Tuesday, April 03, 2007

Papers Have the Vapors

Well, wave a dead chicken and call in the auspex. The signs of news media's future are everywhere!

It started slowly, with a bunch of us bloggers heading to Lowell this weekend for the New(s) England Revolution conference. That entails omphaloskepsis by a motley crew of print and broadcast folk with a big chunk of academics and a few new-media sorts such as we.

The much more formal and puffier American Society of Newspaper Editors just finished their conference. Their annual survey of themselves concluded that editors and publishers are feeling pretty good about their business and think they can integrate and profit from this new-media thingummy.

Now the patterns in the birds in flight reveal that the big media deal of this century shows at last one billionaire eager to hop on and ride a newspaper into transformation and new wealth. Gravedancer Sam Zell just won the Tribune group for $8.2 billion. As the media conglomerate itself describes the deal:
The matchup of Tribune and Zell couldn't be more improbable. The deal will place a motorcycle riding, epithet slinging multibillionaire atop of one of the most conservative, buttoned-down companies in America.
More telling may be that for decades newspaper publishers have been whining like Red Sox fans. All their problems are someone else's fault and life is terrible.

Suddenly though, it is becoming very apparent that many media companies are getting beyond their self-pity and are ready to play the game with its new rules. The second front of today's Financial Times (subscriber access only, in paper or electron form [how 20th Century]) highlight several aspects of the Trib deal.

First the fantasy that the industry can provide returns like software is gone. Specifically, the emotion-laden sale three years ago of the Pulitzer group was at 30 times earnings. Zell paid about eight times. The FT noted too that this deal illustrated, "The emergence of Mr Zell and two California billionaires - Eli Broad and Ron Burkle - as final contestants for Tribune also reflected the different sort of buyer newspaper companies are courting: wealthy, civic-minded investors who may be willing to accept lower returns and greater uncertainty than Wall Street."

That's the good/bad news game -- two rich bidders for the property, but lower multiple purchase.

That written, I bet that Zell is not about to view the Trib purchase as an altruistic, vanity operation.

Here in the Northeast, both bean and apple country show what happens when the old mentality timorously tries to milk a little more profit from the old newspaper model of publishing. The New York Times has failed spectacularly in its gutless efforts with the Boston Globe and Worcester Telegram.

They put one foot in the water and expected to move. Meanwhile, print advertising has plummeted and subscriptions dwindled. The parent wrote down half the value of its Massachusetts properties.

Look to Zell to mandate a transformation to the Net and its profit potential. He'll make sure it happens and not in the stodgy and incremental ways most MSM has been half-heartedly trying. At his relative bargain price, he'll have some flexibility too. As the FT quotes Boston University's journalism department chair, Lou Ureneck, "If you want to buy a newspaper, now is the time. Prices are low."

Fortune favors the bold -- Virgil.

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Anonymous said...

My question is: Is there a political agenda to Zell. Is he a consevative like Murdock, a liberal or a fence sitter. I worry about the direction of these papers.

massmarrier said...

Yeah, the LA paper people are wary too, but:
1)He's not known to care much about politics, much less align himself.
2)He is famous in his numerous other turnaround efforts for doing big-picture things and not micromanaging.

LA looks like his biggest battle. The staff there fairly screamed at and quit over previous management and ownership. They are loaded for bear. On the other hand, he is converting the company to ESOP and the employee ownership gives them a higher emotional and intellectual stake.

He'll definitely want profitable companies. Allegedly he wants loyal employees and managers. To that, he doesn't want to do a Jack Welch, slash and burn.

It seems unlikely he'll impose political requirements. He never has and he's in his mid-60x.