Content Bridges

Tribune/Media News Deal Shows 14% Loss in Newspaper Worth This Year

Addendum to this post: Friday's Chicago Tribune story attributes the lowered selling price not to market value, but to the role of CareerBuilder (CB) in the transaction. Since Tribune and Gannett (the original buyer) both own stakes in CB, the thinking apparently goes that the deal had to capture the value of Career Builder as the paper would have moved from one company to the other. That value -- given sale -- would probably be in the two Connecticut papers' share of the Tribune's equity stake in CB, not in the annual revenues gained from the affiliation. So the thinking would go that Media News -- not a CB owner -- wouldn't be getting that value.

That argument has a certain logic, though I haven't done the arithmetic yet on the value of Tribune's current overall CB stake value. If it is correct, it would be surprising to see these assets going at close to what they went for earlier in the year. The stock market has taken down the value of most public news companies by more 10% during the same period. So that might well tell us that Tribune's original selling price was too low, or that Media News paid more than it had to, the latter being the more unlikely scenario. Of course, now Media News has a great concentration of properties in Connecticut and its cost savings -- through bundling and cutting "redundancy" -- makes the two properties more valuable to it.

As properties (post-Zell Tribune+) hit the market, we'll get the chance further to see value assessed.

Thursday Post:

How do you put a number on the toll of unstoppable newspaper print revenue declines this year?

One way is to consider today's announced sale of the Stamford Advocate and the Greenwich Time by Tribune to Media News. The sales price: $62.4 million.

Just last March, Tribune tried to shed the papers, selling them both to Gannett, which nullified the deal when it couldn't break existing labor contracts.  The sales price then: $73 million.

That's a 14% drop in roughly seven months.

Sure, New England may be hit harder than other areas by some revenue declines, but the number has great meaning nationwide. Double-digit revenue declines in classified advertising have already taken a substantial toll, diminishing newspaper value -- and power -- going into 2008.

NYT: A Good Month's a Reprieve, Not a Pardon

One reporter I talked today said the New York Times people he talked were "giddy." Well, why not, enjoy the day. The Times reported 3Q numbers that surprised everyone -- unexpected "above-expectation" reporting hardly within recent memory.

The Times reported earnings up 6.7%, with total revenue UP, I repeat UP, 5.5%.

Compared to other recent earnings like Gannett's (Newspaper Revenues -- -5.6%), McClatchy's (Newspaper Revenues -- -9.2%) and Media General's (Newspaper Revenues -- -6.7%), that's great news. Wall Street thought so too. In an up day at the market, NYT stock caught an upwind, closing up an unbelievable 9.83%. Observers would have the day to enjoy the irony that Morgan Stanley, long a public critic of the Sulzbergers, finally threw in the towel just a week ago. It sold its 7.2% stake near the 52-week low. So today's rise would have been worth about $19 million, not bad even by Wall Street standards.

Maybe the Times execs will have some time to savor their small triumph. Though their advice that October looks less of a turnaround than September and more like a return to that troubling first half doesn't bode well.

Neither do the classifieds and retail numbers:
----Classifieds down 14.4%, with the shared real estate+ woes of the rest of the industry;
----Retail down 7.3%, as department store consolidation and the move to web ads takes a continuing toll.

The bright spots, though, clearly, are affirmations of the Times strategy:

Microsoft Gets Off the Sidewalk and Back into "Local"

There's nothing like having a big brother in Redmond. That may be one of the lessons of today's announcement that Microsoft is picking up a four percent stake in CareerBuilder. The market's been watching CareerBuilder and what moves it would make in light of the Yahoo/newspaper consortium deal. So those newspaper partners took on a big brother in Sunnyvale, and CareerBuilder may feel a bit safer cozying up a bit more to Yahoo's rival (and potential acquirer) to the north. Certainly, four per cent is not much of a stake and only reduces Gannett's and Tribune's stakes a bit, to 40.8%, with McClatchy dropping to 14.4%. But why would Microsoft do it? Certainly, it can pick up seats at Wrigley Field anytime it wants already (and this perk may be gone if Sam Zell does take control of the "New Tribune" and sells off the Cubbies). Could it be that Microsoft would like a little closer seat at the table of "local," doing what it does best -- study, study, study and then act. When I heard today's news I remembered an interview with Microsoft CEO Steve Ballmer, from the New York Times in January, with this curious quote about the Microsoft's ahead-of-its-time online city guide service, which it sold off in 1999.

