Tribune is latest to feel sting of bad economy

Other newspaper and TV companies also suffering

December 09, 2008|By David Zurawik and Chris Kaltenbach | David Zurawik and Chris Kaltenbach,david.zurawik@baltsun.com and chris.kaltenbach@baltsun.com

Yesterday's news that the Tribune Co. is seeking to restructure its debt in bankruptcy court is only the latest development in what has become an ongoing roll call of very bad news for most of the media business in recent days, weeks and months.

Despite the fact that Tribune finds itself rocked by vast industry changes, a wobbly economy and crushing debt as it heads into Chapter 11 bankruptcy protection, analysts steered clear of dire predictions yesterday for the Chicago-based company as well as Tribune-based generalizations about where the industry is headed.

Nearly every major newspaper chain in the country seems to be in some kind of financial trouble these days.

Major newspapers known to be up for sale include the McClatchy Co.'s Miami Herald, Copley's San Diego Union-Tribune and E.W. Scripps' Rocky Mountain News. Gannett Co., the largest newspaper chain in the United States, laid off about 2,000 workers this month, or 10 percent of its work force, while the venerable New York Times is seeking to borrow $250 million, using its new Manhattan headquarters building as collateral.

In Philadelphia, meanwhile, Philadelphia Media Holdings LLC, which owns the Inquirer and the Daily News, missed at least two loan payments as officials worked to restructure debt.

And the news is not all that much better in the world of television.

Viacom, the giant media conglomerate run by Sumner M. Redstone, slashed 7 percent of its work force, about 850 workers, last week. NBC Universal announced that it would lay off 500 employees, including veteran reporters and producers at NBC News. As contracts come up for year-end renewal, veteran anchormen and anchorwomen, the "faces" of the news operations, are being laid off as local stations across the country seek to cut salaries.

"Everybody is feeling the pain, not just Tribune. And it's going to get worse before it gets better, especially in the newspaper business," said Douglas Gomery, media economist at the University of Maryland, College Park. "But I have to tell you, the really dark predictions about dominoes falling and the Tribune action somehow being the beginning of the end for newspapers are way off base."

Gomery, scholar in residence at the university's Library of American Broadcasting, cites an often overlooked fact to make his case about Chapter 11 bankruptcy not being the end of the world in media.

"During the Great Depression, three of the five major movie companies went bankrupt," Gomery said. "And two of them [Fox and Paramount] are still in business, while the third did just fine after reorganization until Howard Hughes ran it into the ground in 1957. What Tribune did is just classic business cycle stuff. This is capitalism."

Tom Rosenstiel, director of the Project for Excellence in Journalism, said yesterday's move could strengthen the company financially.

"Theoretically, in the long run, this could relieve the debt burden - that's assuming creditors won't get a 100 percent on the dollar," he said.

But Rosenstiel also believes it will spell harder times in the newsrooms of Tribune papers such as The Baltimore Sun.

"In the short run, it is almost certain to mean more belt-tightening, more cutting, less investment in the news," said the director of the Washington-based journalism think tank. "And I guess in theory it could mean Sam Zell might not be running the company when the bankruptcy process is over. When you go into bankruptcy, you cede some control over the process to other people."

Rosenstiel and several other analysts cautioned against extrapolating from Tribune to the rest of the newspaper industry, saying that Tribune's announcement was more the result of crushing debt, taken on when Zell purchased the company and took it private last year, than the continuing downturn in the newspaper business and the larger economy. While revenues continue to fall at many newspapers, the analysts said, most papers continue to make money, though not as much as they might be used to.

"I would caution against generalizing about the newspaper business, because not all newspapers are in similar circumstances," said Alan Mutter, a former editor at the Chicago Sun-Times and the San Francisco Chronicle who writes a media blog called Reflections of a Newsosaur. "The Tribune Co. is a particular case, insofar as it has been more highly leveraged than any other newspaper company."

"It sounds sobering, but bear in mind that all of Tribune's papers are making operating profits, they're just not making as much as they did," said John Morton, head of Silver Spring-based Morton Research Inc. "They're viable businesses; it's just that the corporation's debt structure has gotten the corporation in trouble."

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