections are for further declines over the next six months to a year.
The company said it plans to file in Delaware, where it is incorporated.
Rainey and Hiltzik are Times staff writers.
james.rainey@latimes.com
michael.hiltzik@latimes.com
The Tribune Buyout: Was It Ever a Good Idea?
Posted by Heidi N. Moore
THE WALL JOURNAL
No one thought the buyout of Tribune Co. would work — and it didn’t.
The fact that Tribune Co. has hired Lazard as its adviser for a potential Chapter 11 filing ranks among the least surprising potential bankruptcies ever. That’s not just because bankruptcy is starting to take root in the industry, with Lazard advising Chapter-11-enmeshed Journal Register Co.
The inevitability is due directly to Tribune’s position before the buyout. All the warning signs were there from minute one of Sam Zell’s impending buyout of the newspaper company. Consider what CNBC journalist Julia Boorstin wrote nearly 18 months ago, when the buyout was in its early days:
The worse the company does, the worse the debt burden for the employee stock ownership plan that Zell’s using to structure the deal. Even if the deal wins approval from shareholders and the government it must borrow $4.2 billion (in addition to the $7 billion it’s already borrowed to buy back shares for the first step of the transaction). And think about the premium!
To many people, the math never worked from the beginning. Tribune’s revenues had been falling precipitously for years. Zell offered a generous $8.2 billion offer for Tribune to win against two other billionaires halfheartedly bidding for the company. From the beginning, his plan was that the price tag would be paid through the pensions of Tribune’s 20,000 workers, held in an employee stock ownership plan, or ESOP.
The ESOP structure was designed to reduce Tribune’s taxes to nearly zero and it lowered Zell’s own price tag to $315 million. Unfortunately, it also left a $12 billion debt load to pay just as the newspaper industry as a whole is largely cratering on lower ad revenues. The principle — that the company could hoard its declining cash flows to pay down this enormous debt — was flawed. Cash flows declined, and tax savings couldn’t help. A populism-friendly redesign did little to goose revenues.
Zell’s frustration did not take long to come through to the newspaper company’s beleaguered employees. “Am I the only person in this room who really wants to win?” he once demanded. “We are in crisis mode. The days of the newspaper being some kind of a holy monopoly are over.” In another conversation, he called the Tribune’s Washington bureau “overhead” because it did not generate revenue.
In a sprawling interview with the New Yorker’s Connie Bruck last year, Zell played up his reputation as a maverick. Bruck wrote, “He says that he is constantly trying to ’shut out the noise’ of conventional wisdom, because, although it may not always be wrong, it is rarely profitable.” The case of Tribune is one where the conventional wisdom — that the buyout would be disastrous — was nothing to sneeze at.
THE WALL JOURNAL
No one thought the buyout of Tribune Co. would work — and it didn’t.
The fact that Tribune Co. has hired Lazard as its adviser for a potential Chapter 11 filing ranks among the least surprising potential bankruptcies ever. That’s not just because bankruptcy is starting to take root in the industry, with Lazard advising Chapter-11-enmeshed Journal Register Co.
The inevitability is due directly to Tribune’s position before the buyout. All the warning signs were there from minute one of Sam Zell’s impending buyout of the newspaper company. Consider what CNBC journalist Julia Boorstin wrote nearly 18 months ago, when the buyout was in its early days:
The worse the company does, the worse the debt burden for the employee stock ownership plan that Zell’s using to structure the deal. Even if the deal wins approval from shareholders and the government it must borrow $4.2 billion (in addition to the $7 billion it’s already borrowed to buy back shares for the first step of the transaction). And think about the premium!
To many people, the math never worked from the beginning. Tribune’s revenues had been falling precipitously for years. Zell offered a generous $8.2 billion offer for Tribune to win against two other billionaires halfheartedly bidding for the company. From the beginning, his plan was that the price tag would be paid through the pensions of Tribune’s 20,000 workers, held in an employee stock ownership plan, or ESOP.
The ESOP structure was designed to reduce Tribune’s taxes to nearly zero and it lowered Zell’s own price tag to $315 million. Unfortunately, it also left a $12 billion debt load to pay just as the newspaper industry as a whole is largely cratering on lower ad revenues. The principle — that the company could hoard its declining cash flows to pay down this enormous debt — was flawed. Cash flows declined, and tax savings couldn’t help. A populism-friendly redesign did little to goose revenues.
Zell’s frustration did not take long to come through to the newspaper company’s beleaguered employees. “Am I the only person in this room who really wants to win?” he once demanded. “We are in crisis mode. The days of the newspaper being some kind of a holy monopoly are over.” In another conversation, he called the Tribune’s Washington bureau “overhead” because it did not generate revenue.
In a sprawling interview with the New Yorker’s Connie Bruck last year, Zell played up his reputation as a maverick. Bruck wrote, “He says that he is constantly trying to ’shut out the noise’ of conventional wisdom, because, although it may not always be wrong, it is rarely profitable.” The case of Tribune is one where the conventional wisdom — that the buyout would be disastrous — was nothing to sneeze at.
Tribune Co. Ponders Bankruptcy
THE WASHINGTON POST
WASHINGTON - Media giant Tribune Co., saddled with billions in debt since it became a privately-held company last year, has hired bankruptcy advisers, according to its flagship newspaper, the Chicago Tribune.
The Chicago-based company owns a coast-to-coast empire with television stations and newspapers in most of the nation's largest cities. Its holdings include the Los Angeles Times; cable television superstation WGN in Chicago; the Baltimore Sun; and WDCW-50 in Washington, the CW affiliate. The company even owns the Chicago Cubs.
Tribune assumed some $13 billion in debt when real estate mogul Sam Zell engineered an employee-owned transition to private ownership one year ago this month. Hopes were high among employees that the company could be re-engineered to be a news company of the 21st century.
But sharply dropping advertising revenues, which have hit almost all of the nation's newspapers in recent years, have put the company in danger of being unable to meet its debt covenants and may force it to seek the shelter of bankruptcy reorganization, said a source close to the company who spoke on the condition of anonymity because Tribune is privately held.
The company has hired investment bank Lazard and law firm Sidley Austin to examine the company's options, according to an article on the Tribune's Web site.
Bankruptcy, however, may not be the endgame for Tribune: Some creditors feel that newspapers forced into bankruptcy protection have even less chance of repaying their loans.
In November, the company reported a $124 million third-quarter loss, compared with an $84 million profit in the same period of last year.
Tribune is on the hook for about $1 billion per year in loan repayments. The company is eyeing a big payment in June 2009, which had worried analysts.
Tribune declined to comment for this article but directed inquiries to the Chicago Tribune article, which was posted online Sunday evening.
Further darkening Tribune's picture is the ongoing financial crisis. Analysts forecast a dim 2009 for all media companies dependent on advertising from retailers who likely will cut back on ad and marketing spending or simply be forced out of business. Newspapers also depend on help-wanted ads, which shrink as unemployment rises.
Venerable newspaper chain Knight Ridder was swallowed in June 2006 by rival chain McClatchy Co., which has watched its stock price lose 90 percent of its value since then. Over the same period, shares of The New York Times Co. are down more than 60 percent, while shares of The Washington Post Co. are down more than 40 percent.
Tribune has been raising cash by putting assets up for sale. The Cubs and their storied Wrigley Field are on the block and the company hopes for a spring sale, with an expected price tag of several hundred million dollars. However, the pool of potential bidders has shrunk since the team went on the market, as the credit crisis has put financing in doubt for such a large deal.
In May, Tribune sold Newsday to Cablevision for $650 million. Last summer, Zell said he was hiring real estate advisers to ascertain how much the Tribune and L.A. Times buildings were worth. The company has been cutting staff across the company in an effort to save money.
The L.A. Times, the largest paper in the chain, has drawn steady interest, with suitors including entertainment mogul David Geffen. Prior to the economic crisis, the paper was estimated to be worth as much as $1 billion. But Tribune was reluctant to sell the paper, which still generates substantial profit.
Asset sales, however, may not be enough to save the venerable chain, which grew from the namesake Chicago Tribune -- the Midwest's paper of record since the mid-19th century -- and expanded with the 2000 purchase of the Times Mirror papers, which brought the L.A. Times, the Sun and other papers.
Zell, who made his money in commercial real estate, emerged as the only serious bidder when Tribune was forced onto the sales block by a boardroom revolt staged by a group of minority shareholders who wanted to cash out, angered by the company's falling share price since the 2000 merger.
To finance the deal, Zell put up $315 million of his own money and got more than $8 billion in new loans on top of the company's existing $5 billion in debt, a move many analysts questioned at the time.
Zell got Washington help to take over Tribune.
In order to secure $4.2 billion in new debt, Tribune had to prove to creditors it would be able to retain the revenue-generating ownership of television stations in cities where it owns newspapers -- a violation of Federal Communications Commission rules. The FCC had given Tribune a number of waivers through the years to allow the so-called cross-ownership, but the waivers required periodic renewal.
However, in December 2007, the FCC granted a permanent waiver to Tribune to allow the cross-ownership of its Chicago stations (WGN radio and TV) and two-year waivers for the other stations, clinching the deal for Zell.
WASHINGTON - Media giant Tribune Co., saddled with billions in debt since it became a privately-held company last year, has hired bankruptcy advisers, according to its flagship newspaper, the Chicago Tribune.
The Chicago-based company owns a coast-to-coast empire with television stations and newspapers in most of the nation's largest cities. Its holdings include the Los Angeles Times; cable television superstation WGN in Chicago; the Baltimore Sun; and WDCW-50 in Washington, the CW affiliate. The company even owns the Chicago Cubs.
Tribune assumed some $13 billion in debt when real estate mogul Sam Zell engineered an employee-owned transition to private ownership one year ago this month. Hopes were high among employees that the company could be re-engineered to be a news company of the 21st century.
But sharply dropping advertising revenues, which have hit almost all of the nation's newspapers in recent years, have put the company in danger of being unable to meet its debt covenants and may force it to seek the shelter of bankruptcy reorganization, said a source close to the company who spoke on the condition of anonymity because Tribune is privately held.
The company has hired investment bank Lazard and law firm Sidley Austin to examine the company's options, according to an article on the Tribune's Web site.
Bankruptcy, however, may not be the endgame for Tribune: Some creditors feel that newspapers forced into bankruptcy protection have even less chance of repaying their loans.
In November, the company reported a $124 million third-quarter loss, compared with an $84 million profit in the same period of last year.
Tribune is on the hook for about $1 billion per year in loan repayments. The company is eyeing a big payment in June 2009, which had worried analysts.
Tribune declined to comment for this article but directed inquiries to the Chicago Tribune article, which was posted online Sunday evening.
Further darkening Tribune's picture is the ongoing financial crisis. Analysts forecast a dim 2009 for all media companies dependent on advertising from retailers who likely will cut back on ad and marketing spending or simply be forced out of business. Newspapers also depend on help-wanted ads, which shrink as unemployment rises.
Venerable newspaper chain Knight Ridder was swallowed in June 2006 by rival chain McClatchy Co., which has watched its stock price lose 90 percent of its value since then. Over the same period, shares of The New York Times Co. are down more than 60 percent, while shares of The Washington Post Co. are down more than 40 percent.
Tribune has been raising cash by putting assets up for sale. The Cubs and their storied Wrigley Field are on the block and the company hopes for a spring sale, with an expected price tag of several hundred million dollars. However, the pool of potential bidders has shrunk since the team went on the market, as the credit crisis has put financing in doubt for such a large deal.
In May, Tribune sold Newsday to Cablevision for $650 million. Last summer, Zell said he was hiring real estate advisers to ascertain how much the Tribune and L.A. Times buildings were worth. The company has been cutting staff across the company in an effort to save money.
The L.A. Times, the largest paper in the chain, has drawn steady interest, with suitors including entertainment mogul David Geffen. Prior to the economic crisis, the paper was estimated to be worth as much as $1 billion. But Tribune was reluctant to sell the paper, which still generates substantial profit.
Asset sales, however, may not be enough to save the venerable chain, which grew from the namesake Chicago Tribune -- the Midwest's paper of record since the mid-19th century -- and expanded with the 2000 purchase of the Times Mirror papers, which brought the L.A. Times, the Sun and other papers.
Zell, who made his money in commercial real estate, emerged as the only serious bidder when Tribune was forced onto the sales block by a boardroom revolt staged by a group of minority shareholders who wanted to cash out, angered by the company's falling share price since the 2000 merger.
To finance the deal, Zell put up $315 million of his own money and got more than $8 billion in new loans on top of the company's existing $5 billion in debt, a move many analysts questioned at the time.
Zell got Washington help to take over Tribune.
In order to secure $4.2 billion in new debt, Tribune had to prove to creditors it would be able to retain the revenue-generating ownership of television stations in cities where it owns newspapers -- a violation of Federal Communications Commission rules. The FCC had given Tribune a number of waivers through the years to allow the so-called cross-ownership, but the waivers required periodic renewal.
