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Tribune Co. Fraught with Debt, Leadership Loss

July 15, 2008 at 6:40 PM EDT
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As the Tribune Co. searches for ways to sustain its readership, two of its major papers, the Chicago Tribune and the Los Angeles Times, suffered heavy losses in leadership. A columnist and a professor discuss the latest blows to the company and changes in the media landscape.

JEFFREY BROWN: The troubled newspaper industry took two more casualties yesterday, when Ann Marie Lipinski, editor of the Chicago Tribune, and David Hiller, publisher of the Los Angeles Times, resigned their positions.

The common denominator: their papers are both owned by the Tribune Company, an industry leader that was bought last December by real estate magnate Sam Zell in an $8.2 billion deal that took the company private, but left it saddled with debt.

Last month, Zell announced a major round of budget cuts, including a plan for fewer news pages and staff layoffs. Recently, the L.A. Times announced it would cut another 150 newsroom jobs, and the Chicago Tribune said it would cut 80.

We take a look at what’s going on now with Esther Thorson, associate dean of the University of Missouri’s School of Journalism, and Jon Fine, media columnist for BusinessWeek magazine.

Well, Jon Fine, there are troubles galore for this industry, but start with the Tribune Company itself. Explain its particular problems right now.

JON FINE, BusinessWeek magazine: Well, the Tribune’s particular problems are that real estate magnate Sam Zell bought the company for $8.2 billion. That deal left the company with $13 billion in debt, which means, in plain terms, you have an enormous mortgage payment to make every year. I think it’s $1 billion this year.

The profits, the total profits of Tribune last year were $1 billion, I think $1.1 billion. Not much of a cushion there. Profits are dropping and revenues are dropping.

That said, what’s affecting Tribune is not at all different from what’s affecting every other major market newspaper and newspaper company. You’re seeing double-digit revenue falloffs. You’re seeing layoffs on a truly massive scale. You’re seeing 15 percent, 20 percent, 25 percent of newsrooms being whacked.

This is not a happy time, but it’s not just that Sam Zell is too deep in debt or that he paid too much for Tribune. It’s that this is what is happening to newspapers. The world is shrinking. No one’s figured out a way around that.

Redesigning Newspapers

JEFFREY BROWN: Well, let's stay with this company for the moment. First, Esther Thorson, the resignations we saw yesterday -- now, these are just the latest big changes at these papers, particularly the L.A. Times -- is it known yet whether or to what degree they were connected with the kind of financial pressures that we were just talking about?

ESTHER THORSON, University of Missouri: Well, I think there's no doubt that that's the case. I mean, it's very hard to manage either a newsroom or the business end of newspapers when revenues from both circulation and advertising continue to plummet.

At the L.A. Times, they've seen really just a lot of chaos in the last five or six years, a lot of turnover in both publishers and editors. And it's very hard to manage effectively when the top of the system is constantly changing.

JEFFREY BROWN: Now, staying with you, Sam Zell has talked last month about these cuts that involve cutting the news pages, redesigning the paper. Do we know yet what that will look like? In other words, what will readers see in these papers eventually?

ESTHER THORSON: Well, the Orlando Sentinel is a good example of what you'll see. They've done a redesign, where basically there's much more advertising in relationship to the editorial content.

Ordinarily, newspapers -- not counting classifieds, which, of course, is all advertising -- run about 60 percent editorial material, 40 percent advertising. These newspapers are now going to go to a 50 percent-50 percent split, and that will include classified advertising.

So basically what that means is there's going to be lots less news and lots more advertising. And there's a lot of research out there that suggests that you don't want to push on that ratio too hard, because then people who are paying for the news are going to be unhappy.

More advertisements, less news

JEFFREY BROWN: The Orlando Sentinel, of course, another of the papers in the Tribune Company. Well, Jon Fine, what do you see about that balance of cutting the news versus advertising and where that line is crossed, in terms of changing the content that the readers get?

