As if newspapers didn’t have enough problems, they also have investment bankers.
The reorganized Tribune Company, already driven to bankruptcy by Sam Zell’s 2008 “Deal from Hell,” is about to split in two, separating the relatively healthy TV assets, including superstation WGN, from its eight newspapers, including the iconic Chicago Tribune and Los Angeles Times. Both papers, of course, played and still play instrumental roles in the civic lives of their communities, helping to keep government honest to the degree that it was honest. And both are now shadows of their former selves, drained of prestige and resources as much by misbegotten financial schemes as by the digital revolution. It was insane levels of debt, remember, that marked TribCo. for doom in the first place. And it’s the same players who underwrote the misbegotten scheme who are now in control of the reorganized company.
It is true that other media companies, Belo in 2008, and, notably, News Corp. this year, have seen fit to separate healthy, growing TV assets from low-growth, or declining, newspapers. But, nobody should get the idea that these moves were done to benefit the newspapers in any way. Rather, they will be torn from larger companies with more diversified revenue streams that could help provide reinvestment capital while the papers navigate the new digital landscape. Basically, this is I-banker short-termism.
But at least when Belo and the old News Corp. cut their papers loose, they gave them a fighting chance by launching the new companies essentially debt-free. News Corp. even bestowed the new print company with a $2.6 billion cash endowment. Yes, Rupert Murdoch should be given his due here. Not so the angry birds at TribCo. management, who disclosed they plan to add to the newly Tribune Publishing Company as-yet-unspecified but assumed-to-be hefty debt to pay for, not future investment in the digital figure, but a dividend for investors. As I’ve written in another context, dividends are capital returned to shareholders because a business believes it has no better use for it. In this context, a dividend is wildly inappropriate.
As Cahill puts it:
Such dividends are fairly common in corporate spinoffs, but Tribune Publishing isn’t a fast-growing spinoff looking to spread its wings. It’s an old-line company fighting for long-term survival.
Exactly. More specifically, these are major national and regional newspapers, still the backbone of American journalism, already weakened and now saddled with unproductive demands on future earnings.
It gets worse, of course. The new publishing company will be stripped even of the valuable real estate in which its reporters, editors, and ad salespeople operate. The new company will have to pay $30 million in rent to the old one. This is insult on top of more injury.
These days, newspaper companies can basically choose one of two paths: they can
either reinvest for the long term—beefing up newsrooms and technological capacity, and rethinking business strategies and their approach to customers— or not, which is tantamount to throwing in the towel.
In the former category are examples like the New York Times Company, the Financial Times, and its parent, Pearson, yes, News Corp., Aaron Kushner’s Freedom Communications, and others. Despite reservations, I would add, Jeff Bezos, John Henry, and Pierre Omidyar.
A sure sign of the other path is defunding the newsroom, except as the absolutely last resort. As I’ve written, now that local ad markets are no longer under newspapers’ thumbs, the news, the loyalty of readers, is pretty much all newspapers have left to sell.
And an even surer sign of throwing in the towel is the practice of cutting the newsroom while at the same time granting executive bonuses. At the Providence Journal, for instance, executive bonuses in recent years for the paper’s parent, AH Belo, amounted to nearly three times the $1.2 million in concessions demanded of the paper’s work force, which has been reduced drastically. Now, the Projo—its newsroom depleted past the breaking point—is up for sale. Thanks for nothing.
If you’re wondering, the Tribune Company last month announced it was cutting 700 newspaper employees, about eight percent of its workforce, and as Cahill suggests, the company’s new balance sheet make future cuts, and a downward quality spiral, almost inevitable.Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.