However, in December 2007, the FCC granted a permanent waiver to Tribune to allow the cross-ownership of its Chicago stations (WGN radio and TV) and two-year waivers for the other stations, clinching the deal for Zell.
Tribune Co. Mulling Bankruptcy
By Jon Fine
Business Week
Sam Zell, the real estate mogul who owns media conglomerate Tribune Co., has retained advisers to assist with a potential bankruptcy filing
The Tribune Co., the media conglomerate bought by real estate mogul Sam Zell in an extremely leveraged deal in December 2007, has hired advisers to assist with a potential bankruptcy filing, according to multiple published reports. The company continues to work feverishly to try to restructure its debt agreements with lenders, as the company's declining cash flow puts it in danger of being in default of its loan convenants.
It's by no means certain which course of action Tribune will choose, although the Wall Street Journal , which broke the news that Tribune had hired investment bank Lazard Ltd. and legal firm Sidley Austin to assist its explorations, reported a bankruptcy filing could come as early as this week.
Should Tribune file for bankruptcy, it would be the first recent major media deal birthed in the assumptions and debt markets of a previous era—an era that flourished as recently as 18 months ago—that has gone bankrupt in the current economic environment. Zell's $8.2 billion deal for Tribune (BusinessWeek, 7/30/08) left the company with $13 billion in debt.
Opposition from Day One
A Tribune spokesman did not return calls Sunday evening, but told Tribune's Chicago Tribune that "we haven't made any decision. We're looking at all of our options."
While Zell's deal, accomplished thanks to his use of an employee stock-ownership plan, had vocal critics from Day One, the degree to which events have turned against Tribune is astonishing. Its media businesses are dependent on advertising, which is severely affected by the kind of broad economic downturn the U.S. is now facing, and what might have been negotiated with its lenders in a more generous credit environment is now impossible.
Zell bought Tribune just as newspapers' businesses collapsed, and that collapse has been particularly pronounced for the big-city dailies found in Tribune's portfolio. And the business of newspapers continues to worsen: Tribune newspapers' ad revenues dropped 19% in the third quarter of this year.
Papers on the Block
In the past week, E W Scripps announced it was seeking a buyer for its Denver newspaper The Rocky Mountain News, and The New York Times reported that McClatchy had approached potential buyers for its Miami Herald. That major companies would consider selling in such a terrible environment speaks volumes as to how impaired an asset a big-city newspaper is.
Elsewhere in Tribune's portfolio, its TV station business hit headwinds so severe that even an election season marked by unprecedented political ad spending and a closely watched Summer Olympics failed to lift that business into positive territory. In the third quarter, Tribune's TV revenue fell 8%.
A cornerstone of Tribune strategy was to sell the company's Chicago Cubs Major League Baseball team, but that hasn't happened yet, and the financial downturn has hit asset valuations in sports teams along with everything else. Tribune had counted on selling the Cubs to give it breathing room with its interest payments. Around $1 billion in interest payments are due this year, and a $512 million debt payment is due next June.
Little Chance of a Deal
But an executive familiar with media deals and bankruptcy pointed out that having a seller potentially nearing bankruptcy may well delay any possible transaction until such a situation resolves itself.
Fine is BusinessWeek's MediaCentric columnist and Fine On Media blogger
Business Week
Sam Zell, the real estate mogul who owns media conglomerate Tribune Co., has retained advisers to assist with a potential bankruptcy filing
The Tribune Co., the media conglomerate bought by real estate mogul Sam Zell in an extremely leveraged deal in December 2007, has hired advisers to assist with a potential bankruptcy filing, according to multiple published reports. The company continues to work feverishly to try to restructure its debt agreements with lenders, as the company's declining cash flow puts it in danger of being in default of its loan convenants.
It's by no means certain which course of action Tribune will choose, although the Wall Street Journal , which broke the news that Tribune had hired investment bank Lazard Ltd. and legal firm Sidley Austin to assist its explorations, reported a bankruptcy filing could come as early as this week.
Should Tribune file for bankruptcy, it would be the first recent major media deal birthed in the assumptions and debt markets of a previous era—an era that flourished as recently as 18 months ago—that has gone bankrupt in the current economic environment. Zell's $8.2 billion deal for Tribune (BusinessWeek, 7/30/08) left the company with $13 billion in debt.
Opposition from Day One
A Tribune spokesman did not return calls Sunday evening, but told Tribune's Chicago Tribune that "we haven't made any decision. We're looking at all of our options."
While Zell's deal, accomplished thanks to his use of an employee stock-ownership plan, had vocal critics from Day One, the degree to which events have turned against Tribune is astonishing. Its media businesses are dependent on advertising, which is severely affected by the kind of broad economic downturn the U.S. is now facing, and what might have been negotiated with its lenders in a more generous credit environment is now impossible.
Zell bought Tribune just as newspapers' businesses collapsed, and that collapse has been particularly pronounced for the big-city dailies found in Tribune's portfolio. And the business of newspapers continues to worsen: Tribune newspapers' ad revenues dropped 19% in the third quarter of this year.
Papers on the Block
In the past week, E W Scripps announced it was seeking a buyer for its Denver newspaper The Rocky Mountain News, and The New York Times reported that McClatchy had approached potential buyers for its Miami Herald. That major companies would consider selling in such a terrible environment speaks volumes as to how impaired an asset a big-city newspaper is.
Elsewhere in Tribune's portfolio, its TV station business hit headwinds so severe that even an election season marked by unprecedented political ad spending and a closely watched Summer Olympics failed to lift that business into positive territory. In the third quarter, Tribune's TV revenue fell 8%.
A cornerstone of Tribune strategy was to sell the company's Chicago Cubs Major League Baseball team, but that hasn't happened yet, and the financial downturn has hit asset valuations in sports teams along with everything else. Tribune had counted on selling the Cubs to give it breathing room with its interest payments. Around $1 billion in interest payments are due this year, and a $512 million debt payment is due next June.
Little Chance of a Deal
But an executive familiar with media deals and bankruptcy pointed out that having a seller potentially nearing bankruptcy may well delay any possible transaction until such a situation resolves itself.
Fine is BusinessWeek's MediaCentric columnist and Fine On Media blogger
Tribune's Descent Sends New Shock Waves
By: Ken Doctor
iStockAnalyst
Has it less than a single year? One year since Sam Zell took over the Tribune Company as its management, like Knight Ridder's two years earlier, simply ran out of juice and said, "hey you try it, we've run out of ideas and energy?"
In one quick year -- who's doing the photo slideshow online? -- we've seen what happens when the barbarians do enter and start to rule within a formerly genteel kingdom. If it were any other industry, we might see it more as entertaining, but when it comes to the news industry, it's been jaw-droppingly sad.
As the Tribune prepares for the possibility of a bankruptcy filing this week -- and, if not now then probably later -- we can see the shock waves radiating out from the news:
Yes, Sam Zell's words and actions have been outrageous, sometimes outrageously and even refreshingly true -- on non-commissioned salespeople, on subscription pricing, on trying new things -- but in the end, it's not about Sam Zell. Look around. Just in the last couple of weeks, we've seen Scripps sign the Rocky Mountain News' death warrant; reports that McClatchy has shopping around the Miami Herald (an offer that insiders tell me has been floating around South Florida for months); the Journal Register Company, living on borrowed time and about to shut down two dailies; and Freedom's East Valley Tribune testing the very meaning of "daily" newspaper.
The business model's busted.
Whether you are good journalism advocate Gary Pruitt or it's-just-another-business Sam Zell, the cards dealt are fairly similar. What separates Zell from the pack, but maybe just barely, is the mountain of debt he gorged on to make the ill-conceived ESOP scheme work. From Day One, he put the sword over his own head and then cried wolf.
We've learned that Zell isn't too good with math. He told Portfolio's Joanne Lipman just last month that:
"When we looked at the historical numbers, we saw an average erosion of about 3 percent. At the time we underwrote the transaction, we used a 6 percent erosion."
But look at Tribune's 4Q, 2007, the quarter running up immediately to Zell's finalization (on Dec.21, 2007) of the buyout, and you see that its publishing operating revenues compared to a year earlier weren't down three percent or six percent. They were down 13% for the quarter (and 9% for the year overall). So why would Zell budget half of what the last quarter was telling him, as newspapers' deeper decline was evident for all who, well, evident for all those those who read newspapers.
I suppose in a more trusting time we might have expected lenders Citibank, Bank of America, Merrill Lynch and JP Morgan to have actually vetted his numbers. But hey, it was probably a no-doc loan.
We'll see if this is the first bankruptcy domino in the newspaper business. In the wider financial meltdown, newspaper companies have become just part of a much larger problem. Creditors have been eager to work with McClatchy, Lee, MediaNews, Freedom, Gannett and others -- just about everybody -- to adjust lending terms. They've loosened (in the short term) covenants linking (diminished) cash flow to debt, given term extensions -- and picked up a little vig on interest rates. They seem to so far figure that that's a better route than forcing the companies into bankruptcy. A Tribune filing though may lead to lender rethinking, in what we've learned is a herd trade.
If talk of default increase and bankruptcy is ramping up now, what about March? The consumer recovery, at the most Obamamistic, is six months away. As with the sudden Rocky announcement Friday, we're seeing newspaper companies increasingly throwing in the towel. Once those 4Q revenue numbers trickle out, it'll be worse.
There are two bad markets determining the fate of newspaper companies now. One, of course, is the news and advertising market. Print ads are down toward 20% and online will decline mildly this year. And here comes the latest 2009 forecasts -- down 3-6% overall -- to be presented at Monday's UBS Media Conference.
The second, of course, is the real estate market. We all know the story there, yesterday's story. If you had to bet, though, which market will come back first, newspapers or real estate, you'd have to bet on real estate. And therein may lie the next newspaper industry act. Whether it is McClatchy trying to sell bayfront Miami Herald land, or Tribune selling the Colonel's Tower, the fate of newspaper companies may depend on the real estate recovery. If that land and/or the buildings on it seem to be coming back to commercial life, newspaper companies or their lenders may see new moves. And that may determine a good deal about what we'll have for daily reading by 2010 and 2011.
Tribune Co. Mulling Bankruptcy Filing: Report
Media conglomerate Tribune Company is contemplating bankruptcy and may file for the same as early as this week, The Wall Street Journal reported on its website today.
Believed to be the nation's second-largest newspaper publisher, it owns the Chicago Tribune, Los Angeles Times, Hartford Courant, Orlando Sentinel, and The Morning Call, among others. Through its subsidiaries, the Tribune Company also owns Tribune Broadcasting, Tribune Entertainment, Tribune Media Services, and the Chicago Cubs baseball team.
The newspaper said the publisher and broadcaster, owned by real estate moghul Sam Zell has hired investment bank Lazard Ltd. as its financial adviser and legal firm Sidley Austin to advise the company in possible Chapter 11 filings.
The company, however, refused to comment on the story. The company however told Chicago Tribune "It’s an uncertain and difficult environment. We haven’t made any decision. We’re looking at all of our options.”
According to the report, the company's cash flow might not be sufficient to allow it to handle more than $1 billion in interest payments due in 2008. Tribune must also make a payment of more than $500 million by June.
Currently, the company is struggling under a $13 billion debt load. Much of the debt was incurred last December when Sam Zell took the company private in an $8.2 billion leveraged buyout. Tribune also faces a Monday deadline on $70 million of unsecured debt taken on by publisher before the deal.
In November, Tribune reported that it swung to third-quarter loss of $121.6 million compared to earnings of $152.8 million in same quarter a year ago. Advertising revenue declined 19%.
Media companies have seen their revenues falling off the cliff. Major advertisers have cut back on their ad spending as they tighten their belts to face what is being seen as the worst crisis since Great Depression of 1929. Newspapers have been especially hit hard as more and more readers are shifting to the internet, away from print. According to the Newspaper Association of America, during the third quarter of 2008, national ad sales in newspapers plunged 18.4%, compared to a drop of 2.5% in the corresponding quarter in 2007.
Recently, Fitch warned that more newspapers and newspaper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010.
Standard & Poor's Ratings Services downgraded Tribune's debt to junk in November.
The company has resorted to cost cutting measures and has put many of its assets on the block. A few days back Los Angeles Times eliminated 75 newsroom positions, or about 10% of the editorial staff. The cuts follow earlier staff reductions this year of about 180 Tribune employees. The company has also cut jobs at its other publications.
The company is also mulling the possible sale of Chicago Cubs and their stadium (Wrigley Field). Earlier, in May this year, US cable television group Cablevision acquired New York-based Newsday - the nation's eighth largest newspaper - from Tribune Co. for US$650 million.