JON FINE: Well, there's no question that the content is changing. I mean, there are going to be fewer people producing the news; there are going to be fewer news pages.

But I'd like to advance a slightly radical notion here. You know, when the newspapers were flourishing, when Tribune and all other newspapers were flourishing, when the Orlando Sentinel was fat and happy, and the Los Angeles Times was, that was a time when the newspaper was really the one place in any city where you could get news.

You know, as I was discussing with someone else earlier today, if I wanted to, this morning I could go online and read 100 news stories about what happened in one province of Iraq. You couldn't do that 20 years ago.

So it's sad that, you know, there will be less stuff of certain kinds at the Los Angeles Times, at the Orlando Sentinel, at other Tribune Company newspapers like the Baltimore Sun. But at the same time, there's just generally a lot of duplication of news.

I adore the New York Times. It's my hometown newspaper. I've got to tell you the honest-to-God truth. If they cut 12 to 15 pages out of it every week, and they did it right, I might not even notice. And this is something that I spend a lot of time with.

Local news focus or neglect?

JEFFREY BROWN: Well, but this is the conundrum for news organizations everywhere, isn't it? Esther Thorson, let me just, on that notion, Russ Stanton -- he's the L.A. Times editor -- when he announced the cuts last week to his staff, he wrote a memo, and he had in that memo a line.

It says, "Thanks to the Internet, we have more readers for our great journalism than at any time in our history." That's because they have a very large online presence. But then he continued, "But also, thanks to the Internet, our advertisers have more choices and we have less money."

Now, that is the conundrum for not only the Tribune Company papers, but all kinds of papers, right?

ESTHER THORSON: Well, that's absolutely true, but I have to disagree with Jon. The problem is you can get a lot of information about Iraq by looking at the Internet, but local news is really produced by newspapers, local newspapers.

And the problem is that, as there's less and less of that, there's more and more stories about business, and politics, and government, and schools that just simply never gets covered. I mean, local news is in serious danger from these cutbacks.

JEFFREY BROWN: Jon, do you want to come back on that?

JON FINE: Yes. If I may jump in, actually, what the papers are doing is focusing on local, because there's a recognition that's the one thing they do that no one else does.

The Orlando Sentinel is the largest newsroom in Orlando. The Baltimore Sun is the largest newsroom in Baltimore. They're putting their resources that are left to bear on the local market. This is, frankly, what they should have been doing for a long time.

It's sad. I mean, I would probably prefer a Baltimore Sun that had a much wider worldview than you're going to see in it now. But if you have to make these hard decisions -- and, unfortunately, we do -- then the decision you make is to focus on the local market. That's what these guys are doing.

Methods to keep readership

JEFFREY BROWN: Esther Thorson, do you see any interesting experiments out there where newspapers are trying to do that, are trying to find some ways to keep their readership?

ESTHER THORSON: Well, there are all kinds of experiments that are going on out there, but basically what has happened in the newspaper industry, which I think is the bigger story that makes this more meaningful, is that they have spent years converting most of their revenues into profits.

So the cuts that we're seeing now are much larger, but we've seen cuts in newsrooms on a continuing basis for at least 20 years. And so what we know happens -- and research shows us this again and again and again -- is that, sure, Jon is happy reading just, you know, 10 articles or what have you, but there's a great diversity of people out there.

So it used to be, when the L.A. Times was just chockfull of news, that no matter who you were or what you were interested in you could find something there for you. But what we know very clearly is, when there's less and less news, less and less diversity in the content of the newspaper, circulation is bound to go down. And when circulation goes down, advertising revenues go down, as well.

So the killing off of the newsrooms, which is just exactly what we're seeing, really does threaten the value of not only the print product, I think, but also the online product of newspapers.

JEFFREY BROWN: All right. All right. Well, this is a story to be continued. We'll keep watching. Jon Fine, Esther Thorson, thanks very much.


JON FINE: Thank you.