Chicago Tribune (and the rest of Tribune newspapers) may be sold. Maybe.
I missed this bit of news amidst all the Black Friday protests in Chicago, but, if this pans out, this could have lasting repercussions for Chicago and many other major American cities.
On Friday, Rupert Murdoch posted a tweet that set off a firestorm of speculation.
Strong word Tribune newspaper group to be bought by big Wall St firm, LA Times to go to philanthropist Eli Broad and local group.
- Rupert Murdoch (@rupertmurdoch) November 27, 2015
Politico Media then reported that Apollo Global Management private equity firm, which considered but ultimately decided not to buy the Digital First Media newspaper company earlier this year, was the Wall Street firm Murdoch was talking about.
Broad has been trying to buy Los Angeles Times from the Tribune for years. As I've written before, LA Times is the biggest, most profitable newspapers in the company. Most of national and international reporting that appears in Chicago Tribune (and doesn't come from wire services) actually comes from LA Times. But a lot of people in Los Angeles area - including Broad - felt that Tribune has been mismanaging the paper, cannibalizing its resources at the readers' expense.
In September, Tribune fired LA Times publisher Austin Beutner after he, allegedly, tried to help Broad buy the paper. In months leaning up to the firing, he and Tribune CEO Jack Griffin clashed over plans for LA Times. As best as anyone can tell, Griffin is trying to consolidate the papers' resources as much as possible, centralizing the operations in Chicago, all while trying to maintain profit margins by cutting expenses and/or staff. Beutner, on the other hand, wanted to put more money into LA Times, arguing that if you want the paper to make money, you need to make a product more people would want to read. Which means focusing more on local issues, which meant hiring more people and spending more money.
A weeks ago, Tribune offered buyouts to over 500 employees. For LA Times, this resulted in a loss of a decent chunk of national and international reporters, to say nothing of more local and beat reporters. (Chicago Tribune and Daily Southtown also lost quite a few talented reporters, columnists and editors, but that's a topic for another post).
Politico Media offered a long, complex theory as to why Apollo Global Management and Broad would want a deal like that, but the short version is that it makes a lot of financial and logistical sense.
In a memo to employees, Tribune said that the company wasn't interested in selling anything to anyone. And that may well be true. As Politico Media points out, if the company sells its California newspapers, it would lose half of its revenue. And Griffin does seem committed to his strategy. A more centralized media company that seeks to appeal to national audience would want to have reporters in Hollywood and West Coast in general. If Tribune loses its California papers, it would have to start from scratch.
But let's say, for the sake of the argument, that Apollo buys the company and Broad gets the California newspapers. What would happen next?
Tribune Publishing's most recent preliminary quarterly report revealed a decrease in both print and digital advertising. The reports don't break it down by newspaper, so you can't really tell what the figures are for LA Times specifically. But I would be surprised if it was that drastically different from the overall trend (then again, there have been reports suggesting that Griffin had the LA TImes' numbers played down to make Beutner look bad, so who knows). What I am trying to say is that, if LA Times' long-term financial prospects aren't looking good now, a new ownership will not change that. At least not right away. There have been newspapers that defy industry-wide trends, but none of them are daily newspapers in large cities. But at least, unlike Tribune, it wouldn't be under shareholder pressure to make money, so it would have more room to experiment. Those experiments may not work - just look at Wrapports - but at least there wouldn't be acute pressure to maintain slim profit margins through cuts, so it wouldn't necessarily have to keep doing more with less.
As far Tribune... the financial pressure to stay profitable would only become more acute. And one big unknown hanging over Tribune Publishing's future is a debt it was settled with when Tribune Company was split into Tribune Publishing and Tribune Media. How would the sale effect the debt - and the additional financial pressures that come with it.
And here's another thing. Say what you will about Griffin, but he does seem to legitimately care about the Chicago Tribune Media Group portion of the company. He wanted to keep TribLocal newspapers around, even after the purchase of Sun Times Media's suburban newspapers made most of them redundant. He was apparently thinking about putting more resources into Southtown Star/Daily Southtown. I suppose, from Californians' perspectives, it would've been nice if he showed the same level of care for their papers, but the fact that Griffin at least cared somewhat about it offered some small degree of reassurance. I have no reason to believe that Apollo would care about anything other than ensuring that they would get something in terturn for their investments.