Tribune Co. Considers Bankruptcy Filing
The Associated Press
CHICAGO -- The Tribune Co., owner of the Los Angeles Times and the Chicago Tribune, other newspapers and the Chicago Cubs and Wrigley Field, has reportedly hired financial advisers ahead of a possible filing for bankruptcy-court protection.
The Chicago Tribune reported that its parent has hired investment bank Lazard Ltd. and law firm Sidley Austin as it considers its financial options.
Tribune Co. spokesman Gary Weitman called it "an uncertain and difficult environment." He said company executives haven't made any decision but are looking at all their options.
The Wall Street Journal, quoting people familiar with the matter, reported that a bankruptcy filing could come as early as this week.
It said Tribune Co.'s cash flow may not be enough to cover nearly $1 billion in interest payments that are due this year.
Tribune was taken private last December in an $8.2 billion buyout led by real estate mogul Sam Zell.
Copyright 2008 by The Associated Press.
iStockAnalyst
Has it less than a single year? One year since Sam Zell took over the Tribune Company as its management, like Knight Ridder's two years earlier, simply ran out of juice and said, "hey you try it, we've run out of ideas and energy?"
In one quick year -- who's doing the photo slideshow online? -- we've seen what happens when the barbarians do enter and start to rule within a formerly genteel kingdom. If it were any other industry, we might see it more as entertaining, but when it comes to the news industry, it's been jaw-droppingly sad.
As the Tribune prepares for the possibility of a bankruptcy filing this week -- and, if not now then probably later -- we can see the shock waves radiating out from the news:
Yes, Sam Zell's words and actions have been outrageous, sometimes outrageously and even refreshingly true -- on non-commissioned salespeople, on subscription pricing, on trying new things -- but in the end, it's not about Sam Zell. Look around. Just in the last couple of weeks, we've seen Scripps sign the Rocky Mountain News' death warrant; reports that McClatchy has shopping around the Miami Herald (an offer that insiders tell me has been floating around South Florida for months); the Journal Register Company, living on borrowed time and about to shut down two dailies; and Freedom's East Valley Tribune testing the very meaning of "daily" newspaper.
The business model's busted.
Whether you are good journalism advocate Gary Pruitt or it's-just-another-business Sam Zell, the cards dealt are fairly similar. What separates Zell from the pack, but maybe just barely, is the mountain of debt he gorged on to make the ill-conceived ESOP scheme work. From Day One, he put the sword over his own head and then cried wolf.
We've learned that Zell isn't too good with math. He told Portfolio's Joanne Lipman just last month that:
"When we looked at the historical numbers, we saw an average erosion of about 3 percent. At the time we underwrote the transaction, we used a 6 percent erosion."
But look at Tribune's 4Q, 2007, the quarter running up immediately to Zell's finalization (on Dec.21, 2007) of the buyout, and you see that its publishing operating revenues compared to a year earlier weren't down three percent or six percent. They were down 13% for the quarter (and 9% for the year overall). So why would Zell budget half of what the last quarter was telling him, as newspapers' deeper decline was evident for all who, well, evident for all those those who read newspapers.
I suppose in a more trusting time we might have expected lenders Citibank, Bank of America, Merrill Lynch and JP Morgan to have actually vetted his numbers. But hey, it was probably a no-doc loan.
We'll see if this is the first bankruptcy domino in the newspaper business. In the wider financial meltdown, newspaper companies have become just part of a much larger problem. Creditors have been eager to work with McClatchy, Lee, MediaNews, Freedom, Gannett and others -- just about everybody -- to adjust lending terms. They've loosened (in the short term) covenants linking (diminished) cash flow to debt, given term extensions -- and picked up a little vig on interest rates. They seem to so far figure that that's a better route than forcing the companies into bankruptcy. A Tribune filing though may lead to lender rethinking, in what we've learned is a herd trade.
If talk of default increase and bankruptcy is ramping up now, what about March? The consumer recovery, at the most Obamamistic, is six months away. As with the sudden Rocky announcement Friday, we're seeing newspaper companies increasingly throwing in the towel. Once those 4Q revenue numbers trickle out, it'll be worse.
There are two bad markets determining the fate of newspaper companies now. One, of course, is the news and advertising market. Print ads are down toward 20% and online will decline mildly this year. And here comes the latest 2009 forecasts -- down 3-6% overall -- to be presented at Monday's UBS Media Conference.
The second, of course, is the real estate market. We all know the story there, yesterday's story. If you had to bet, though, which market will come back first, newspapers or real estate, you'd have to bet on real estate. And therein may lie the next newspaper industry act. Whether it is McClatchy trying to sell bayfront Miami Herald land, or Tribune selling the Colonel's Tower, the fate of newspaper companies may depend on the real estate recovery. If that land and/or the buildings on it seem to be coming back to commercial life, newspaper companies or their lenders may see new moves. And that may determine a good deal about what we'll have for daily reading by 2010 and 2011.
Tribune Co. Mulling Bankruptcy Filing: Report
Media conglomerate Tribune Company is contemplating bankruptcy and may file for the same as early as this week, The Wall Street Journal reported on its website today.
Believed to be the nation's second-largest newspaper publisher, it owns the Chicago Tribune, Los Angeles Times, Hartford Courant, Orlando Sentinel, and The Morning Call, among others. Through its subsidiaries, the Tribune Company also owns Tribune Broadcasting, Tribune Entertainment, Tribune Media Services, and the Chicago Cubs baseball team.
The newspaper said the publisher and broadcaster, owned by real estate moghul Sam Zell has hired investment bank Lazard Ltd. as its financial adviser and legal firm Sidley Austin to advise the company in possible Chapter 11 filings.
The company, however, refused to comment on the story. The company however told Chicago Tribune "It’s an uncertain and difficult environment. We haven’t made any decision. We’re looking at all of our options.”
According to the report, the company's cash flow might not be sufficient to allow it to handle more than $1 billion in interest payments due in 2008. Tribune must also make a payment of more than $500 million by June.
Currently, the company is struggling under a $13 billion debt load. Much of the debt was incurred last December when Sam Zell took the company private in an $8.2 billion leveraged buyout. Tribune also faces a Monday deadline on $70 million of unsecured debt taken on by publisher before the deal.
In November, Tribune reported that it swung to third-quarter loss of $121.6 million compared to earnings of $152.8 million in same quarter a year ago. Advertising revenue declined 19%.
Media companies have seen their revenues falling off the cliff. Major advertisers have cut back on their ad spending as they tighten their belts to face what is being seen as the worst crisis since Great Depression of 1929. Newspapers have been especially hit hard as more and more readers are shifting to the internet, away from print. According to the Newspaper Association of America, during the third quarter of 2008, national ad sales in newspapers plunged 18.4%, compared to a drop of 2.5% in the corresponding quarter in 2007.
Recently, Fitch warned that more newspapers and newspaper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010.
Standard & Poor's Ratings Services downgraded Tribune's debt to junk in November.
The company has resorted to cost cutting measures and has put many of its assets on the block. A few days back Los Angeles Times eliminated 75 newsroom positions, or about 10% of the editorial staff. The cuts follow earlier staff reductions this year of about 180 Tribune employees. The company has also cut jobs at its other publications.
The company is also mulling the possible sale of Chicago Cubs and their stadium (Wrigley Field). Earlier, in May this year, US cable television group Cablevision acquired New York-based Newsday - the nation's eighth largest newspaper - from Tribune Co. for US$650 million.
Tribune Co. Considers Bankruptcy Filing
The Associated Press
CHICAGO -- The Tribune Co., owner of the Los Angeles Times and the Chicago Tribune, other newspapers and the Chicago Cubs and Wrigley Field, has reportedly hired financial advisers ahead of a possible filing for bankruptcy-court protection.
The Chicago Tribune reported that its parent has hired investment bank Lazard Ltd. and law firm Sidley Austin as it considers its financial options.
Tribune Co. spokesman Gary Weitman called it "an uncertain and difficult environment." He said company executives haven't made any decision but are looking at all their options.
The Wall Street Journal, quoting people familiar with the matter, reported that a bankruptcy filing could come as early as this week.
It said Tribune Co.'s cash flow may not be enough to cover nearly $1 billion in interest payments that are due this year.
Tribune was taken private last December in an $8.2 billion buyout led by real estate mogul Sam Zell.
Copyright 2008 by The Associated Press.
Friday, December 5, 2008
Michigan Governor Jennifer Granholm Reaffirms Commitment to Employee Free Choice Act
By: Jennifer M. Granholm
The Employee Free Choice Act is a vital part of an effective economic recovery program and President-elect Obama has said he will sign it into law. I support quick passage of this law because the wages and salaries of American workers provide critical fuel for the engine of economic growth. Declining family income and stagnate real wages underlie today's economic crisis.
The new administration is committed to giving the highest priority to policies and programs that promote sustainable, long term economic growth. The Employee Free Choice Act is a vital part of an effective economic recovery program and President-elect Obama has said he will sign it into law. I support quick passage of this law because the wages and salaries of American workers provide critical fuel for the engine of economic growth. Declining family income and stagnate real wages underlie today's economic crisis.
Unions provide workers the right to bargain for better wages and benefits. One of the most efficient means to restore the purchasing power of working families and stimulate economic recovery is to guarantee that right.
While CEO pay and corporate profits have risen dramatically, and worker productivity has grown consistently, wages have not kept pace. Today we have the greatest income inequality since the Great Depression. Working families are bearing the burden and our economic future is at risk.
Now, more than ever we need to make sure working Americans have the pay and benefits they need to deserve so we can get the economy back on the road to prosperity.
For more information about the Employee Free Choice Act, visit the websites of the AFL-CIO or Change to Win.
Statement by SEIU President Andy Stern:
"Yesterday, Michigan Governor Jennifer Granholm reaffirmed her commitment to protecting workers' free choice for a voice at work by calling for quick passage of the Employee Free Choice Act.
"Granholm understands that at a time when the auto industry is asking Congress for assistance to keep Michigan's core economic engine afloat and billions have already been spent bailing out Wall Street that we need to stop blaming workers for the decisions made in the board room and start finding ways to help working families that are facing tough times.
"The Employee Free Choice Act is a bipartisan non-governmental solution that's needed now to make sure that workers, not just CEOs, can have the chance for a voice at their companies to benefit from the economic progress they help create and to advocate for the best quality services and products for consumers and customers.
"Workers in unions earn 30 percent higher wages and are 59 percent more likely to have employer-provided health coverage. According to the Center for Economic Research, joining a union raises a woman's wage as much as a full-year of college, and a union raises the chance a woman has health coverage by more than earning a four-year college degree.
"Workers at successful companies like Kaiser Permanente, Harley Davidson, and AT&T have formed partnerships with their employers to benefit from the economic progress they help create and to advocate for the best quality services and products for consumers and customers.
"SEIU members agree with Governor Granholm that President-elect Obama and Congress should act quickly to pass the Employee Free Choice Act to help create an economy that works for everyone."
Marcus Mrowka,SEIU.org
202-730-7759
The Employee Free Choice Act is a vital part of an effective economic recovery program and President-elect Obama has said he will sign it into law. I support quick passage of this law because the wages and salaries of American workers provide critical fuel for the engine of economic growth. Declining family income and stagnate real wages underlie today's economic crisis.
The new administration is committed to giving the highest priority to policies and programs that promote sustainable, long term economic growth. The Employee Free Choice Act is a vital part of an effective economic recovery program and President-elect Obama has said he will sign it into law. I support quick passage of this law because the wages and salaries of American workers provide critical fuel for the engine of economic growth. Declining family income and stagnate real wages underlie today's economic crisis.
Unions provide workers the right to bargain for better wages and benefits. One of the most efficient means to restore the purchasing power of working families and stimulate economic recovery is to guarantee that right.
While CEO pay and corporate profits have risen dramatically, and worker productivity has grown consistently, wages have not kept pace. Today we have the greatest income inequality since the Great Depression. Working families are bearing the burden and our economic future is at risk.
Now, more than ever we need to make sure working Americans have the pay and benefits they need to deserve so we can get the economy back on the road to prosperity.
For more information about the Employee Free Choice Act, visit the websites of the AFL-CIO or Change to Win.
Statement by SEIU President Andy Stern:
"Yesterday, Michigan Governor Jennifer Granholm reaffirmed her commitment to protecting workers' free choice for a voice at work by calling for quick passage of the Employee Free Choice Act.
"Granholm understands that at a time when the auto industry is asking Congress for assistance to keep Michigan's core economic engine afloat and billions have already been spent bailing out Wall Street that we need to stop blaming workers for the decisions made in the board room and start finding ways to help working families that are facing tough times.
"The Employee Free Choice Act is a bipartisan non-governmental solution that's needed now to make sure that workers, not just CEOs, can have the chance for a voice at their companies to benefit from the economic progress they help create and to advocate for the best quality services and products for consumers and customers.
"Workers in unions earn 30 percent higher wages and are 59 percent more likely to have employer-provided health coverage. According to the Center for Economic Research, joining a union raises a woman's wage as much as a full-year of college, and a union raises the chance a woman has health coverage by more than earning a four-year college degree.