“But Sidewalk was really aimed at what we now call local search,” Mr. Ballmer says. “Sidewalk is one we should not have gotten out of.”

Now recruitment isn't just local, and four percent's not much of a stake. But it could be a small Trojan Horse. For CB's owners, the deal makes a good deal of a sense beyond acquiring a bit of family protection. CB's spent a lot over the years, securing prominence of its listings on MSN. This agreement commits it to pay as much as (performance-based) $443 million through 2013 for that privilege. They'd hope that in addition to their cash, Microsoft is incented to look for every opportunity to push the brand, for instance on mobile as mobile recruitment becomes more used. Beyond, that CB CEO Matt Ferguson's explanation holds water:

"Microsoft's equity stake builds on this successful relationship and establishes a global alliance with one of the world's most ubiquitous technology powerhouses. It enables CareerBuilder to continue to grow faster in the U.S. than any other job site while leveraging a strong international platform to quickly enter new markets in Europe and all over the world."

Three words: equity, technology, global.

Sam Zell and the Smell of Burning Newsprint

Two weeks ago, Sam Zell told the Chicago Tribune in an interview that  he knew the newspaper industry was smokin'. No, not smoking with profits, but with a troublesome fire. The nature of the blaze was the question he couldn't yet answer:

The question is, 'is it a 5 -11 alarm fire or is it a brush fire?' If it's a 5-11 fire we're in big trouble. If it's a brush fire, we're going to figure out how to put it out or make its impact so minuscule as to not to impair the rest of the opportunity.

Now, you've got to be wondering what Sam thinks. Consider what's happened just since then:

• Twelve mid-size newspaper companies with more than 250 cities among them have jumped into bed with Yahoo. While Tribune's long-time partner Gannett has stayed out, as have the New York Times, Washington Post and Advance (all for now, at least), those 12 companies make up the broad mid-section of the American daily press. Most damaging to Tribune and Gannett was the defection of McClatchy to the consortium. While McClatchy will not (now) join in the Yahoo HotJobs recruitment partnership, it will join in the rest of it, and its CEO Gary Pruitt is prominently quoted in the p.r. What McClatchy is saying to its Gannett and Tribune partners is this: we'll stay with you on recruitment, auto and real estate (through Classified Ventures) for now, but we think the mojo has moved beyond newspaper-only partnerships to at least Yahoo. It's a public repudiation of the proposed national ad network Gannett and Tribune had pitched earlier this year. Sam's takeaway: Tribune isn't the leader in the newspaper trade I'd been told.

• Google buys DoubleClick for $3.1 billion. Forget news and news readership, this digital revolution is all about connecting buyers and sellers. If that is through news, great, but any kind of content that people will read, listen to or view is good. This is the same Google that Sam had previously complained about, noting how it takes newspaper headline and briefs without paying them. Sam's takeaway: If Google's paying that kind of money and buying an ad system that works without us, this could be a bigger problem than I thought.

Billionaire Bingo: Nine More Tribune Questions

Thanks to all for the points, questions and comments, on yesterday's post. Here's the next nine questions at this point:

1. So what will the role of former L.A. Times Publisher Jeff Johnson (shown here, left to right, in happier days with editors Dean Baquet and John Carroll) in a post-sale world be, if Ron Burkle gets the prize? Will Johnson, a once-loyal Tribune exec, who was sacked for impudence in publicly resisting budget cuts by CEO Dennis FitzSimons, play an operational role, and have FitzSimons, even for a day or so, reporting to him?

2. Recalling that Knight Ridder top execs walked away with three years pay,  what are the colors of those parachutes for Tribune management?

