Daniel Gross takes your questions about the decline of the Tribune Co. and the future of fish wrap.
Daniel Gross: Hi Philly—I don't know much about the situation with the Inquirer and Daily News. But it's quite similar to that of the Tribune—a leveraged play by non newspaper people.
Baltimore: So Sam Zell has ruined a huge media company, but he managed to put up only $315 million out of his many billions to do it. Yes, it was rapacious and unconscionable, but if you have to do something rapacious and unconscionable, at least he picked a smart way to do it.
Now I hope that maybe my hometown paper, the Baltimore Sun, can fall under local ownership and not be the piece of trash it's become.
Daniel Gross: "only $315 million"? Even for Zell, that's real money.
re: future ownership. That's the big question. Will the papers be sold off individually or in groups? Will someone come in and try to run the whole company. We don't have any answers yet.
Reston, Va.: There is a Web site which lists Tribune's acquisitions from 1924 forward. You can look at the acquisitions year by year.
Eventually you get to 2007, and there it is: Zell buys Tribune. And whoosh, only one year passes and the whole enterprise files for bankruptcy.
It seems to me something is off-base. This company made acquisition decisions going back 80 plus years, then suddenly Zell appears, buys it, and they go bankrupt. Is it possible that this was orchestrated by the U.S. Chamber of Commerce, or perhaps an investment group (hedge fund in particular) with very influential members?
Daniel Gross: i don't think the u.s. chamber of commerce had anything to do with this.
This deal was thought up by someone whom the world had dubbed to be an investing genius, it was backed and advised by all the blue-chip investment banks, and name-brand banks lent tons of money to the company. The net worth—and reputation—of all involved has taken a significant hit.
It was just a miracle of poor timing.
Your blog: After reading your book, Pop!, I went to your Web site.
Do you not update that anymore?
Daniel Gross: First, thanks so much for reading. And, yes, when I joined the staff of Newsweek in the summer of '07 I stopped updating the blog. Basically, you can see all my work on Slate or on Newsweek.com
Baltimore: What happens to all the people who took the Tribune buyout during the last year? Do they still get paid, or are they now unsecured creditors?
Seems pretty slimy if they get rid of workers with the promise of severance, even while knowing they're about to declare bankruptcy and not make good on those obligations.
Daniel Gross: That's a good question. To a degree, it depends where the buyout money came from. Sometimes, if companies' pension funds are overfunded, they can use those assets to fund buyouts and severance. And in that case, a bankruptcy wouldn't mean the workers were out of luck. I know one of the big creditors of Tribune Co. is Mark Willes, who was a former CEO and is owed several million in retirement money. oh well.
Washington, D.C.: It's been my understanding that many (most?) newspapers are still profitable—there just isn't any growth, which isn't good enough for shareholders. Incorrect?
Daniel Gross: I think many newspapers are profitable, although this year—and this quarter in particularly—I would guess that not all that many are. Newspapers are really tied to the economic cycle—when a recession hits, people cut back on discretionary spending, like newspaper subscriptions, and advertisers pull back.
You could check out the quarterly results of Gannett Co.
Seems like they made a pretty decent profit on newspaper operations in the most recent quarter
Hartford, Conn.: From where I sit the Zell strategy seems to be to cheapen the product so its inherent value to the consumer (news) is even less so, in the hopes that it can shrink its way back to profitability, then regain its lost luster in some way. The next industry to successfully pull off that business model will be the first.
Daniel Gross: that might be a simplification. I don't think he really had a strategy to deal with the newspapers per se. This was a guy who probably hadn't thought for more than a few minutes about how to run a newspaper before taking control of the companies. Basically, he saw a financial opportunity—acquire control of Tribune with very little down and lots of debt and hope to flip pieces of it.
Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek, and the author of Pop! Why Bubbles Are Great for the Economy.