"Workers at successful companies like Kaiser Permanente, Harley Davidson, and AT&T have formed partnerships with their employers to benefit from the economic progress they help create and to advocate for the best quality services and products for consumers and customers.
"SEIU members agree with Governor Granholm that President-elect Obama and Congress should act quickly to pass the Employee Free Choice Act to help create an economy that works for everyone."
Marcus Mrowka,SEIU.org
202-730-7759
Strapped Local Stations Look To Web For Cash
By James Erik Abels
Forbes.com
As advertising falters, station managers have big plans for the Internet.
Local television stations need some good news. Just this month, the Television Bureau of Advertising announced spot TV advertising would fall this year roughly 7%--despite the lucrative presidential election. Next year looks bleak too: It predicted 7% to 11% declines. Those are big numbers in an industry that's used to clearing roughly $65 billion in advertising.
While the decline is due in part to a recession, the bigger reason is more systemic. Advertisers have more outlets than ever to choose from. So what are local stations to do? Increasingly, they're turning for salvation in the usual direction: the Internet.
There are reasons for stations' emboldened outlook. Ion Puspurica, who has spent a decade helping build and manage hundreds of local television Web sites, says some 30% of TV stations have managed to increase online revenues to a point where they matter.
"If you get to the point where they can generate 5% or above on their bottom line, then they really pay attention to you," Puspurica says. As general manager of Critical Media's broadcast services group, he is now selling a service to stations that simplifies their ability to post broadcast video feeds on the Internet.
Driven by increased consumer use of online video over the last year and a half, stations are pushing hard to turn it into a moneymaker. "We're getting a lot of pressure from our clients to sell their Web sites, and to sell them uniquely," says Garnett Losak, who's company, Petry Media, sells advertising and builds programming schedules for local stations.
Many local stations not only compete with other stations, but also fight with local newspapers for ad dollars. Every day a station doesn't push more of its resources online is another day a competitor might. With fewer and fewer viewers tuning in to local newscasts, Adam Symson, vice president of interactive for E.W. Scripps' (nyse: SSP - news - people ) television division, which owns 10 stations, says building online audiences is imperative.
Consider ABC affiliate KCRG in Cedar Rapids, Iowa. While it internally tracks an average of seven million unique visitors per month, and streams its noon newscast to an average of 9,000 people per day, the two-year-old site only earned some $500,000 last year. "It's got to grow. It just absolutely has to grow," says the station's general manager John Phelan, noting there will be no real political ads next year.
He hopes to double revenue in 2009, and for several years thereafter, with a new sales program. He's finalizing a system where his nine sales people will be penalized if they do not meet monthly Web revenue goals. "At this point, you have to try something different," he says.
Giving sales staff incentives to sell the Web remains a huge problem, says Steve Ridge, president of media strategy at television consultancy Frank N. Magid Associates. And there is no consistency on how to approach the issue--whether via separate sales reps or a unified sales force.
But Web sites continue to be a bet on the future for most stations, rather than a quick fix for flagging ad sales. "[Stations] don't realize how much effort, resources and time it takes for that business to develop," says Scott Blumenthal, executive vice president of television at Lin TV (nyse: TVL - news - people ). His company, which owns 29 local television stations, is very focused on the Internet. While the company has struggled this year, digital has been a bright spot, growing in the first nine months of the year to $19.7 million, from $10.1 million last year.
Those are results other stations are likely looking to emulate. For instance, Robert Forsyth, director of Internet operations at Albritton Communications, says the company has spent the last year rebuilding the technology system underlying its 12 Web properties, including eight television stations. With 70,000 to 80,000 videos streaming from his sites per month--many of which will soon be in high definition--and 75 to 100 new videos published per day, Forsyth says increasing online ad dollars remains a priority for 2009.
But local advertising consultant Gordon Borrell of Borrell Associates says he's worried some stations have a mismatched expectation for how quickly the Internet can become a significant piece of their business.
His firm surveyed 647 television stations, and many are setting Web budgets for next year based on massive increases in online revenue expectations. In one case, the number is seven times greater than 2008 revenue. Borrell says, "I'm kinda wondering how they're going to do that."
Forbes.com
As advertising falters, station managers have big plans for the Internet.
Local television stations need some good news. Just this month, the Television Bureau of Advertising announced spot TV advertising would fall this year roughly 7%--despite the lucrative presidential election. Next year looks bleak too: It predicted 7% to 11% declines. Those are big numbers in an industry that's used to clearing roughly $65 billion in advertising.
While the decline is due in part to a recession, the bigger reason is more systemic. Advertisers have more outlets than ever to choose from. So what are local stations to do? Increasingly, they're turning for salvation in the usual direction: the Internet.
There are reasons for stations' emboldened outlook. Ion Puspurica, who has spent a decade helping build and manage hundreds of local television Web sites, says some 30% of TV stations have managed to increase online revenues to a point where they matter.
"If you get to the point where they can generate 5% or above on their bottom line, then they really pay attention to you," Puspurica says. As general manager of Critical Media's broadcast services group, he is now selling a service to stations that simplifies their ability to post broadcast video feeds on the Internet.
Driven by increased consumer use of online video over the last year and a half, stations are pushing hard to turn it into a moneymaker. "We're getting a lot of pressure from our clients to sell their Web sites, and to sell them uniquely," says Garnett Losak, who's company, Petry Media, sells advertising and builds programming schedules for local stations.
Many local stations not only compete with other stations, but also fight with local newspapers for ad dollars. Every day a station doesn't push more of its resources online is another day a competitor might. With fewer and fewer viewers tuning in to local newscasts, Adam Symson, vice president of interactive for E.W. Scripps' (nyse: SSP - news - people ) television division, which owns 10 stations, says building online audiences is imperative.
Consider ABC affiliate KCRG in Cedar Rapids, Iowa. While it internally tracks an average of seven million unique visitors per month, and streams its noon newscast to an average of 9,000 people per day, the two-year-old site only earned some $500,000 last year. "It's got to grow. It just absolutely has to grow," says the station's general manager John Phelan, noting there will be no real political ads next year.
He hopes to double revenue in 2009, and for several years thereafter, with a new sales program. He's finalizing a system where his nine sales people will be penalized if they do not meet monthly Web revenue goals. "At this point, you have to try something different," he says.
Giving sales staff incentives to sell the Web remains a huge problem, says Steve Ridge, president of media strategy at television consultancy Frank N. Magid Associates. And there is no consistency on how to approach the issue--whether via separate sales reps or a unified sales force.
But Web sites continue to be a bet on the future for most stations, rather than a quick fix for flagging ad sales. "[Stations] don't realize how much effort, resources and time it takes for that business to develop," says Scott Blumenthal, executive vice president of television at Lin TV (nyse: TVL - news - people ). His company, which owns 29 local television stations, is very focused on the Internet. While the company has struggled this year, digital has been a bright spot, growing in the first nine months of the year to $19.7 million, from $10.1 million last year.
Those are results other stations are likely looking to emulate. For instance, Robert Forsyth, director of Internet operations at Albritton Communications, says the company has spent the last year rebuilding the technology system underlying its 12 Web properties, including eight television stations. With 70,000 to 80,000 videos streaming from his sites per month--many of which will soon be in high definition--and 75 to 100 new videos published per day, Forsyth says increasing online ad dollars remains a priority for 2009.
But local advertising consultant Gordon Borrell of Borrell Associates says he's worried some stations have a mismatched expectation for how quickly the Internet can become a significant piece of their business.
His firm surveyed 647 television stations, and many are setting Web budgets for next year based on massive increases in online revenue expectations. In one case, the number is seven times greater than 2008 revenue. Borrell says, "I'm kinda wondering how they're going to do that."
Layoffs Imminent At Universal
By Dan Cox
Fishbowl LA
It's only about 70 people out of workforce of 2000-plus, but Universal corporate executives Mark Shmuger and David Linde told employees via an email that the force would be reduced. Universal confirmed the layoffs.
Below is the note:
Dear Colleagues
As we strive to meet the challenges presented by the struggling economy, leaders from every department at Universal Pictures have worked hard to identify cost saving measures in many areas of our business. Those measures include scaling back on travel, overtime, consultants, premieres, conferences, newspaper marketing and general administrative costs.
While much has been accomplished to find necessary savings, we regret that we must also reduce headcount by around 3%. No company likes to have to make these kinds of decisions, and certainly we are no exception. We want to assure you that everyone has done their best to keep job cuts to an absolute minimum.
The process of communicating with those individuals whose positions are affected has begun today and will continue for the next few days.
We appreciate the effort from everyone who has participated in this difficult process.
Sincerely,
Marc Shmuger and David Linde
Posted by Dan Cox | 12:23 PM | Studio film
Fishbowl LA
It's only about 70 people out of workforce of 2000-plus, but Universal corporate executives Mark Shmuger and David Linde told employees via an email that the force would be reduced. Universal confirmed the layoffs.
Below is the note:
Dear Colleagues
As we strive to meet the challenges presented by the struggling economy, leaders from every department at Universal Pictures have worked hard to identify cost saving measures in many areas of our business. Those measures include scaling back on travel, overtime, consultants, premieres, conferences, newspaper marketing and general administrative costs.
While much has been accomplished to find necessary savings, we regret that we must also reduce headcount by around 3%. No company likes to have to make these kinds of decisions, and certainly we are no exception. We want to assure you that everyone has done their best to keep job cuts to an absolute minimum.
The process of communicating with those individuals whose positions are affected has begun today and will continue for the next few days.
We appreciate the effort from everyone who has participated in this difficult process.
Sincerely,
Marc Shmuger and David Linde
Posted by Dan Cox | 12:23 PM | Studio film
VIACOM BLOODBATH
By PETER LAURIA
The New York Post
DAUMAN TRIPLES ESTIMATE, FIRES 850+ IN ALL DIVISIONS
The sheer size of the bloodletting that went down at Viacom yesterday has current and now-former employees referring to CEO Philippe Dauman alternately as "the undertaker" and "the mortician" around the company's water coolers.
Initially expected to total around 300 people, Dauman nearly tripled that number by announcing that Viacom would cut 850 jobs, or about 7 percent of its workforce. The company also said that it is suspending salary increases in 2009 for senior-level executives.
"The only time people hear from Philippe is when he's firing them," said one former executive, who asked to remain anonymous because he still maintains close ties to the company.
Sources expressed particular umbrage at the letter Dauman sent to staffers yesterday announcing the layoffs. In the letter, Dauman says he "couldn't be more proud or more appreciative" of Viacom's employees and that "saying goodbye to friends and colleagues is always difficult."
But coming in the context of massive layoffs, several staffers agreed with one source, who found the letter "totally offensive."
However, Dauman does have supporters in the company. One source, disputing the idea that Dauman is only heard from when it's bad news, said, "Dauman's always been available to speak at conferences or meet with clients whenever needed."
Viacom said the 850 job cuts will be carried out across the company's various divisions, but didn't provide a precise number for each unit. Sources said movie studio Paramount will lose about 100 employees and the MTV Networks group, which includes MTV, VH1, Nickelodeon and Comedy Central, would shed as many as 500 people.
At MTV Networks, sources said the advertising sales division would be hit particularly hard, which is ironic since advertising at Viacom's channels is trending below that of its peers.
Digital ad sales, which is supposed to be a growth area for Viacom, is expected to lose a few dozen people. And the former Viacom executive said the rumor going around is that digital media chief Mika Salmi might leave the company by the end of the year.
The layoffs, combined with the writedown of certain programming and other assets, will result in a pre-tax charge of $400 million to $450 million, or 42 cents to 48 cents per share, in the fourth quarter. But, the company expects to save between $200 million and $250 million next year as a result of the moves.
Viacom's layoffs are independent of the debt issues faced at Chairman Sumner Redstone's National Amusements. Redstone's next move may be to sell his stake in slot-machine company WMS Industries or part of the National Amusements movie theater chain.
Viacom shares closed trading yesterday up 13 cents to $14.63.
The New York Post
DAUMAN TRIPLES ESTIMATE, FIRES 850+ IN ALL DIVISIONS
The sheer size of the bloodletting that went down at Viacom yesterday has current and now-former employees referring to CEO Philippe Dauman alternately as "the undertaker" and "the mortician" around the company's water coolers.
Initially expected to total around 300 people, Dauman nearly tripled that number by announcing that Viacom would cut 850 jobs, or about 7 percent of its workforce. The company also said that it is suspending salary increases in 2009 for senior-level executives.
"The only time people hear from Philippe is when he's firing them," said one former executive, who asked to remain anonymous because he still maintains close ties to the company.
Sources expressed particular umbrage at the letter Dauman sent to staffers yesterday announcing the layoffs. In the letter, Dauman says he "couldn't be more proud or more appreciative" of Viacom's employees and that "saying goodbye to friends and colleagues is always difficult."