3. With Brian Tierney and Eric Grilly promising whole new approaches to modern newspapering online and off in Philadelphia and Chris Harte doing the same in Minneapolis, will a Tribune sale give juice to the next generation of independent outsiders bent on seeing these franchises differently and breaking molds?

4. So this week, is it more fun being part of The Chicagoist (which today sports a WSJ Online ad banner across the top of its home page) or the Chicago Tribune?

5. On the lure of an ESOP, is it a good idea for Tribune company staff to keep repeating, "It's not Peoria, it's not 1983," in reference to the much-cited Peoria (Ill.) Journal Star ESOP that left a bunch of reporting and copy-editing slugs early-retired and well-heeled?

Tribune Tower Totters: Nine Questions

Consider this. When the Chandler Trusts, owner of 19% of the company, first pushed to "maximize their investment" in Tribune last June, the share price stood at $33. It dipped and rose, but as Sam Zell's offer looked like it would win the day, we were back to the same number. $33. There's an irony in that, but so much irony abounds in the Tribune's recent tribulations, it's hard to isolate it.

Now of course, it's L.A. billionaires vs. Chicago billionaires, and Tribune shareholders -- if not employees -- look like they will pick up buck or two from the bidding, as Ron Burkle and Eli Broad slug it out with Zell. After the bidding is settled -- we think Saturday when the Tribune board meets -- many questions will remain about the Tribune Company going forward. Nine of them; what's yours?

1. Explain it to me again, how is the debt of $10 billion-plus going to get paid down, as revenues decline and capital expenditures for both the old business (presses, trucks) and the new businesses (ahead-of-the-curve classifieds and editorial publishing platforms) are required? If the proposition includes putting more of the current $2.3 billion in employee pension funds into the deal as an ESOP, aren't the employees doubling down on their prospects at what seems a poor time?
2. When Sam Zell says, "My intention is not to break it up," don't you just hear the inflection on "intention"?
3. If the keys to future growth are the stakes in the classifieds properties, CareerBuilder and Classified Ventures, what's the impact in a change of control of the company? Can Gannett increase its 42.5% in CareerBuilder and take a majority?
4. If one private equity formula is to find the greater fool, which fool do these buyers believe will be standing in the wings?
5. What might be the impact of the sale on the one initiative that has mojo in the industry, the growth of the Yahoo/newspaper consortium, already encompassing 10 chains and more than 22o papers?

Eric Grilly Chooses the Liberty of Philly.com

Out of the Yahoo consortium stew pot and into the Philly frying pan?

Eric Grilly shocked many newspaper web watchers with his announcement this week. He's leaving his job as MediaNews Group Interactive president and taking over as president of Philly.com for Philadelphia Media Holdings, the upstart, locally owned independent media company that bought the Philadelphia Inquirer and Philadelphia Daily News out of the Knight Ridder dissolution.

Grilly (right) had become a member of the MediaNews exec committee last year, just as that company rocketed from little-known hard-charger to the fourth largest newspaper company in the U.S.
His boss, MediaNews CEO Dean Singleton used his well-known powers of persuasion to force the newspaper industry to confront hard realities. The biggest reality: Yahoo, Google and MSN have beaten the newspaper companies in the games of audience-building and channel creation. The consequence: Newspaper companies had to partner with the competition to make a new future.

So Singleton pushed a major deal with Yahoo. The first step was around recruitment ads, and Yahoo! HotJobs. Next up will be a farther-ranging agreement. While Singleton did the pushing, Grilly has done a lot of the pulling. Along with such leaders as Lincoln Millstein of Hearst and Wes Jackson at Belo, they've pulled nine newspaper companies -- never an easy task! -- together. And then pulled some more to get a doable deal done with Yahoo.

So why move on to Philly? Grilly, who turned 36 this week, gave himself a gift of liberty.

