Slate's "Moneybox" columnist Daniel Gross was online on Washingtonpost.com to chat with readers about Sam Zell and the fall of the Tribune Co. An unedited transcript of the chat follows.
Tokyo, Japan: It's Bill Ackman, not Dan Ackman.
Daniel Gross: correct you are. We will fix.
Brooklyn, N.Y.: Would this have been a less awful move had the credit crisis not hit? Or was it that dumb money was always gonna come back to show us just how dumb everyone was?
Daniel Gross: In theory, yes, it would have been less awful. A year ago, to think that he could get, say, $1 billion for the Chicago Cubs, which is a great franchise and would attract lots of bidders, was perhaps not entirely unrealistic. And he could have taken those proceeds a decent sized chunk of debt—not to make it in the long-term, but perhaps to get through this year.
I think, though, in the end, it was a question of "when" not "if" for Tribune, given the underlying businesses. It's one thing to have a company with relatively stable revenues and profits, like a manufacturer of soup, supporting big debt. It's quite another thing for a bunch of newspapers, whose revenues have been unstable and whose profits have been tough to come by, to support a massive amount of debt.
Not anyone from The Post, honest: Do you think the future of newspapers are their online versions? How do you judge (at the risk of an appearance of conflict of interest) washingtonpost.com and its online newspaper? Personally, I find The Post far ahead of most other newspapers in developing an online site.
Daniel Gross: So, while I work for the Washington Post Company (my salary comes from Newsweek & Slate), I don't work directly for the Washington Post. So no big conflict of interest. And it's how I read the Post (it's not on the newsstand where I live). I think it's very good. The New York Times has been doing an excellent job, and so has the WSJ, except you have to pay for that.
That said, in answer to your question, I think it's likely that, say, 30 years from now, newspapers in their current form may not be with us. However, for the near future, I think the newspapers' future will be in a combination of print and online. When things are going well in the economy at large, newspapers have proven they can be profitable businesses, and the revenues from online only aren't enough to support the newsgathering and all the other resources that make the online publications great.
New York, N.Y.: Who would you compare the situation with the Tribune to the situation with the New York Times? I know the Times has its troubles but—or am I wrong—there seems to be a family ownership that has kept the paper in check and is fighting to see that the Times survives.
Daniel Gross: The situation with the Times is very different than that with the Tribune. For one, the level of debt at the Times Co. is much more manageable—it's a challenge for the Times to manage, but nothing on the scale of what was piled on the Tribune.
Family ownership at publicly held companies (the washington post co. falls into this category) can be a double-edged sword at times. On the one hand, it encourages long-term thinking, preservation of capital, and guards against things like the Zell takeover. On the other hand, it sometimes means there are other interest at work. Take, for example, the New York Times and its dividend.
Right now, the Times' main operating businesses—the New York Times and the Boston Globe—don't seem to be making money. About.com seems to be generating some cash. And it has some valuable assets—its building, a chunk of the Boston Red Sox—but it can only monetize those by selling. In an environment where cash is king and access to credit is difficult, you would think a company in the Times' situation would be doing everything it can to preserve capital. Eliminating your dividend would seem to be a no-brainer.
And yet in recent years, the Times increased its dividend—only to cut it sharply (but not eliminate it). One of the reasons, of course, is that there are a few generations of Sulzbergers who depend on the Times Co.'s dividends to support themselves in comfort. So there are times when family control can influence corporate policies in ways that are not always optimal.
On the whole, however, in this climate, companies are frequently off under family control than under the control of highly indebted private equity types.
Texas: How likely is it that the Cubs would be sold by the Tribune Company and for how much? Based on past interest, do you have any ideas as which parties would be interested buyers of the franchise?
Daniel Gross: Interesting questions. So, a year ago, it was common to hear people say that the Cubs could go for $1 billion, which is a lot of money. And of course, there's more to the Cubs (in terms of what Tribune owns) than the team. I believe they might have owned the stadium, as well as all or part of WGN, the tv station that carries the cubs' games.
Lots of names have been floated. Mark Cuban, owner of the Dallas Mavericks, various Chicago-based financiers. But pretty much all the names floated have seen their net worths hacked significantly in the past year. I'd say it's likely to be a consortium rather than a single individual.
Dunn Loring, Va.: You and others commenting on the Tribune's failure have focused on Sam Zell's incompetent management, but since most newspapers are slumping, aren't there other factors (such as the lack of objective reporting) that greatly contribute to the overall decline?
Daniel Gross: Newspapers' decline stems from two factors. One is secular (i.e. it's a long-term trend)—and that is that advertising dollars, resources, and eyeballs are moving away from printed newspapers to tv, online, mobile, etc. Also, classified ads, which were a big moneymaker for newspapers, have basically gone to Craigslist.
The second factor is more cyclical—namely the recession, and the fact that advertising always shrinks during recessions across the board. Virtually every form of media is finding reduced advertising spending.
Philadelphia: There was a sense of some that a few years ago, a partisan political operator with little newspaper experience got a group of investors to buy the Philadelphia Inquirer and Philadelphia Daily News at an overvalued price. These company is declining in value, I am not sure how readership is (they proclaimed in an ad that it is up). So I wonder: Do you have any sense on what the future may hold for the Philadelphia dailies?