But coming in the context of massive layoffs, several staffers agreed with one source, who found the letter "totally offensive."
However, Dauman does have supporters in the company. One source, disputing the idea that Dauman is only heard from when it's bad news, said, "Dauman's always been available to speak at conferences or meet with clients whenever needed."
Viacom said the 850 job cuts will be carried out across the company's various divisions, but didn't provide a precise number for each unit. Sources said movie studio Paramount will lose about 100 employees and the MTV Networks group, which includes MTV, VH1, Nickelodeon and Comedy Central, would shed as many as 500 people.
At MTV Networks, sources said the advertising sales division would be hit particularly hard, which is ironic since advertising at Viacom's channels is trending below that of its peers.
Digital ad sales, which is supposed to be a growth area for Viacom, is expected to lose a few dozen people. And the former Viacom executive said the rumor going around is that digital media chief Mika Salmi might leave the company by the end of the year.
The layoffs, combined with the writedown of certain programming and other assets, will result in a pre-tax charge of $400 million to $450 million, or 42 cents to 48 cents per share, in the fourth quarter. But, the company expects to save between $200 million and $250 million next year as a result of the moves.
Viacom's layoffs are independent of the debt issues faced at Chairman Sumner Redstone's National Amusements. Redstone's next move may be to sell his stake in slot-machine company WMS Industries or part of the National Amusements movie theater chain.
Viacom shares closed trading yesterday up 13 cents to $14.63.
SUMMARY OF THE BASIC AGREEMENT BETWEEN IATSE and AMPTP
Steven Poster
National President
IATSE Local 600
stevenasc@ipgla.com
December 4, 2008
Dear Local 600 Members,
We just got the go-ahead from the IATSE to release the following information, and, as promised, here is a brief summary of the negotiations between the IATSE and AMPTP. We are pleased that the IATSE has successfully completed these negotiations and will be putting this tentative deal out to members for ratification in the near future. If approved by the Membership, this new contract would be in effect for three years from August 1, 2009 through July 31, 2012.
As you will see, one of the accomplishments of these negotiations is that, despite the economic crisis, the Union was successful in preventing the Producers from requiring IATSE members to co-pay the cost of health insurance premiums for themselves or family members.
The agreement provides wage increases of 3% a year on a compounded basis and protects our pension plan in this very uncertain time. Under the contract the producers agreed to substantially increase their contributions into the health plan so that our benefits would remain the strongest in the industry.
The Union also succeeded in securing jurisdiction over New Media. This ground-breaking achievement also creates a new source of funding for our benefits plans, because residuals will be paid on productions released on new Media platforms as described in the summary.
Because of the rapidly increasing cost of healthcare and the deepening recession, the IATSE had to make some painful decisions in order to protect the benefit structure of the active and retiree health plans. Because of these rising costs, the tentative agreement includes some modifications in the plans and an increase in the number of hours a member needs to work in order to qualify for coverage. Beginning in the final year of the contract, this requirement will be increased from 300 to 400 hours over a six month period.
We do know that this 100-hour increase will be difficult for some of our members. This is all the more reason why we need to focus on calling in our jobs, particularly those that are non-IA. We must organize every kind of employment opportunity so that the Union can expand job possibilities for the membership. Your officers and I pledge to make this our major focus to ensure that not one of our brothers or sisters loses coverage.
We have to challenge ourselves to become a better union and to do that we have to do a better job of looking out for our Brothers and Sisters. It's our responsibility to help members qualify for the health plan. We can do this if we just take the time to check the Membership First service that appears on the Local 600 website and will be greatly improved with the new computer system.
Again, we would like to stress that this deal is tentative and the bullet points below do not represent the entire Agreement. We will provide more details and information as they become available from the IATSE and the AMPTP. Your questions and comments are always welcome.
Fraternally,
Steven Poster
National President
SUMMARY OF THE BASIC AGREEMENT BETWEEN IATSE and AMPTP
WAGES and INDIVIDUAL ACCOUNT PLANS (IAP)
Increase current wages 3% per year, in each year of the three-year Agreement. This is the best wage package since the 2000 negotiations.
The IAP percentage contribution of 6% will apply on all hours worked or guaranteed and employers will contribute additional money with each wage increase.
PENSION PLAN
Negotiated 13th and 14th check for current retirees in each year of the Agreement and eliminated the requirement which conditioned payment on a minimum of eight months reserves in the active health plan.
Protected pensions by bargaining for a funding plan that over time will mitigate the effect of the unfavorable investment climate and prevent reductions in our pensions.
HEALTH PLAN
Increased employer contributions into plan by $.35 per year for a total of $164 million over the life of the Agreement.
Won additional employer contributions of $.15 per hour when health plan reserves fall below 10 months for actives, and an additional $.15 if reserve levels fall below six months in active plan or eight months in retiree plan or on July 31, 2011, whichever is earlier. These contributions amount to an additional $35 million.
Maintained Bank of Hours maximum at 450.
Modifications in the Plans
Out of Network: Co-insurance paid by participants utilizing out-of-network hospital and professional services will be increased from 30% to 50% while allowances for the usual and customary charges for these services will be reduced from 85% to 70%.
In-Network Hospital and Professional out-of-pocket 10% with annual cap increased from $800 to $1000. For example, if your hospital and doctor's bills total $45,000, the maximum you have to pay is $1,000 for these bills.
Mandatory mail order maintenance prescription drug usage, with co-pays capped at 2.5 times retail. After two thirty-day prescriptions, participants utilizing maintenance drugs must purchase 90-day supplies of prescription drugs through Medco. By using Medco, you will save money. For example, if you are co-paying $20.00 a month for a prescription drug, under this new provision, rather than pay $60.00 over a three-month period, you would only pay $50.00 over the same period.
Full cost on "Brand" drugs when approved "Generic" is available. Member pays difference. (Medical appeals available).
All brand co-pays increased by $5.
Preferred "Brand" drug co-pay increased by $5. Retail "Generic" no change.
Discontinue coverage for these drugs with over-the-counter equivalent available - PPI's (Heartburn) and NSA (Antihistamines). (Medical appeals available).
Emergency Room co-pay of $100 (waived if admitted to hospital).
PPO office co-pay increased to $30 for those in the Motion Picture Television Fund (MPTF) area not using MPTF. MPTF to require $5 co-pay for Doctor's visits.
$100 co-pay for each hospital visit.
HMO (Kaiser, Healthnet, Oxford) office co-pay increased from $0 to $15.
Coordination of Benefits provisions are expanded to include prescription charges.
Eligibility requirement increased from 300 to 400 hours, effective August 2011. Because the Bank of Hours remains at a maximum of 450 hours, and Local 600 members on average have 409 hours in their "banks," members earning 300 hours should be able to qualify through August of 2013. (Local 600 will use this period of time to convince members to call in their non-union jobs so that we can utilize our organizing resources to help them qualify for health benefits).
NEW MEDIA
Original Programs Made for New Media
IATSE increased its jurisdiction to cover these New Media consistent with the DGA, WGA and AFTRA.
New Media production based on existing shows (derivatives) are covered under the Basic Agreement.
Original programs made for New Media over $15,000 per minute or $300,000 per episode or $500,000 per series are covered. Producers will pay full pension and health contributions.
On covered programs for original New Media rates and terms of employment are freely negotiable, except that union security, grievance and arbitration and no strike/no lockout provisions will apply. No mandatory staffing and full interchange of classifications will also apply.
Re-use of Programs Transmitted in New Media
Residuals: Producers agree to pay residuals on:
· Productions created for traditional markets (feature films and television programs) that are released into New Media platforms.
· Derivative and original New Media programs when released originally on consumer and free ad-supported markets and subsequently released to a consumer pay market for electronic pay-per-view or download to rent after a 26-week period.
· New Media programs released into Supplemental Markets, such as basic cable, pay television and home DVD.
IATSE has the right to inspect unredacted copies of all licenses, distribution and other agreements, etc. pertaining to New Media exploitation on a quarterly basis. The purpose of this section is to allow the IATSE to monitor and evaluate the growth of new Media.
All New Media provisions will "Sunset" at the end of the contract and will be re-negotiated.
UNLIKE MANY OTHER UNION MEMBERS IN THE INDUSTRY, IATSE MEMBERS WILL NOT BE REQUIRED TO PAY ANY HEALTH INSURANCE PREMIUMS FOR THEMSELVES OR FAMILY MEMBERS
National President
IATSE Local 600
stevenasc@ipgla.com
December 4, 2008
Dear Local 600 Members,
We just got the go-ahead from the IATSE to release the following information, and, as promised, here is a brief summary of the negotiations between the IATSE and AMPTP. We are pleased that the IATSE has successfully completed these negotiations and will be putting this tentative deal out to members for ratification in the near future. If approved by the Membership, this new contract would be in effect for three years from August 1, 2009 through July 31, 2012.
As you will see, one of the accomplishments of these negotiations is that, despite the economic crisis, the Union was successful in preventing the Producers from requiring IATSE members to co-pay the cost of health insurance premiums for themselves or family members.
The agreement provides wage increases of 3% a year on a compounded basis and protects our pension plan in this very uncertain time. Under the contract the producers agreed to substantially increase their contributions into the health plan so that our benefits would remain the strongest in the industry.
The Union also succeeded in securing jurisdiction over New Media. This ground-breaking achievement also creates a new source of funding for our benefits plans, because residuals will be paid on productions released on new Media platforms as described in the summary.
Because of the rapidly increasing cost of healthcare and the deepening recession, the IATSE had to make some painful decisions in order to protect the benefit structure of the active and retiree health plans. Because of these rising costs, the tentative agreement includes some modifications in the plans and an increase in the number of hours a member needs to work in order to qualify for coverage. Beginning in the final year of the contract, this requirement will be increased from 300 to 400 hours over a six month period.
We do know that this 100-hour increase will be difficult for some of our members. This is all the more reason why we need to focus on calling in our jobs, particularly those that are non-IA. We must organize every kind of employment opportunity so that the Union can expand job possibilities for the membership. Your officers and I pledge to make this our major focus to ensure that not one of our brothers or sisters loses coverage.
We have to challenge ourselves to become a better union and to do that we have to do a better job of looking out for our Brothers and Sisters. It's our responsibility to help members qualify for the health plan. We can do this if we just take the time to check the Membership First service that appears on the Local 600 website and will be greatly improved with the new computer system.
Again, we would like to stress that this deal is tentative and the bullet points below do not represent the entire Agreement. We will provide more details and information as they become available from the IATSE and the AMPTP. Your questions and comments are always welcome.
Fraternally,
Steven Poster
National President
SUMMARY OF THE BASIC AGREEMENT BETWEEN IATSE and AMPTP
WAGES and INDIVIDUAL ACCOUNT PLANS (IAP)
Increase current wages 3% per year, in each year of the three-year Agreement. This is the best wage package since the 2000 negotiations.
The IAP percentage contribution of 6% will apply on all hours worked or guaranteed and employers will contribute additional money with each wage increase.
PENSION PLAN
Negotiated 13th and 14th check for current retirees in each year of the Agreement and eliminated the requirement which conditioned payment on a minimum of eight months reserves in the active health plan.
Protected pensions by bargaining for a funding plan that over time will mitigate the effect of the unfavorable investment climate and prevent reductions in our pensions.
HEALTH PLAN
Increased employer contributions into plan by $.35 per year for a total of $164 million over the life of the Agreement.
Won additional employer contributions of $.15 per hour when health plan reserves fall below 10 months for actives, and an additional $.15 if reserve levels fall below six months in active plan or eight months in retiree plan or on July 31, 2011, whichever is earlier. These contributions amount to an additional $35 million.
Maintained Bank of Hours maximum at 450.
Modifications in the Plans
Out of Network: Co-insurance paid by participants utilizing out-of-network hospital and professional services will be increased from 30% to 50% while allowances for the usual and customary charges for these services will be reduced from 85% to 70%.
In-Network Hospital and Professional out-of-pocket 10% with annual cap increased from $800 to $1000. For example, if your hospital and doctor's bills total $45,000, the maximum you have to pay is $1,000 for these bills.
Mandatory mail order maintenance prescription drug usage, with co-pays capped at 2.5 times retail. After two thirty-day prescriptions, participants utilizing maintenance drugs must purchase 90-day supplies of prescription drugs through Medco. By using Medco, you will save money. For example, if you are co-paying $20.00 a month for a prescription drug, under this new provision, rather than pay $60.00 over a three-month period, you would only pay $50.00 over the same period.
Full cost on "Brand" drugs when approved "Generic" is available. Member pays difference. (Medical appeals available).
All brand co-pays increased by $5.
Preferred "Brand" drug co-pay increased by $5. Retail "Generic" no change.
Discontinue coverage for these drugs with over-the-counter equivalent available - PPI's (Heartburn) and NSA (Antihistamines). (Medical appeals available).
