26 July 2010

Tribune to Leave Bankruptcy, Old Ways Behind

The Wall Street Journal

Tribune Co. Chief Executive Randy Michaels wants to remake the 163-year-old media company. But first he has to steer it out of bankruptcy.

Mr. Michaels, a veteran radio executive, was hired by investor Sam Zell to run Tribune's Internet and broadcast divisions when Mr. Zell took the company private in 2007. But the $8.2 billion deal, funded nearly entirely with borrowed money, proved unmanageable, leading to a December 2008 filing for bankruptcy protection.

Now, Mr. Michaels—promoted seven months ago to CEO— is rethinking Tribune's business, which includes eight major newspapers, such as the Los Angeles Times and the Chicago Tribune, and 23 local TV stations. He's reducing duplication in news reporting, so that smaller papers use national and foreign articles from larger siblings rather than writing their own.

He's also looking for revenue boosts in unconventional places, such as renting out part of Tribune's headquarters for the filming of a "Transformers" movie for more than $200,000.

The company is expected to wrap up bankruptcy proceedings later this summer. On Monday, a bankruptcy examiner is slated to weigh in on certain debtholders' claims that the buyout was improper.

As a radio personality before becoming an executive at Clear Channel and elsewhere, Mr. Michaels was known for colorful on-air stunts, including faking a frog being pureed in a blender.

He shared his strategy at Tribune's Chicago headquarters.


WSJ:As a radio executive, you helped lead industry consolidation by merging local stations. Will Tribune consolidate the newspaper and local-TV industries?

Mr. Michaels: For there to be a printing plant in Miami, Ft. Lauderdale and Palm Beach is crazy. There's too much infrastructure.

On the TV side, this is an industry ready to consolidate. I believe my experience in helping people look rationally at opportunities to grow their business by intelligently consolidating regionally will be very helpful.

WSJ: You've centralized the production of foreign and national news across your papers to save money and manpower. What have you done and why?

Mr. Michaels: Stories [are] laid out in modules — standard sizes with collections of headlines, content, images [reducing the need for layout and copy editors]. If you pick up the Allentown [Pa.] Morning Call, the foreign news was written in Los Angeles and the national news was written in either Chicago or Washington. It's probably higher quality journalism than a local paper that size is going to be able to afford.

WSJ: How are you keeping employees motivated?

Mr. Michaels: We recognize people who've had great ideas. A fellow in Florida figured out a way to save us a couple of million dollars [in] the way we buy newsprint. We gave him a $25,000 check, took his picture, sent it around. There were some people who groused about that, but there were a lot more people who sent us ideas.

WSJ: Are companies spending money on advertising again?

Mr. Michaels: We're seeing a substantial rebound in certain sectors. Auto [advertising] is back to a large extent, particularly in broadcast, but I don't believe auto sales are matching ad spend. If that doesn't change it could be a different situation. BP is spending a lot of money [on ads]. There apparently is a bright side to polluting the planet.

WSJ: But the newspaper industry's revenue from selling print ads has been falling for more than four years. Is print media in a death spiral?

Mr. Michaels: We're going to do a couple billion dollars in newspaper advertising this year. It's still the number one place people advertise. It's just [that] costs went up at a time when margins were very high.

WSJ: Mr. Zell got a lot of attention recently when he said print newspaper delivery will be replaced by electronic versions. What do you think?

Mr. Michaels: We will stop printing if and when it's no longer economically viable. Today, at every one of our papers, it's not even close. Our smallest paper makes north of $10 million [a year]. Our largest paper makes north of $100 million.

WSJ: News organizations have been flirting with charging people to read their websites. Will you?

Mr. Michaels: I just don't believe the economics of a paywall are going to work, unless your content is unique, highly differentiated, difficult to duplicate. As good as I believe our content is, if there are reasonable substitutes available for free it's tough to get people to pay.

WSJ: You and your team have said Tribune is going to "blow up" the traditions of local-TV news. What do you mean?

Mr. Michaels: We are about to launch a TV newscast in Houston that has no anchors, that has great pictures and great writing, but doesn't involve a set or a desk or anyone standing in the way of the picture. Now is it going to work? We're going to find out.

WSJ: When are you expecting Tribune will be out of bankruptcy?

Mr. Michaels: I believe we're close to the end of the process. We're working towards the dates that you see [lenders must vote by Aug. 6 on the company's bankruptcy-exit plan] and believe that those will hold.

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