Tribune Strategy Melds ‘Old’ With ‘New’

Tribune Co., to the casual observer, is perhaps best known for owning its flagship newspaper, the Chicago Tribune; the cable superstation WGN-TV; and the Chicago Cubs baseball team.

But Tribune, which plans to buy the Los Angeles Times and its parent, Times Mirror Co., for $5.8 billion, is a diversified media concern with a reputation for strong management that has its collective eye squarely on the “new media” of the Internet just as it does on the “old media” of newspapers and TV stations.

“Tribune, since 1992, has been at the leading edge of newspaper companies in terms of its embrace of the new media,” said Peter Kreisky, who heads the media practice at Mercer Management Consulting.

Just one example: Tribune invested in America Online Inc. “very early on,” he noted. That investment is now worth $595 million, and Tribune already has collected $261 million from earlier sales of its AOL holdings.

Now Tribune plans to use Times Mirror’s assets to implement its newest strategy to exploit the opportunities available with television, newspapers and online operations. After the takeover, Tribune would not only have properties in the nation’s three largest cities--Chicago, Los Angeles and New York--it would also have newspapers, TV stations and online activities in each of them to lure advertisers.

It’s a broader “platform” by which the Tribune can deliver news, sports, entertainment and other information. And it expects this will appeal to more advertisers--especially companies that advertise nationally--and thus grow Tribune’s earnings and sales.

That’s because each region “will have a local touch with national reach,” Tribune Chairman John Madigan, 62, said Monday. Tribune will be “taking what are essentially local-market media companies and putting them together into a national footprint.”

“They [Tribune] create . . . a one-stop shopping area for advertisers who are looking to purchase advertising in the three largest markets,” said Jeff Borden, associate editor of Crain’s Chicago Business magazine.

At the moment, though, much of the Tribune’s sales growth is being driven not by its four newspapers or fledgling online efforts but by its 22 TV stations, which compose the largest group of stations not owned by a TV network. That group includes KTLA-TV Channel 5 in Los Angeles, KSWB-TV in San Diego and KTXL-TV in Sacramento.

Yet Tribune and Madigan’s executive team get good marks for using cost-cutting and technology improvements throughout the corporation to generate a profit margin that’s among the industry’s highest.

Madigan also said no layoffs are expected at The Times and other Times Mirror properties, though he said, “We’re just getting started on looking at the market and the business carefully.”

Whether jobs are eventually lost at Times Mirror by layoffs or attrition, Tribune is known for not using massive job cuts to generate quick profits from media properties it has bought.

“They have a track record of being very respectful of talent in the companies they’ve invested in and purchased,” said Mercer’s Kreisky. “I would not expect major layoffs to be their chosen method of improving [investment] returns.”

‘Most Admired’ in Publishing

Tribune posted an 18% gain in earnings last year (before one-time gains and charges) to $415 million, while its revenue rose 8% to $3.2 billion. About 49% of the revenue came from newspapers, 41% from broadcasting and entertainment, and the rest from its education-products unit. And last year Tribune was voted the “most admired” player in the publishing field, according to Fortune magazine.

In addition to The Times, Tribune will acquire Newsday in suburban New York, the Baltimore Sun, the Hartford Courant and three smaller papers as part of its Times Mirror deal. Times Mirror also publishes specialty consumer magazines and provides flight-information services for the airline industry.

Tribune also tends to let its various newspapers, TV stations and other holdings operate with a fair amount of autonomy, so long as they meet expectations for financial performance. Decisions regarding editorial content and programming, budgets, hiring, investments for expansion and community affairs are typically made locally, though with Tribune’s oversight.

“When they said you get to run this business as you see fit, they did just that,” said Lise Markham, general manager of KSWB-TV in San Diego, which airs on broadcast and cable. Tribune bought the station, formerly called KTTY, out of bankruptcy proceedings in 1995.

“It’s a good, solid, Midwestern company that has its values in the right place, but at the same time it’s very strategic-minded,” Markham said.

The Los Angeles Times will have similar independence, with its own chief executive, budget responsibility and the like, although the operating control of The Times will stay with Tribune, said Jack Fuller, president of Tribune’s publishing unit and winner of the 1986 Pulitzer Prize for editorial writing at the Chicago Tribune.

But if the Chicago Tribune is to be a measure, a more regional focus could be in store for The Times.

Once a newspaper with some national influence, the Tribune has spent the last 18 years paring its national and foreign bureaus to shift more resources into coverage of the suburbs, the city and the state in a never-ending battle with rival Chicago Sun-Times for readership.

Some Combining of Resources Likely

The Tribune’s once-envied network of bureaus has been whittled from a 1987 high of 11 domestic offices with 32 correspondents to six bureaus and 27 writers today.

Some combining of editorial resources also appears likely between Tribune and Times Mirror. The Tribune and its Tribune Co. sister papers combine some resources in covering Washington, D.C., for example.

And some observers predict that similar cost-cutting efforts might be made in many cities where both companies maintain bureaus, from Washington to Moscow. “If the Tribune doesn’t try to be a national paper, they’re not going to do that with the L.A. Times. I see a reining in” of national and foreign coverage, said Michael Miner, senior editor and media critic at the Chicago Reader, an alternative weekly.

Still, Fuller said Tribune’s papers--which also include the Orlando Sentinel, the Sun-Sentinel in South Florida and the Hampton Roads (Va.) Daily Press--are primarily run from their home cities. “They’re growing really fast [and] we’re proud that they’ve improved journalistically,” Fuller said.

At the same time, Madigan--who has an MBA from the University of Michigan--and Tribune’s other managers have effectively controlled costs and employed new technologies in distribution and purchasing to give Tribune the envious profit margins that have lifted its stock.

Despite falling $6.38 a share, to $30.81, on Monday after the Times Mirror deal was announced, Tribune’s stock has gained 165% over the last five years. That not only outpaced the 133% gain of Standard & Poor’s index of newspaper-publishing companies but also is virtually the same gain posted by the bellwether Standard & Poor’s 500 Index.