Emergency Room co-pay of $100 (waived if admitted to hospital).
PPO office co-pay increased to $30 for those in the Motion Picture Television Fund (MPTF) area not using MPTF. MPTF to require $5 co-pay for Doctor's visits.
$100 co-pay for each hospital visit.
HMO (Kaiser, Healthnet, Oxford) office co-pay increased from $0 to $15.
Coordination of Benefits provisions are expanded to include prescription charges.
Eligibility requirement increased from 300 to 400 hours, effective August 2011. Because the Bank of Hours remains at a maximum of 450 hours, and Local 600 members on average have 409 hours in their "banks," members earning 300 hours should be able to qualify through August of 2013. (Local 600 will use this period of time to convince members to call in their non-union jobs so that we can utilize our organizing resources to help them qualify for health benefits).
NEW MEDIA
Original Programs Made for New Media
IATSE increased its jurisdiction to cover these New Media consistent with the DGA, WGA and AFTRA.
New Media production based on existing shows (derivatives) are covered under the Basic Agreement.
Original programs made for New Media over $15,000 per minute or $300,000 per episode or $500,000 per series are covered. Producers will pay full pension and health contributions.
On covered programs for original New Media rates and terms of employment are freely negotiable, except that union security, grievance and arbitration and no strike/no lockout provisions will apply. No mandatory staffing and full interchange of classifications will also apply.
Re-use of Programs Transmitted in New Media
Residuals: Producers agree to pay residuals on:
· Productions created for traditional markets (feature films and television programs) that are released into New Media platforms.
· Derivative and original New Media programs when released originally on consumer and free ad-supported markets and subsequently released to a consumer pay market for electronic pay-per-view or download to rent after a 26-week period.
· New Media programs released into Supplemental Markets, such as basic cable, pay television and home DVD.
IATSE has the right to inspect unredacted copies of all licenses, distribution and other agreements, etc. pertaining to New Media exploitation on a quarterly basis. The purpose of this section is to allow the IATSE to monitor and evaluate the growth of new Media.
All New Media provisions will "Sunset" at the end of the contract and will be re-negotiated.
UNLIKE MANY OTHER UNION MEMBERS IN THE INDUSTRY, IATSE MEMBERS WILL NOT BE REQUIRED TO PAY ANY HEALTH INSURANCE PREMIUMS FOR THEMSELVES OR FAMILY MEMBERS
Thursday, December 4, 2008
More Layoffs Hit Tribune Newsroom
CHICAGO (CBS) ― The Chicago Tribune is in the midst of another round of layoffs.
More than a dozen newsroom employees were cut on Wednesday, including both of the New York-based correspondents for the newspaper. They will have to clean out their desks by the end of the week.
More jobs are expected to be cut next month.
Last month, Tribune Co. announced that it had lost $121.6 million for the third quarter this year as newspaper advertising revenue fell.
The privately held company's net income in the same quarter a year earlier was $152.8million. Revenue fell 10.5 percent to $1.04 billion, from $1.16 billion a year ago, the company said.
Publishing revenue fell 13 percent to $654 million, as advertising revenue dropped 19percent, and total paid circulation fell 7 percent from a year ago to 2.2 million from Monday to Friday.
The company was taken private last December in an $8.2 billion buyout led by real estate mogul Sam Zell. It still must report its results to comply with bondholder agreements.
Tribune said its debt load increased to $11.8 billion at the end of the third quarter, up from $9.4 billion a year ago.
In September, the Tribune unveiled a redesigned newspaper that is less costly to produce, with a brighter, bolder product with fewer sections on narrower newsprint. The Metro and Business sections were eliminated, and the paper was reduced to three sections -- front page, Sports and Live!, an arts and entertainment section that supplants Tempo.
(© MMVIII, CBS Broadcasting Inc. All Rights Reserved.)
--------------------------------------------------------------------------------
More than a dozen newsroom employees were cut on Wednesday, including both of the New York-based correspondents for the newspaper. They will have to clean out their desks by the end of the week.
More jobs are expected to be cut next month.
Last month, Tribune Co. announced that it had lost $121.6 million for the third quarter this year as newspaper advertising revenue fell.
The privately held company's net income in the same quarter a year earlier was $152.8million. Revenue fell 10.5 percent to $1.04 billion, from $1.16 billion a year ago, the company said.
Publishing revenue fell 13 percent to $654 million, as advertising revenue dropped 19percent, and total paid circulation fell 7 percent from a year ago to 2.2 million from Monday to Friday.
The company was taken private last December in an $8.2 billion buyout led by real estate mogul Sam Zell. It still must report its results to comply with bondholder agreements.
Tribune said its debt load increased to $11.8 billion at the end of the third quarter, up from $9.4 billion a year ago.
In September, the Tribune unveiled a redesigned newspaper that is less costly to produce, with a brighter, bolder product with fewer sections on narrower newsprint. The Metro and Business sections were eliminated, and the paper was reduced to three sections -- front page, Sports and Live!, an arts and entertainment section that supplants Tempo.
(© MMVIII, CBS Broadcasting Inc. All Rights Reserved.)
--------------------------------------------------------------------------------
Tuesday, December 2, 2008
A Generation of Local TV Anchors Is Signing Off
By BRIAN STELTER
Published: November 30, 2008
THE NEW YORK TIMES
One of the most familiar voices in Denver is about to sign off for the last time.
In October, three weeks after Ernie Bjorkman, an institution in Colorado television, signed a new annual contract worth close to a quarter of a million dollars, he was told he was being let go by KWGN, the CW affiliate in Denver, a victim of consolidation with another station.
In the self-assured baritone of his profession, Mr. Bjorkman, a 36-year television veteran who will be paid through the end of his contract period, said, “I don’t think we’re going to see the anchor people grow old with the audience anymore.”
Across the country, longtime local TV anchors are a dying breed. Facing an economic slump and a severe advertising downturn, many stations have cut costs drastically in the last year, and veteran anchors, with their expensive contracts, seem to be shouldering a disproportionate share of the cutbacks. When station managers are forced to make cuts, hefty anchor salaries are a tempting target.
In Chicago, the 23-year anchor Diann Burns was laid off from WBBM. In Boston, the renowned sports anchor Bob Lobel was let go by WBZ. In Houston, the 26-year veteran Carolyn Campbell was dismissed from KHOU.
When the anchors depart, they take decades of experience and insight with them. “Basically, you replace someone who knows City Hall with someone who can’t find it,” said John Beard, who lost his job at KTTV last December after 26 years as a news anchor in Los Angeles.
Almost all of the country’s 1,300 television stations with network affiliations have a face, or a pair of faces, that represent their news operations better than any logo or commercial can. Many years after signing off, the larger-than-life characters are still fixtures of newscast lore, like Bill Beutel in New York, Fahey Flynn in Chicago and Ann Bishop in Miami.
While some anchors in top markets can still command million-dollar salaries — like Chuck Scarborough and Sue Simmons on WNBC in New York — the positions are becoming more vulnerable to the market forces that are roiling local TV, analysts say.
“There is certainly an erosion of longtime anchors happening at many stations across the country, for a very simple reason: economics,” said Al Primo, a television news consultant who developed the “Eyewitness News” format in the 1960s and 1970s.
Mr. Primo says anchors’ salaries now seem “out of sync with the reality” of budgets. As stations record lower revenue, managers are trying to adjust anchor salaries accordingly.
“We’ve been aggressive in our cost controls,” said Peter Diaz, the executive vice president of the Belo Corporation, which instituted a companywide wage freeze at its 20 TV stations in mid-November. Although anchors have separate contracts, they have been asked to participate in the freeze, and many have agreed, he said.
Local TV, although it lacks the glamour of the network nightly news or the prestige of print newspapers, remains the most popular single source of news in the United States. Slightly more than half of the population watches local news regularly, according to the Pew Research Center for People and the Press, while only 34 percent read a newspaper each day and 29 percent watch a network evening newscast.
But the ratings for the broadcasts have gradually eroded over the years. The typical late newscast now reaches 12 percent of viewers watching TV in a given market, down from 21 percent 10 years ago.
The news departments are not alone in feeling the squeeze. Advertising is falling sharply, partly because of cutbacks in spending by automakers and car dealerships, which represent the single largest category of advertiser for broadcasters.
Until mid-November, a trade association for stations, the Television Bureau of Advertising, had expected total commercial revenue to be flat compared with 2007. It revised the forecast, however, and predicted a 7.1 percent decline. The group expects a 7 to 11 percent decrease in revenue next year. Already, the financial pressures are trickling down to newsrooms.
“The conditions are as bad as I’ve ever seen, and I’ve been on TV since 1980,” said Rich Rodriguez, who is 54 and has anchored newscasts for 20 years, most recently at KSEE in Fresno, Calif. He was laid off in October. When the station’s general manager asked him to take a 25 percent pay cut, Mr. Rodriguez refused. He was fired the same day his first grandchild was born.
“It’s scary for people over 50,” he said.
Many stations — and viewers — still place a premium on the gravitas that older anchors provide. But confronted by the era of always-available news and information on the Internet, local stations are being forced to rethink their mission.
On the Web, users can assemble their own newscast from an around-the-clock buffet of options, making anchors seem somewhat superfluous, especially to younger viewers. Perhaps as a result, station layoffs are in the news almost every day now, said Tom Petner, who edits the television industry newsletter ShopTalk.
“The industry is moving from star players to more of a team sport,” he said.
News is still a profit center for many local TV owners; it represents about 40 percent of an average station’s revenue. But as that revenue shrinks, local news operations have automated many of their technical operations and spread their staffs ever more thinly.
“There aren’t a lot of bodies left to cut, unless you scale back newscasts,” said Robert Papper, chairman of Hofstra University’s journalism department. After surveying 300 newsrooms last summer, Mr. Papper projected that about 360 local TV news jobs had been lost this year. (That represents only a small fraction of the thousands of journalists laid off by newspapers, though TV news operates with a much smaller base of employees.)
Mr. Papper says longtime anchors at top-rated stations in local markets are at little risk of being laid off. But “if I were a very highly paid anchor of a No. 3 station, I’d be really nervous,” he said.
Looking forward, Mr. Bjorkman, the Colorado newsman, says he doubts that many TV anchors will manage to stay in the same market for decades. He expects more mergers, consolidations and cost-cutting as local news grapples with competition online and on digital channels.
His last day in local TV will be Dec. 31. Presciently, Mr. Bjorkman, 57, started taking veterinary technician classes two years ago, acting on a decades-old dream of working with animals. While Mr. Bjorkman has been performing his veterinary internships, some residents have recognized him, and a few have wondered whether he was working undercover on an investigative reporting assignment.
He has explained to them, this will be his new full-time assignment. He finished his course work in September, two weeks before he found out he would lose his anchor job. “I’m ready to reinvent myself,” he said.
Published: November 30, 2008
THE NEW YORK TIMES
One of the most familiar voices in Denver is about to sign off for the last time.
In October, three weeks after Ernie Bjorkman, an institution in Colorado television, signed a new annual contract worth close to a quarter of a million dollars, he was told he was being let go by KWGN, the CW affiliate in Denver, a victim of consolidation with another station.
In the self-assured baritone of his profession, Mr. Bjorkman, a 36-year television veteran who will be paid through the end of his contract period, said, “I don’t think we’re going to see the anchor people grow old with the audience anymore.”
Across the country, longtime local TV anchors are a dying breed. Facing an economic slump and a severe advertising downturn, many stations have cut costs drastically in the last year, and veteran anchors, with their expensive contracts, seem to be shouldering a disproportionate share of the cutbacks. When station managers are forced to make cuts, hefty anchor salaries are a tempting target.
In Chicago, the 23-year anchor Diann Burns was laid off from WBBM. In Boston, the renowned sports anchor Bob Lobel was let go by WBZ. In Houston, the 26-year veteran Carolyn Campbell was dismissed from KHOU.
When the anchors depart, they take decades of experience and insight with them. “Basically, you replace someone who knows City Hall with someone who can’t find it,” said John Beard, who lost his job at KTTV last December after 26 years as a news anchor in Los Angeles.
Almost all of the country’s 1,300 television stations with network affiliations have a face, or a pair of faces, that represent their news operations better than any logo or commercial can. Many years after signing off, the larger-than-life characters are still fixtures of newscast lore, like Bill Beutel in New York, Fahey Flynn in Chicago and Ann Bishop in Miami.
While some anchors in top markets can still command million-dollar salaries — like Chuck Scarborough and Sue Simmons on WNBC in New York — the positions are becoming more vulnerable to the market forces that are roiling local TV, analysts say.
“There is certainly an erosion of longtime anchors happening at many stations across the country, for a very simple reason: economics,” said Al Primo, a television news consultant who developed the “Eyewitness News” format in the 1960s and 1970s.