Bottom line - no matter what happens, I don't think it's going to bode well for Chicago Tribune.
On Friday, Rupert Murdoch posted a tweet that set off a firestorm of speculation.
Strong word Tribune newspaper group to be bought by big Wall St firm, LA Times to go to philanthropist Eli Broad and local group.
- Rupert Murdoch (@rupertmurdoch) November 27, 2015
Politico Media then reported that Apollo Global Management private equity firm, which considered but ultimately decided not to buy the Digital First Media newspaper company earlier this year, was the Wall Street firm Murdoch was talking about.
Broad has been trying to buy Los Angeles Times from the Tribune for years. As I've written before, LA Times is the biggest, most profitable newspapers in the company. Most of national and international reporting that appears in Chicago Tribune (and doesn't come from wire services) actually comes from LA Times. But a lot of people in Los Angeles area - including Broad - felt that Tribune has been mismanaging the paper, cannibalizing its resources at the readers' expense.
In September, Tribune fired LA Times publisher Austin Beutner after he, allegedly, tried to help Broad buy the paper. In months leaning up to the firing, he and Tribune CEO Jack Griffin clashed over plans for LA Times. As best as anyone can tell, Griffin is trying to consolidate the papers' resources as much as possible, centralizing the operations in Chicago, all while trying to maintain profit margins by cutting expenses and/or staff. Beutner, on the other hand, wanted to put more money into LA Times, arguing that if you want the paper to make money, you need to make a product more people would want to read. Which means focusing more on local issues, which meant hiring more people and spending more money.
A weeks ago, Tribune offered buyouts to over 500 employees. For LA Times, this resulted in a loss of a decent chunk of national and international reporters, to say nothing of more local and beat reporters. (Chicago Tribune and Daily Southtown also lost quite a few talented reporters, columnists and editors, but that's a topic for another post).
Politico Media offered a long, complex theory as to why Apollo Global Management and Broad would want a deal like that, but the short version is that it makes a lot of financial and logistical sense.
In a memo to employees, Tribune said that the company wasn't interested in selling anything to anyone. And that may well be true. As Politico Media points out, if the company sells its California newspapers, it would lose half of its revenue. And Griffin does seem committed to his strategy. A more centralized media company that seeks to appeal to national audience would want to have reporters in Hollywood and West Coast in general. If Tribune loses its California papers, it would have to start from scratch.
But let's say, for the sake of the argument, that Apollo buys the company and Broad gets the California newspapers. What would happen next?
Tribune Publishing's most recent preliminary quarterly report revealed a decrease in both print and digital advertising. The reports don't break it down by newspaper, so you can't really tell what the figures are for LA Times specifically. But I would be surprised if it was that drastically different from the overall trend (then again, there have been reports suggesting that Griffin had the LA TImes' numbers played down to make Beutner look bad, so who knows). What I am trying to say is that, if LA Times' long-term financial prospects aren't looking good now, a new ownership will not change that. At least not right away. There have been newspapers that defy industry-wide trends, but none of them are daily newspapers in large cities. But at least, unlike Tribune, it wouldn't be under shareholder pressure to make money, so it would have more room to experiment. Those experiments may not work - just look at Wrapports - but at least there wouldn't be acute pressure to maintain slim profit margins through cuts, so it wouldn't necessarily have to keep doing more with less.
As far Tribune... the financial pressure to stay profitable would only become more acute. And one big unknown hanging over Tribune Publishing's future is a debt it was settled with when Tribune Company was split into Tribune Publishing and Tribune Media. How would the sale effect the debt - and the additional financial pressures that come with it.
And here's another thing. Say what you will about Griffin, but he does seem to legitimately care about the Chicago Tribune Media Group portion of the company. He wanted to keep TribLocal newspapers around, even after the purchase of Sun Times Media's suburban newspapers made most of them redundant. He was apparently thinking about putting more resources into Southtown Star/Daily Southtown. I suppose, from Californians' perspectives, it would've been nice if he showed the same level of care for their papers, but the fact that Griffin at least cared somewhat about it offered some small degree of reassurance. I have no reason to believe that Apollo would care about anything other than ensuring that they would get something in terturn for their investments.
Bottom line - no matter what happens, I don't think it's going to bode well for Chicago Tribune.