Yes, it’s business -- ours
LATE Thursday, this newspaper’s current owner, the Chicago-based Tribune Co., announced that it had hired Merrill Lynch and Citigroup to give financial advice on the troubled company’s future.
Along with Tribune’s managers, the two Wall Street firms will present “strategic alternatives” to a special six-member committee of the company’s independent directors. That group, by the way, said Thursday that it has retained its own legal counsel. The company, meanwhile, told reporters that the committee will make its recommendations to the full board by year’s end.
Among the alternate futures likely to be considered are sale of the entire company, dispersal of some of its parts -- individually or in combination -- and a leveraged buyout by management and private equity investors. Other proposals almost surely will emerge, because once a Fortune 500 company puts itself up for sale, surprises tend to abound. Avarice is seldom charitable, but it is inexhaustibly ingenious.
In a statement, Tribune Chief Executive Dennis FitzSimons said that “in order to maximize shareholder value, our initial focus is determining the best strategic alternatives for the company and its publishing and broadcast groups as a whole, before evaluating strategic alternatives for individual business units.”
Value in this case means money, and a “business unit” is what you are holding in your hands, though the sentimental among us usually refer to it as a newspaper.
The Los Angeles Times, in fact, is Tribune’s largest business unit and accounts for roughly a quarter of its publishing revenue.
Corporate executives like to talk about “unlocking value.” Taken as a whole, analyst Edward Atorino of the Benchmark Co. told Reuters this week, Tribune might be worth as much as $14 billion. Analysts, however, are skeptical that a significant fraction of that value can be unlocked by any of the alternatives now under discussion. As Bear Stearns’ Alexia Quadrani wrote to investors Wednesday, “With limited interest in private equity, the absence of strategic buyers and generally unappealing breakup scenarios, we believe strategic change may not necessarily create value.”
What about simply selling assets and, specifically, The Times, where Publisher Jeffrey M. Johnson and Editor Dean Baquet recently put their jobs on the line when they rejected corporate demands for further staff cuts in pursuit of relentlessly increasing profit margins? Johnson and Baquet, supported by hundreds of the paper’s journalists, have taken the position that, with The Times already running a balance-sheet-engorging 20% margin, further staff reductions are unwarranted because they will fundamentally undermine the paper’s ability to provide readers with an acceptable quality of journalism.
Most estimates put The Times’ monetary value at $2.5 billion, and several Southern Californians of more than adequate means already have expressed interest in bidding. But according to Wall Street’s smart money, Tribune is unlikely to sell because taxes would eat up more than 40% of the proceeds.
WHAT’S lost in this numerical hall of mirrors with all its dead-end corridors and distorted funhouse refractions is an ethically intelligible notion of what the word “value” must mean in this context.
No one can argue that Tribune or anyone who owns The Times is obliged to lose money. On the other hand, no one should argue that a newspaper’s proprietor has no obligation except to make as much money as it can. Somewhere between those two extremes is a fulcrum called responsibility on which a balance must be struck. Doing so requires the recognition that, although stockholders certainly are stakeholders in this process, so -- and just as surely -- are a paper’s readers.
What this moment in the life of the Los Angeles Times requires is recognition that the paper’s social, intellectual and political value to readers needs to be unlocked and not just its monetary value to investors.
Unless the real interests of all the stakeholders are respected, everybody will end up with a handful of nothing -- maybe not tomorrow, but in the not-too-distant future. That’s the substance of the principled position Johnson, Baquet and their staff have taken and of the letter a group of distinguished civic leaders recently sent to Chicago. It’s a position that will have to be taken into account whether some version of the Tribune Co. continues to operate The Times or the paper passes back into local hands.
As Jon Fine wrote Friday on BusinessWeek’s online edition, “The Times is one of America’s great newspapers and also one of its oddest
Fine went on to acknowledge the “20% profit margins, which the Los Angeles Times notched in the past few years on revenues topping $1.1 billion.... Its roughly $225 million in profits in 2005 was about 20% of Tribune’s total.” Those are the facts -- the value, if you will -- of interest to one set of stakeholders.
However, he was only part way to the facts according to which the other set of stakeholders make their calculation of value: Alone among America’s major newspapers, The Times is simultaneously the hometown newspaper of one of the world’s great cities, the most important source of news in the nation’s richest and most significant state, the leading source of journalism in the country’s Western region and a newspaper with national and international reach, particularly in Latin America and along the Pacific Rim.
At the same time, it is Southern California’s leading journal of the arts and culture and primary chronicler of the world’s most significant laboratory of popular culture: the film industry.
Obviously, The Times plays these roles imperfectly -- often inadequately and, sometimes, abysmally -- but it cannot abandon any of them without fundamentally breaking faith with its readers, without “devaluing” their relationship with what is, at the end of the day, their newspaper.
A “strategic alternative” that does not unlock The Times’ value to readers is a strategy for continued decline and ultimate failure.