Mr. Primo says anchors’ salaries now seem “out of sync with the reality” of budgets. As stations record lower revenue, managers are trying to adjust anchor salaries accordingly.
“We’ve been aggressive in our cost controls,” said Peter Diaz, the executive vice president of the Belo Corporation, which instituted a companywide wage freeze at its 20 TV stations in mid-November. Although anchors have separate contracts, they have been asked to participate in the freeze, and many have agreed, he said.
Local TV, although it lacks the glamour of the network nightly news or the prestige of print newspapers, remains the most popular single source of news in the United States. Slightly more than half of the population watches local news regularly, according to the Pew Research Center for People and the Press, while only 34 percent read a newspaper each day and 29 percent watch a network evening newscast.
But the ratings for the broadcasts have gradually eroded over the years. The typical late newscast now reaches 12 percent of viewers watching TV in a given market, down from 21 percent 10 years ago.
The news departments are not alone in feeling the squeeze. Advertising is falling sharply, partly because of cutbacks in spending by automakers and car dealerships, which represent the single largest category of advertiser for broadcasters.
Until mid-November, a trade association for stations, the Television Bureau of Advertising, had expected total commercial revenue to be flat compared with 2007. It revised the forecast, however, and predicted a 7.1 percent decline. The group expects a 7 to 11 percent decrease in revenue next year. Already, the financial pressures are trickling down to newsrooms.
“The conditions are as bad as I’ve ever seen, and I’ve been on TV since 1980,” said Rich Rodriguez, who is 54 and has anchored newscasts for 20 years, most recently at KSEE in Fresno, Calif. He was laid off in October. When the station’s general manager asked him to take a 25 percent pay cut, Mr. Rodriguez refused. He was fired the same day his first grandchild was born.
“It’s scary for people over 50,” he said.
Many stations — and viewers — still place a premium on the gravitas that older anchors provide. But confronted by the era of always-available news and information on the Internet, local stations are being forced to rethink their mission.
On the Web, users can assemble their own newscast from an around-the-clock buffet of options, making anchors seem somewhat superfluous, especially to younger viewers. Perhaps as a result, station layoffs are in the news almost every day now, said Tom Petner, who edits the television industry newsletter ShopTalk.
“The industry is moving from star players to more of a team sport,” he said.
News is still a profit center for many local TV owners; it represents about 40 percent of an average station’s revenue. But as that revenue shrinks, local news operations have automated many of their technical operations and spread their staffs ever more thinly.
“There aren’t a lot of bodies left to cut, unless you scale back newscasts,” said Robert Papper, chairman of Hofstra University’s journalism department. After surveying 300 newsrooms last summer, Mr. Papper projected that about 360 local TV news jobs had been lost this year. (That represents only a small fraction of the thousands of journalists laid off by newspapers, though TV news operates with a much smaller base of employees.)
Mr. Papper says longtime anchors at top-rated stations in local markets are at little risk of being laid off. But “if I were a very highly paid anchor of a No. 3 station, I’d be really nervous,” he said.
Looking forward, Mr. Bjorkman, the Colorado newsman, says he doubts that many TV anchors will manage to stay in the same market for decades. He expects more mergers, consolidations and cost-cutting as local news grapples with competition online and on digital channels.
His last day in local TV will be Dec. 31. Presciently, Mr. Bjorkman, 57, started taking veterinary technician classes two years ago, acting on a decades-old dream of working with animals. While Mr. Bjorkman has been performing his veterinary internships, some residents have recognized him, and a few have wondered whether he was working undercover on an investigative reporting assignment.
He has explained to them, this will be his new full-time assignment. He finished his course work in September, two weeks before he found out he would lose his anchor job. “I’m ready to reinvent myself,” he said.
Monday, December 1, 2008
Of course we'll have newspapers. But will there be any news in them?
By James O’Shea
Nieman Watchdog
jamesoshe@gmail.com
James O’Shea, ex-editor of the LA Times, sees pandering to readers as a current danger and says newspapers aren’t going to solve their problems by lay-offs or closing bureaus. Journalists need to persuade people that we “once again are a public trust,” he writes.
With all the reports about huge layoffs and financial troubles in the news business, it’s no wonder that many journalists and caring Americans question whether we will continue to have newspapers.
But those concerned about the fate of these fabled institutions are asking the wrong question. Of course we will have newspapers. Communist China has newspapers; Russia under the Soviets had newspapers. Serbia had newspapers under dictator Slobadan Milosevic.
The real question is what kind of journalism will we have in the newspapers that manage to survive the current wave of circulation and advertising declines plaguing the industry.
Will we have the rich, hard-hitting storytelling that gives the news its infrastructure of shoe-leather journalism from courthouses, police stations, legislatures and war zones, the kind of reporting that gives bloggers, broadcasters and others something to write and talk about?
Or will the surviving newspapers become vessels for “panderism” instead of journalism, flimsy content organized around the age-old principle of luring dog owners to stories in the paper so you can sell them some dog food?
I’ve been wondering about this question ever since I left the newsroom of the Los Angeles Times earlier this year over what has come to be commonly known as “a disagreement over the future direction of the paper.” But it really came home to me recently after I read Portfolio editor Joanne Lippman’s interview with Sam Zell, the real estate billionaire who seized control the company that owned the Times just before I was told it would be a good idea to spend more time with my family.
With his typical flair for controversy, Zell slammed newspapers BZ (Before Zell) for acting more like charitable trusts than businesses driven by the trusty capitalist principal of giving your investors something in return for their money.
“I think the newspaper industry truly still doesn’t understand that it is in a business with customers,” Zell told Lippman and others at a media conference, “and the business must reflect the needs and demands of the customer. And to the extent that we don’t do that, we will disappear.
“If you want to be a charitable trust, be a charitable trust,” he continued in a dismissive reference to Arthur Sulzberger’s New York Times. “But if you don’t want to be a charitable trust, then you’ve got to focus on producing a return for investors capital. It’s just that simple.”
I have a few problems with what Zell says. Sulzberger currently sells the New York Times, an excellent newspaper, for $1.50 a day, the same price that Zell’s acolytes are asking for four days of the Chicago Tribune in a special offer to win back readers who quit the paper after he took control. So I guess I would question who is running the “charitable trust.”
On the surface, though, much of what Zell says seems to make sense. There’s a pragmatic allure to his vision of challenging every newspaper cost and every decision through the prism of a cost-benefit analysis “just like our government is supposed to do when it raises our taxes.” Who would criticize him for suggesting we listen to our customers?
Speaking as someone who spent the last 30 years in a newsroom, I think he’s also probably right when he says journalists often refused to accept much responsibility for the industry’s declining readership and circulation problems, or that we cared more about our drive to excel journalistically than the serious problems in our business model.
The problem I have with Zell’s philosophy – and the questions it raises about the kind of journalism we will have in print and digital newspapers – is how that vision is applied in newsrooms he controls.
One of the journalistic Petri dishes for his experiments is the Chicago Tribune, a place, in the interest of full disclosure, where I worked for more than 25 years, including five in which I had the honor of being its managing editor.
The paper currently is in the throes of a massive redesign of its pages driven by people that Zell brought in from the radio industry to “reinvent” the daily newspaper.
Reporters and editors are being schooled in the art of marketing and packaging in an effort to reverse circulation declines at the paper and present “content” in new and visually arresting ways.
Instead of scanning the events, policies, tragedies and joys of the world and giving readers a balanced. in-depth, report on what is important, significant and interesting, editors now place a premium on stories that will appeal to “frenzied families” or “carefree couples.” These are categories of readers that the paper’s marketing studies suggest are turned off by reports of war, corruption and complex issues like financial calamity.
Accompanying the redesign were all-but-mandatory staff meetings run by a newly-minted masthead editor in which the paper’s journalists received lectures on how to reach their “target audiences” from a marketing department employee who long has tried to downplay serious, in-depth journalism in favor of softer stories that she insists readers really want. Write about disease, she told Tribune journalists, because that’s what “frenzied families” want to read about, not some bomb going off in Beirut.
What the Tribune is doing is like trying to improve education by replacing the teachers and giving the students only the books they want to read. I doubt it will happen, although the company is now out in the Chicago market aggressively discounting the price of the paper, presumably so it can claim victory in the months ahead.
In fairness, the Tribune points out in its written appeal to win back readers turned off by its new design that it still does serious journalism, citing three recent stories, including one on domestic violence. But the truth is the paper regularly produces fewer weighty stories on significant issues, and those that it does often are relegated to the confusing inside pages of the paper. At one news meeting, an investigative report on the Chicago Housing Authority (CHA) was rejected for page one because, as one ranking editor put it, the CHA “is not our demographic.”
As anyone who has spent any time in a newsroom can attest, reporters aim for stories that will land them on page one because that’s how they increase their journalistic capital, win the favor or their editors and enhance their careers. An editor who puts soft on page one will get plenty of soft.
In his remarks, Zell also took journalists and journalism to task for ignoring the desires of their readers. I spent many a day and night in my years as an editor talking to and interacting with hundreds of readers, something I really enjoyed.
Most often they were smart, thoughtful people who cared about the news and the future of our craft. Frankly, I never heard one of them tell me they wanted panderized pap in their newspaper organized around the principal of selling ads. They wanted news about the significant issues of the day organized and written in a way that helped them understand an increasingly complicated world.
There’s no question that we have some serious problems in our business, and from what I can determine, Zell and his aides do understand that revenue losses are a far bigger problem in the industry than readership. So even if they resolve the financial problems, reporters and editors will still face a thorny question about how we can practice journalism in the newspapers of the future, be they print and ink or digital.
If journalists want serious journalism to survive and thrive, journalists, and only journalists, will have to resolve the central problem we face: The public finds little economic value in what we do. Otherwise they would gladly pay for the news rather than rely on our increasingly unreliable partners in advertising to foot the bill.
Why is that? I don’t know, and, I would venture to add, I’d bet most other journalists don’t either, because few of us have looked very hard for an answer. This lack of intelligence about ourselves is understandable; newsrooms are busy places and few people have the luxury I’ve enjoyed over the past few months – some time to think.
I’ve come to realize that, as a journalist, I’ve not given enough real thought to how we got into this mess.
Zell says the newspaper industry’s problem is that it is living in the past, when its monopoly status allowed it to play the role of a public trust. “It worked in the old days,” he said, “because you could be a public trust and you could do well for your shareholders because you had a monopoly.” Now, he says, newspapers have to act like a business and do what their customers tell them.
The monopoly stuff may have been true about the classified ad business, where advertisers had few alternatives for reaching a mass market and little choice but to pay whatever rates newspapers charged them. But I had enough journalistic competitors on my heels to question his premise about the news side of the business. I really wonder, though, whether the problem we have is that simple.
If all we had to do was ask readers what they wanted in a newspaper and then give it to them, wouldn’t someone have done that years ago? Had they, and had they been successful, I can guarantee you everyone would have copied them and we would have no problem. Despite what Zell says, I’ve seen dozens of papers march down that road to no success.
I wonder if, contrary to Zell’s prescription, our problems aren’t related to our pursuit of our business interests at the expense of journalism.
It seems to me that the main problem journalism now faces is the lack of public trust in journalists. I don’t have to repeat the numerous studies that document the level of public esteem for journalists to be a cut above – or below – politicians and used car salesmen. And if people lack respect for you and your work, doesn’t it stand to reason that they don’t value what you do and won’t pay for it?
Why is public regard for journalists so low? There is no shortage of theories. Studies show that many disaffected people accuse journalists of political bias, an unfortunate if understandable view in a society that has become politically polarized over the last two decades, with people increasingly looking to print and television news to validate the opinions they already hold.
People tend to lump all media into one category, failing to differentiate between cable TV shoutfests, sensational celebrity-driven television, magazine and tabloid coverage and the more serious journalism traditionally practiced by established, big-city daily newspapers. To the extent we blur the differences between these once-distinct voices with pandering coverage that resembles advertorial and not editorial we play right into this trap.
I doubt there is any one reason that anyone can really point to for sure, but I suspect the lack of regard for our profession has something to do with the way we have operated as a business.
As Zell says, in the old days, we subordinated our goals for profit to our obligation to be a public trust. Newspaper families and owners remained intensely interested in profit, but not at the levels demanded once those families started selling out to professionally managed chains. As public esteem for journalists plunged, pressure from Wall Street to increase profits, often to unsustainable margins of 20 percent or more, also soared.
Newspapers did all sort of things to live up to Wall Street expectations over the years. They cut expenses, cut staff, eliminated sections of the paper and, like the Tribune Company, acquired other more profitable assets such as television stations.
Soon Tribune journalists, many only too willingly, started preening for the TV cameras and spouting their opinions and becoming minor celebrities. I really wonder how much that sort of thing, not only at Tribune Company but all over the nation, undermined our most precious asset, the integrity of our news reports.
