Tribune Applies New Formula to Print Business
Important Details: As soon as entrepreneur Sam Zell closed on the Tribune Company transaction, taking the third largest US news publisher private at the end of 2007, he promised new thinking applied to old newspaper problems. Zell has sold one major Tribune asset – Newsday – to Cablevision (see Insights 12 May 2008, Newsday Sale Shows New Value Equation) and is marketing the sports assets cable network assets it owns. He’s now publicly turned his attention to the operating principles of the company’s core assets, its newspapers.
Announcing a rightsizing of the company’s resources, Zell’s recently appointed COO of Tribune, former Clear Channel Radio head Randy Michaels, suggested new metrics the company would use:
- The company would aim for a 50/50 editorial/ad split — down from 60/40 — on newsprint space daily, not including whole classified or special ad sections. Said Michaels: “When you look at the number of ads in the newspaper, on some days, the paper’s two-thirds ads, but other days the number of ads is a lot less. We decided, just as a sort of arbitrary starting point, that the paper looks pretty good at about 50% advertising….If we take, for instance, the Los Angeles Times to a 50-50 ratio … the smallest paper, Monday and Tuesday, [would be] 56 pages. That would be substantially larger than that day’s Wall Street Journal. We don’t think that’s bad value to the consumer. And we think that by doing that, and then by being able to produce less editorial content … we can save a lot of money by producing the right-size newspaper”. The cuts will begin at the Orlando Sentinel this month and roll out to Tribune’s ten major papers by the end of September.
- The company would track the specific productivity of individual newsroom staffers, cutting the least productive. Said Michaels: “When you get into the individuals, you find you can eliminate a fair number of people, while not eliminating very much content.”
- In addition, Michaels noted that all the papers would feature more graphics, maps and lists, due to feedback from reader studies.
Implications: Outsell believes the new 50/50 ratio is basically a marker in the sand, sand that is shifting too quickly for Tribune to adjust to. Tribune faces all the problems of news publishers, exacerbated by two factors: 1) its newspapers have underperformed the industry as a whole, due both to its markets and the corporate dramas it has seen in the past year and a half; 2) it has an out-sized $12 billion debt, which provides no cushion in a time of fast-declining revenues.
Tribune has no choice but to cut costs, or violate its bank lending covenants. Its asset sales buy months, but not years, of operating space. In cutting, of course, it has to look at people (staff) and paper (newsprint + ink) – those are its two major print costs. Outsell believes, though, that the new metrics show Tribune’s misunderstanding of how the news industry can grow. It is essentially saying it will cut content production, based not on the just-emerging distribution and monetization opportunities of the internet, but based on its dying (former) cash cows. It will be up to advertisers, which are deciding how much of their budgets to pull out of print how quickly, to basically decide how many newsroom staffers Tribune employs to fill shrinking space between the ads. This is a shrinkage strategy, not a growth one.
There’s little doubt that Tribune is on a track shared with many publishers. We’re seeing the number of pages printed down by 10% or more year over year in some papers. Thin-on-ads Monday and Tuesday editions may soon be obsolete as publishers move from a daily print schedule to a largely 24/7 web publishing schedule and then “reverse publish” the best content for print. The web is becoming the new “daily paper,” and smart publishers are using every means possible (more staff blogs, more user-generated content, more multimedia content) to have their news companies create more content, not less.