Tribune Co. sale: Good news for journalism? Maybe …

Billionaire Sam Zell is buying the Tribune Co. Well, sort of. And it may be good news for journalism. Well, sort of.

The Tribune Co, run by a management charitably characterized as selfishly befuddled, owns the Chicago Tribune, the Los Angeles Times and the Chicago Cubs as well as a slew of other newspapers and broadcast outlets.

Mr. Zell is rich. He’s No. 52 on the Forbes list of the 400 richest Americans. He’s worth, says Forbes, $4.5 billion.

Mr. Zell has bid $8.2 billion for the Trib and its sibs. How can he do that if he’s only worth a measly four and a half large? Remember that Danny DeVito movie, “Other People’s Money”? He’s only putting up $315 million, not even 4 percent of the bid. How’s he doing that?
Essentially, the Trib is buying itself. The company’s taking itself private. The company’s employees would put up $34 a share to do so. Is this little risk for Mr. Zell and lots of risk for an employee stock ownership plan?

How will Mr. Zell earn a profit? Usually, buyers such as he might sell off parts of a company at a considerable profit. Recall that large institutional investors demanded that Knight-Ridder be sold and busted into parts because, they argued, the value of the parts exceeded the value of the whole. Others simply cut costs by firing workers, cutting benefits, etc., to make the whole more profitable.

As I’ve argued in previous posts, newsroom staff cuts have diluted the abilities of newspaper companies to produce a viable product that consumers (readers and viewers) will want to buy.

But Mr. Zell says he wants more revenue, not more cuts:

To be honest with you, I don’t know anything about job cuts. My focus is not to look at this thing and see how we can eliminate one more table leg, because, frankly, eliminating a couple more of this or that isn’t going to make this work. What’s going to make this work is raising revenue. [emphasis added]

He wasn’t specific.

How will he do that? Some sort of convergence previously unattempted? A move to all-digital, all-broadband, all the time? Or does that matter? Says Mr. Zell:

If you are relevant, people are going to buy the newspaper. If you’re not relevant, then people will stop buying the newspaper and stop advertising and we’ll all be in a stew of trouble.

It will be interesting to see how Mr. Zell defines relevant. It will be more instructive to find out how readers and viewers of Tribune media properties define relevant. And it will be still more interesting and instructive to find out how advertisers define relevant.

I hope this is a significant change in the attitude of a new chairman of a major media company, an attitude that screams, “It’s the content, stupid.”

But for Mr. Zell, little risk is apparent. With a deal break-up fee of only $25 million (yeah, I know …), the new partners could call it quits tomorrow.

But those with a stake in a democracy fueled by rich, meaningful information rather than who got tossed on “American Idol” last night should be watching the future of the Tribune Co. closely.

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