Business considerations also drove the decision to give away content on the Internet. Once one news organization did it, almost all others followed. Is is any wonder that the public places little value on something that our own industry thought so little of that it gave it away for free?
Obviously, many other factors are no doubt involved. Any investigation of what went wrong would have to go far beyond a piece like this. The decline of readership is a complex problem that also involves sweeping social and cultural changes that have been given far too little attention and study. But if journalists don’t figure out how they got into this mess, they will never figure a way to get out. And that would be the true tragedy.
Contrary to the conventional wisdom, readership of newspapers is not really the problem. If you combine the print and on-line audiences of the Chicago Tribune or the Los Angeles Times, they both reach more readers than at any time in their history.
But the system that financed the news that they provide readers for less than the price of a cup of coffee is crumbling, and there’s nothing on the horizon to replace it.
At some point, readers are going to have to pay for the information, which will be a staggering change to the way we live and an even more fundamental change for journalists.
Newspapers across the country are not going to resolve that problem by laying off journalists, closing bureaus and even abandoning print editions for on-line papers. Tribune just slashed its Washington bureau severely at a time when interest in Washington is soaring because of a newly elected president from Chicago, Barack Obama. I suspect we will soon see newspaper bankruptcies.
Democracy, and indeed, Zell’s cherished capitalism, must have a vibrant and free press to survive and prosper. And you are not going to get that kind of press by simply listening to your customer and giving him what he or she wants. That’s what Detroit did when everyone told them they wanted an SUV. And look where that got them, and all of us.
I suspect that once again our future is at least in part in our past. To thrive and prosper, newspapers have to figure out how to deliver journalism that makes the public believe we once again are a public trust, something of value and something they won’t hesitate to pay for. Instead many papers today are trying to give readers entertainment, without the drama and without the laughs.
James O’Shea was the editor and executive vice president of the Los Angeles Times from 2006 to 2008 and held many high-level reporting and editing positions before that.
E-mail: jamesoshe@gmail.com
Nieman Watchdog
jamesoshe@gmail.com
James O’Shea, ex-editor of the LA Times, sees pandering to readers as a current danger and says newspapers aren’t going to solve their problems by lay-offs or closing bureaus. Journalists need to persuade people that we “once again are a public trust,” he writes.
With all the reports about huge layoffs and financial troubles in the news business, it’s no wonder that many journalists and caring Americans question whether we will continue to have newspapers.
But those concerned about the fate of these fabled institutions are asking the wrong question. Of course we will have newspapers. Communist China has newspapers; Russia under the Soviets had newspapers. Serbia had newspapers under dictator Slobadan Milosevic.
The real question is what kind of journalism will we have in the newspapers that manage to survive the current wave of circulation and advertising declines plaguing the industry.
Will we have the rich, hard-hitting storytelling that gives the news its infrastructure of shoe-leather journalism from courthouses, police stations, legislatures and war zones, the kind of reporting that gives bloggers, broadcasters and others something to write and talk about?
Or will the surviving newspapers become vessels for “panderism” instead of journalism, flimsy content organized around the age-old principle of luring dog owners to stories in the paper so you can sell them some dog food?
I’ve been wondering about this question ever since I left the newsroom of the Los Angeles Times earlier this year over what has come to be commonly known as “a disagreement over the future direction of the paper.” But it really came home to me recently after I read Portfolio editor Joanne Lippman’s interview with Sam Zell, the real estate billionaire who seized control the company that owned the Times just before I was told it would be a good idea to spend more time with my family.
With his typical flair for controversy, Zell slammed newspapers BZ (Before Zell) for acting more like charitable trusts than businesses driven by the trusty capitalist principal of giving your investors something in return for their money.
“I think the newspaper industry truly still doesn’t understand that it is in a business with customers,” Zell told Lippman and others at a media conference, “and the business must reflect the needs and demands of the customer. And to the extent that we don’t do that, we will disappear.
“If you want to be a charitable trust, be a charitable trust,” he continued in a dismissive reference to Arthur Sulzberger’s New York Times. “But if you don’t want to be a charitable trust, then you’ve got to focus on producing a return for investors capital. It’s just that simple.”
I have a few problems with what Zell says. Sulzberger currently sells the New York Times, an excellent newspaper, for $1.50 a day, the same price that Zell’s acolytes are asking for four days of the Chicago Tribune in a special offer to win back readers who quit the paper after he took control. So I guess I would question who is running the “charitable trust.”
On the surface, though, much of what Zell says seems to make sense. There’s a pragmatic allure to his vision of challenging every newspaper cost and every decision through the prism of a cost-benefit analysis “just like our government is supposed to do when it raises our taxes.” Who would criticize him for suggesting we listen to our customers?
Speaking as someone who spent the last 30 years in a newsroom, I think he’s also probably right when he says journalists often refused to accept much responsibility for the industry’s declining readership and circulation problems, or that we cared more about our drive to excel journalistically than the serious problems in our business model.
The problem I have with Zell’s philosophy – and the questions it raises about the kind of journalism we will have in print and digital newspapers – is how that vision is applied in newsrooms he controls.
One of the journalistic Petri dishes for his experiments is the Chicago Tribune, a place, in the interest of full disclosure, where I worked for more than 25 years, including five in which I had the honor of being its managing editor.
The paper currently is in the throes of a massive redesign of its pages driven by people that Zell brought in from the radio industry to “reinvent” the daily newspaper.
Reporters and editors are being schooled in the art of marketing and packaging in an effort to reverse circulation declines at the paper and present “content” in new and visually arresting ways.
Instead of scanning the events, policies, tragedies and joys of the world and giving readers a balanced. in-depth, report on what is important, significant and interesting, editors now place a premium on stories that will appeal to “frenzied families” or “carefree couples.” These are categories of readers that the paper’s marketing studies suggest are turned off by reports of war, corruption and complex issues like financial calamity.
Accompanying the redesign were all-but-mandatory staff meetings run by a newly-minted masthead editor in which the paper’s journalists received lectures on how to reach their “target audiences” from a marketing department employee who long has tried to downplay serious, in-depth journalism in favor of softer stories that she insists readers really want. Write about disease, she told Tribune journalists, because that’s what “frenzied families” want to read about, not some bomb going off in Beirut.
What the Tribune is doing is like trying to improve education by replacing the teachers and giving the students only the books they want to read. I doubt it will happen, although the company is now out in the Chicago market aggressively discounting the price of the paper, presumably so it can claim victory in the months ahead.
In fairness, the Tribune points out in its written appeal to win back readers turned off by its new design that it still does serious journalism, citing three recent stories, including one on domestic violence. But the truth is the paper regularly produces fewer weighty stories on significant issues, and those that it does often are relegated to the confusing inside pages of the paper. At one news meeting, an investigative report on the Chicago Housing Authority (CHA) was rejected for page one because, as one ranking editor put it, the CHA “is not our demographic.”
As anyone who has spent any time in a newsroom can attest, reporters aim for stories that will land them on page one because that’s how they increase their journalistic capital, win the favor or their editors and enhance their careers. An editor who puts soft on page one will get plenty of soft.
In his remarks, Zell also took journalists and journalism to task for ignoring the desires of their readers. I spent many a day and night in my years as an editor talking to and interacting with hundreds of readers, something I really enjoyed.
Most often they were smart, thoughtful people who cared about the news and the future of our craft. Frankly, I never heard one of them tell me they wanted panderized pap in their newspaper organized around the principal of selling ads. They wanted news about the significant issues of the day organized and written in a way that helped them understand an increasingly complicated world.
There’s no question that we have some serious problems in our business, and from what I can determine, Zell and his aides do understand that revenue losses are a far bigger problem in the industry than readership. So even if they resolve the financial problems, reporters and editors will still face a thorny question about how we can practice journalism in the newspapers of the future, be they print and ink or digital.
If journalists want serious journalism to survive and thrive, journalists, and only journalists, will have to resolve the central problem we face: The public finds little economic value in what we do. Otherwise they would gladly pay for the news rather than rely on our increasingly unreliable partners in advertising to foot the bill.
Why is that? I don’t know, and, I would venture to add, I’d bet most other journalists don’t either, because few of us have looked very hard for an answer. This lack of intelligence about ourselves is understandable; newsrooms are busy places and few people have the luxury I’ve enjoyed over the past few months – some time to think.
I’ve come to realize that, as a journalist, I’ve not given enough real thought to how we got into this mess.
Zell says the newspaper industry’s problem is that it is living in the past, when its monopoly status allowed it to play the role of a public trust. “It worked in the old days,” he said, “because you could be a public trust and you could do well for your shareholders because you had a monopoly.” Now, he says, newspapers have to act like a business and do what their customers tell them.
The monopoly stuff may have been true about the classified ad business, where advertisers had few alternatives for reaching a mass market and little choice but to pay whatever rates newspapers charged them. But I had enough journalistic competitors on my heels to question his premise about the news side of the business. I really wonder, though, whether the problem we have is that simple.
If all we had to do was ask readers what they wanted in a newspaper and then give it to them, wouldn’t someone have done that years ago? Had they, and had they been successful, I can guarantee you everyone would have copied them and we would have no problem. Despite what Zell says, I’ve seen dozens of papers march down that road to no success.
I wonder if, contrary to Zell’s prescription, our problems aren’t related to our pursuit of our business interests at the expense of journalism.
It seems to me that the main problem journalism now faces is the lack of public trust in journalists. I don’t have to repeat the numerous studies that document the level of public esteem for journalists to be a cut above – or below – politicians and used car salesmen. And if people lack respect for you and your work, doesn’t it stand to reason that they don’t value what you do and won’t pay for it?
Why is public regard for journalists so low? There is no shortage of theories. Studies show that many disaffected people accuse journalists of political bias, an unfortunate if understandable view in a society that has become politically polarized over the last two decades, with people increasingly looking to print and television news to validate the opinions they already hold.
People tend to lump all media into one category, failing to differentiate between cable TV shoutfests, sensational celebrity-driven television, magazine and tabloid coverage and the more serious journalism traditionally practiced by established, big-city daily newspapers. To the extent we blur the differences between these once-distinct voices with pandering coverage that resembles advertorial and not editorial we play right into this trap.
I doubt there is any one reason that anyone can really point to for sure, but I suspect the lack of regard for our profession has something to do with the way we have operated as a business.
As Zell says, in the old days, we subordinated our goals for profit to our obligation to be a public trust. Newspaper families and owners remained intensely interested in profit, but not at the levels demanded once those families started selling out to professionally managed chains. As public esteem for journalists plunged, pressure from Wall Street to increase profits, often to unsustainable margins of 20 percent or more, also soared.
Newspapers did all sort of things to live up to Wall Street expectations over the years. They cut expenses, cut staff, eliminated sections of the paper and, like the Tribune Company, acquired other more profitable assets such as television stations.
Soon Tribune journalists, many only too willingly, started preening for the TV cameras and spouting their opinions and becoming minor celebrities. I really wonder how much that sort of thing, not only at Tribune Company but all over the nation, undermined our most precious asset, the integrity of our news reports.
Business considerations also drove the decision to give away content on the Internet. Once one news organization did it, almost all others followed. Is is any wonder that the public places little value on something that our own industry thought so little of that it gave it away for free?
Obviously, many other factors are no doubt involved. Any investigation of what went wrong would have to go far beyond a piece like this. The decline of readership is a complex problem that also involves sweeping social and cultural changes that have been given far too little attention and study. But if journalists don’t figure out how they got into this mess, they will never figure a way to get out. And that would be the true tragedy.
Contrary to the conventional wisdom, readership of newspapers is not really the problem. If you combine the print and on-line audiences of the Chicago Tribune or the Los Angeles Times, they both reach more readers than at any time in their history.
But the system that financed the news that they provide readers for less than the price of a cup of coffee is crumbling, and there’s nothing on the horizon to replace it.
At some point, readers are going to have to pay for the information, which will be a staggering change to the way we live and an even more fundamental change for journalists.
Newspapers across the country are not going to resolve that problem by laying off journalists, closing bureaus and even abandoning print editions for on-line papers. Tribune just slashed its Washington bureau severely at a time when interest in Washington is soaring because of a newly elected president from Chicago, Barack Obama. I suspect we will soon see newspaper bankruptcies.
Democracy, and indeed, Zell’s cherished capitalism, must have a vibrant and free press to survive and prosper. And you are not going to get that kind of press by simply listening to your customer and giving him what he or she wants. That’s what Detroit did when everyone told them they wanted an SUV. And look where that got them, and all of us.
I suspect that once again our future is at least in part in our past. To thrive and prosper, newspapers have to figure out how to deliver journalism that makes the public believe we once again are a public trust, something of value and something they won’t hesitate to pay for. Instead many papers today are trying to give readers entertainment, without the drama and without the laughs.
James O’Shea was the editor and executive vice president of the Los Angeles Times from 2006 to 2008 and held many high-level reporting and editing positions before that.
E-mail: jamesoshe@gmail.com
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