Uncertainty as Tribune Company Prepares to Retrench

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NYT: News Analysis
Uncertainty as Tribune Prepares to Retrench
By RICHARD PÉREZ-PEÑA
Published: June 9, 2008

Is Sam Zell right about the newspaper business? Last week, Mr. Zell, chairman and chief executive of the Tribune Company, and Randy Michaels, the chief operating officer, announced a set of deep cuts, saying that shrinking revenue left them no choice. They said they would trim 500 pages of news each week from the company’s dozen papers, including The Chicago Tribune and The Los Angeles Times. Their aim is a paper with pages — excluding classified advertising and special ad sections — split 50-50 between news content and ads. Journalists may recoil, but is a thinner, flashier, more local newspaper, with a smaller newsroom staff, the best financial model for an industry that is enduring a painful contraction with no end in sight?...

Mr. Zell’s plan is an accelerated version of what many newspaper companies are already undertaking in the hope of staving off the kind of huge dislocation that occurred in other industries, like the steel business in the 1980s or the domestic automobile business today. In those cases, the pressure came from legacy costs, labor and foreign competition. In the newspaper business, which struggles with those costs as well, the biggest threat is the migration of advertisers and readers to the Internet.

At Tribune’s largest paper, The Los Angeles Times, Mr. Zell’s plan would mean cutting the news content by 82 pages weekly....

In the short run, Tribune’s approach is likely to save money, on personnel and newsprint. Newsroom staffs — already much smaller than they were a few years ago — will also be cut, though no head counts were given. Mr. Michaels revealed that the company had analyzed the volume of material produced by each reporter, and the per capita production at each paper; it concluded that many people were not pulling their weight and would hardly be missed....But watering down the product hurts staff morale, (Mike Simonton, senior director at Fitch Ratings in Chicago) said, and if taken too far, “could accelerate the migration of readers to the Web or other sources of news.”...

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Mr. Zell and Mr. Michaels did not address what content would be cut, but Mr. Zell has said before that he disagrees with the heavy allocation of resources to national and international news....The largest and most prestigious papers like The Los Angeles Times have long prided themselves on covering the nation and the world, and some executives in the industry say that the material with the least mass appeal — whether foreign news or arts coverage — is essential to their most devoted readers, and to affluent readers who are valued by advertisers....

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Tribune’s $12.8 billion debt load, most of it from the transaction to go private that gave Mr. Zell control of the company in December, leaves it with less room to maneuver than most of its competitors....

http://www.nytimes.com/2008/06/09/business/media/09zell.html?pagewanted=all