Bridgin': Missing Leaders, Curing Newsroom Glooms, Adam Smith Revisited and the Meaning of "Walter Reed"

LOOK WHO IS MISSING? Where have all the news people gone, long time passing? Check out the PC Mag's "50 Most Important People on the Web." Lots of innovation, hipness, Second (and maybe Third) Lives, iconoclasts, naysayers, billionaires....but not one news industry person among them. Isn't it time some news innovators joined the engineers, pontificators and even politicians? Surely, there's enough intellectual power to power someone newsy into next year's Top 50 list, to join the likes of Steve Jobs, Nick Denton, Meg Whitman, Michael Arrington and Tina Tequila.

SALVE FOR NEWSROOM GLOOMINESS: With all the cutbacks, outsourcing, offshoring and predictions of more and worse to come, it's no surprise that those inhabiting newsrooms are a little down, a wee bit depressed. Of course, those of us who came out of them would smirk and say, what's new. Glass half-empty or half-full? Standard newsroom response: Yeah management owns all the glasses and they should fill 'em up.

Still skeptical (okay, cynical) journalists, who tend a bit to the dark side produce the journalism we use daily. For those intent on reforming the trade -- and bringing a bit of light in -- Leonard Witt's PJNet.org (for Public Journalism) is worth a read. In today's post. Here's his first recommendation:

The Readership Institute has done studies and finds that as a group newsroom cultures tend to be passive/ defensive or aggressive, defensive types, neither of which are conducive to change. So issue number one. Change your attitude. Become offensive and aggressive.

Twelve more good -- and maybe more doable -- ideas follow. Post them in a newsroom near you.

ADAM SMITH AND NEWSPAPERING: I forgot to point out what I thought was a milestone "Red All Over" column in the Wall Street Journal by megacapitalist Steve Rattner. It ran in mid-February and did a great job of laying out the financial straits newspaper companies are in. When Rattner wrote isn't news to anyone reading this blog, but his message to the WSJ audience is an important one.

Son of HotJobs: Yahoo and Newspapers Move on to Autos

Both Yahoo and the growing number of newspaper company amigos -- those formerly shut out or junior partnered by the former Tribune-Gannett-McClatchy (which took Knight Ridder's stake) partnership -- got a lot of ink out of their announced HotJobs alliance. You can see the results all over the country, on printed front pages of recruitment sections and on the HotJobs site itself. You may soon be seeing Yahoo! Autos splashed across a lot of newsprint as well.

Now, we're moving on to round two of the partnership dance: auto ads. Word is that a number of the amigos will be meeting in Sunnyvale as early as this week or next around doing a new partnership with Yahoo. The aim: a new push around used cars, harnessing Yahoo's search and lead generation powers, as the auto marketplace heats up.

That development would have a number of strategic ramifications -- further pushing the great middle of America's newspaper companies into the Yahoo fold and further complicating things for Cars.com (owned by Classified Ventures and dominated by Gannett, Tribune and McClatchy, with Belo and the Washington Post holding smaller equity), just as Tribune board meets to decide its very future.

Sure, Yahoo is reeling in the public markets. It is sandwiched somewhere in between the Peanut Butter Manifesto and the growing sense that Google's bullet train to the future has passed it by. Still, it  is vociferously making a full-court press to be The Partner to the News Industry. Yahoo has always considered itself more of a content company than Google, through the much-ballyhooed Lloyd Braun era and given its employ of such pedigreed journalists as Neil Budde. But this push is more about who's in charge at Yahoo.

From White Knight to Dark Prince....

Worth reading:

----From White Knight to Dark Prince in a year. That's the half-life of the Web. The Rise and Fall of Gary Pruitt has been breathtaking. It's well-recorded here (and yes, even without my own quote) in Kit Seelye's New York Times piece.

---Couldn't we be a bit more elegant? Yes, we know that community-created content is a hell of a lot cheaper than paying ink-stained professional wretches. But aren't you supposed to RIF the wretches and then separately announce your warm embrace of user-generated stuff. One Santa Rosa TV station apparently didn't get that memo.

----Want to understands why real estate ad dollars are migrating out of newspapers? Check out this great little piece on Edina Realty -- #1 in the Twin Cities -- which details how and why one big broker is moving money to where the action is, online.