The News Coming Out Of Tribune Is Bad, Really Bad, For Why It Wants To Cull 2% Of Its Workforce, And Other Newspapers Already Realize From January Results That Tribune Is Not Alone

Philip M. Stone February 15, 2008

Tribune newspapers have announced they will fire some 400 – 500 employees, about 2% of their total workforce, with the reasons given by each newspaper’s publisher more frightening than the one before. In sum they’re saying that if you think 2007 was a bad newspaper year, it’s nothing compared to what 2008 is already shaping up to be.

Chicago Tribune Publisher Scott Smith is looking for about 100 jobs to go, about 3.5% of staff. He told his newspaper, “It was a rough year last year, but I would say business got a whole lot tougher at year end and so far this year. If we thought it was a one or two-month blip in business conditions, we would make sure we weren’t overreacting. But there are no signs of near-term improvement in business.”

Total revenue for the Chicago Tribune Media Group was down 5% in January, he said, and ad revenue was down in double digits, continuing the 2007 trend. Cash flow decreased more than the 8% in 2007.

At The Hartford Courant, that will be shedding 4% of its 970 full and part-time work force, Publisher Stephen D. Carver explained that advertising revenue in January was 14% less than January a year earlier. He said the expected pickup in advertising after what is usually a weak couple of weeks after Christmas just did not materialize.

At The Los Angeles Times, publisher David Hiller announced that 100 – 150 jobs would go, 40 – 50 from the 887-person newsroom because things were far worse than had been forecast late last year when real estate magnate Sam Zell took Tribune Co. private in an $8.2 billion buyout.

Three days after the layoff announcement Hiller named Russ Stanton as the new Times editor, replacing James O’Shea who resigned in January rather than fire more newsroom personnel, so Stanton allegedly has “clean hands” in this particular newsroom cull. In naming Stanton over two other in-house candidates Hiller said, “The decisive factor was who can best lead change in the newsroom. We are literally in a battle to save the future of this great newspaper, and we have to change to survive and thrive in this new world.” Sounds rather dire!

At the Baltimore Sun that will offer buyouts to 45 staff, Publisher Tim Ryan wrote staff, “The economy is not cooperating. Just this week, we had a report that Baltimore-area home sales dropped 40% in January, an ongoing trend that has hit our real estate advertising revenue hard. Last week, Macy's announced the elimination of 2,500 jobs, and chain store sales were weaker in January 2008 than they have been in decades – clear signs that our retail advertisers also are feeling the pinch.

“Every day, media-watching websites report another newspaper or magazine that has had to reduce its staff, including The Washington Post, which is also closing its College Park production plant. The economy may not yet be in a recession, but it's clearly on the way, and in the news business, we are feeling it now.”

At Newsday Publisher Tim Knight said he and department heads are still finalizing the reductions and expects to announce specifics within the next few weeks, but employees seem to believe it will be in the 70 – 80 area. "We are looking at all areas of the business for reductions," said Deidra Parrish Williams, Newsday's spokeswoman.

And in Orlando, Sentinel Publisher Kathleen Waltz apparently finally has had enough, resigning with immediate effect, ending a 34-year Tribune career.  

All of this points to Tribune apparently running scared that it’s going to be very tight in having the necessary cash flow to service its more than $13 billion of debt, including the $8.2 billion for Sam Zell to take the company private. And making matters worse is that the company can expect little good news from its broadcasting arm that it had expected to be a big cash flow contributor.

Gannett, Belo and Scripps have already reported weaker broadcast revenues than forecast  for the fourth quarter, and there is no reason to presume the same won’t come from Tribune Broadcasting  especially since its profits dropped in the first nine months by 3%, with revenue off 1.6%. In addition many of its 23 stations are part of the CW Network and that network has had a particularly difficult season, the writers’ strike didn’t help, and ratings are down 21% among its target group of young adults aged 18 to 34 compared with the previous season.

Tribune in January appointed Ed Wilson, president of the Fox Television Network, as President of Tribune Broadcasting, and the company is giving him some more time to take a good look around and then make his  recommendations, but given the serious financial situation everyone expects he will be recommending some serious cuts, too.

Zell, who has been visiting Tribune newspapers with the message he doesn’t want to cut but rather he wants to fix things with added revenues, told his “partners” – that’s what he calls staff -- "Unfortunately, I can't turn this ship from its course of the past 10 years within just a few months. Further, while I will do everything in my power to drive, pull and drag this company forward, I can't promise we won't see additional position eliminations in the future, if we continue at our current rate of cash flow decline."

Most analysts believe Zell must sell assets soon. And that brings up the question of why the real estate mogul hasn’t already sold the Chicago Cubs baseball team and its Wrigley Field home  – most analysts seem to think that would have brought  in some $1 billion in badly needed cash.

Zell seems to be taking a gamble – if he can sell the stadium to the state of Illinois and the team separately then he can probably get more than selling them together. But trying to get Illinois to buy the stadium is a long-drawn out process and if Zell continues on that road then people are predicting the deal won’t get done until the 2009 season when everyone had expected it was vital that it be done this year. As for those interested in the team, they’re not about to make a bid until they know whether they’ll get the stadium, too,  or if the state takes  the stadium and agrees to a long-term lease at a low rent.

Also Zell may have his eye on stadium naming rights. Wrigley Field is named after the chewing gum family that once owned the team, but Tribune gets no money from the name. Zell has been quoted as saying, “Wrigley Field, the Cubs and all the land around it is an asset of the company -- including the right to name the park. Based on the sales of naming rights around the country, this would probably qualify as being extraordinarily valuable.”

Naming rights have become really big business. The New York Mets sold naming rights to their new baseball stadium to Citigroup Inc. for more than $400 million (€275 million) over 20 years, a record.

But the deal expected to set new naming rights records is for the new American football stadium to be shared by the Super Bowl champions New York Giants and their rival New York Jets. Analysts believe the naming rights in the country’s largest metropolitan area could go for $20 million - $25 million annually.  In Los Angeles the commission running the Los Angeles Memorial Coliseum is willing to give up the “Los Angeles” for a corporate name in exchange for some $5 million annually.

Zell has forgotten more than most people know about how to make big real estate deals, but he has the pressure of the debt payments on his back, and if the cash flow from newspapers and broadcasters is not what he had figured then that just puts added need on getting cash quickly for the Cubs and their stadium.

Incidentally, Tribune is offering buyouts to accommodate as many of the staff cuts as possible, but wily Sam has found a neat way to pay for those buyouts – take the money from the employee cash-balance pension fund, which the company says has about $300 million more than it needs.

And a dire warning from publishers to staff that if they are thinking of taking a buyout then this is the time to do it. Starting in January, 2009, if buyouts continue it won’t be two weeks severance for every year worked on offer, but one week.