Dec 31 Tribune Co, which started by publishing
the Chicago Tribune on a hand press in 1847, sees a future in
broadcasting, one not likely to include the major newspapers
that made it a force in the news business.
Now that it has formally emerged from a four-year
bankruptcy, Tribune is expected to concentrate on its
WGN America cable network and a 23-station TV group it tried to
fashion into its own broadcast network in the mid-1990s.
Toward that end, Reuters reported earlier in December, the
company, whose board has been stocked with former TV executives,
will soon begin the process of selling off its eight major
Tribune's controlling owners, which include JPMorgan Chase &
Co and hedge funds Oaktree Capital Management
and Angelo, Gordon & Co, intend to sell most, if not all, of the
newspapers. Tribune has already received expressions of interest
in the Los Angeles Times, the Orlando Sentinel and others
Oaktree is the biggest Tribune shareholder, owning about 23
percent of the company, while Angelo, Gordon and JPMorgan each
hold a 9 percent stake.
Tribune's papers have been at the epicenter of the newspaper
industry's declining fortunes in recent years. And their
problems intensified after real estate magnate Sam Zell took
Tribune Co private in an $8.2 billion leveraged buyout five
Over that period, plummeting advertising and circulation
have hit the newspaper industry hard. The industry's ad revenue
fell by nearly half to $24 billion, and daily circulation fell
10 percent to roughly 40 million copies, according to the
Newspaper Association of America.
"What we have seen in the Tribune in the Zell tenure is a
reflection of the demise of the American metro newspaper and its
uncertain prospects going forward," said Ken Doctor, an analyst
with Outsell Research, a consultancy based in Burlingame,
Still, the newspaper industry could be reshaped as moguls
like Warren Buffett and Rupert Murdoch seek to build newspaper
chains in the United States, even as storied publishers like
Tribune and Knight Ridder exit the sector.
Murdoch, Orange County Register owner Aaron Kushner and the
San Diego Union-Tribune publisher Doug Manchester are interested
in Tribune's publishing assets, sources told Reuters.
Buffett recently said he is interested in adding The Morning
Call, a Tribune paper in Allentown, Pennsylvania, to his growing
stable of papers.
Tribune's newspapers remain profitable despite the falloff
in readers and advertising. Veteran newspaper analyst John
Morton said the Los Angeles Times could fetch $130 million at an
auction, while the Chicago Tribune could garner $86 million.
But with the industry still struggling to find its footing,
and depending on the number of bidders, those prices could
fluctuate wildly, Morton said. Newspapers in general have lost
roughly two-thirds of their value over the past five years, he
"Even though the profitability of newspapers is low, if the
price gets low enough it becomes an attractive investment," said
"The important thing about the Tribune's newspapers are that
they are iconic brands in America even though they are
struggling financially. They have a lot of cultural and
political power," Doctor said.
NEW OWNERS TO FOCUS ON BROADCAST
Peter Liguori, a member of Tribune's newly created board who
formerly held top jobs at Discovery Communications and
News Corp, is expected to be named chief executive.
Liguori, who has a solid track record in TV programming, is
the kind of executive who should be able to improve WGN's
ratings and perhaps help the network command higher carriage
fees, said Horizon media analyst Brad Adgate.
The company likely will fashion a strategy around WGN
America, a national feed of Tribune's Chicago TV stations that
Tribune repackages as a super-station and distributes through
cable and satellite to more than 76 million homes.
Adgate said that WGN America is not "a must buy network
right now," for cable and satellite operators to carry but it
has the potential to reach another 20 million to 25 million
homes if it adds original programming to its lineup.
"If WGN puts on original shows, whether its reality or
scripted, the chance of getting a spike in ratings is higher,"
WGN America collects 19 cents a month for each cable or
satellite home in which it appears, more than Viacom's
VHI and BET channels, according to consultants SNL Kagan. WGN
can also sell high priced national ads.
Adgate said WGN already has some programming that is
attractive to advertisers, especially its live broadcasts of
professional sports in Chicago such as Chicago Cubs baseball
and Chicago Bulls basketball.
Tribune also has built digital channel Antenna TV. It now
has 71 affiliates, including TV stations owned by Gannett
and Media General, and delivers broadcasts of
old shows like "Leave it to Beaver," "Barney Miller" and "Alfred
Hitchcock Presents" that Tribune says reaches more than 61
percent of the country.
Its TV assets include local stations in the nation's three
largest markets, New York, Chicago and Los Angeles, which
advertisers covet. The station group reaches 80 percent of U.S.
households, according to its website. In 1995, Tribune tried to
use its local station to create its own TV network.
Tribune's TV operations are estimated to account for $2.85
billion of the company's $7 billion valuation, while its
publishing assets are estimated to represent $623 million,
according to report by its financial adviser Lazard.
The rest of its value resides in other assets, including its 30
percent stake in the Food Network and its cash balance.
THE DEAL FROM HELL
Tribune was forced into bankruptcy in 2008 not because of
the flagging fortunes of its newspapers, but because Zell
saddled the company with too much debt just as the industry was
hitting a downturn, Morton says.
Zell stunned the media industry when he took the company
private in 2007 in an $8.2 billion leveraged buyout that
burdened the company with debt and that many observers warned
would be disastrous.
In a memo to employees after the company filed for
bankruptcy, Zell wrote: "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."
The bankruptcy was an especially messy one. The "deal from
hell," as Zell eventually described the leveraged buyout, became
a quagmire of lawsuits over who was to blame for the bankruptcy
and Tribune's $13 billion of debt.
Zell's tenure had some positives, say some outside the
Outsell analyst Doctor said that under Zell the company
created a centralized hub in Chicago for its national editorial
coverage and made its advertising production more efficient.
However the four-year bankruptcy proceeding distracted the
company, holding back innovation due to the uncertainty of its
outcome, according to Doctor.