The $13 Billion Paper Shredder


Short on resources and squeezed for cash by its corporate master, the Sentinel no longer has the bark of a vigilant public watchdog.

When Sam Zell took over Tribune Company last year, I doubt anyone in Orlando foresaw the impact his ownership would have on the local daily newspaper. The Orlando Sentinel is a Trib-chain paper, and it historically performed solidly as a money-maker as well as a public watchdog.

It did, that is, until Zell pulled off a leveraged buyout just as the economy’s wheels were coming off.

Zell picked up Tribune, which also owns the Chicago Tribune, Los Angeles Times and a number of other daily papers (as well as nearly two dozen TV stations and the Chicago Cubs) for $8.2 billion in a complicated transaction that cost him an initial investment of $315 million. For less than 4 percent of the total purchase price, Zell, who had made his fortune in real estate, had himself one of the storied brand names in the U.S. media industry. Not included in the price but part of the deal was $5 billion of debt Tribune ran up under former management. So Zell’s Tribune began anew as a private company with $13 billion of debt to service.  

As contributing writer Michael McLeod’s story on Zell (see page 47) reveals, a debt-laden takeover has terrible consequences when things go badly, as they have at Tribune since the economy plummeted.  To be fair, all media businesses across the country have been hit hard by the downturn. But newspapers are acutely vulnerable in the current economy because they had been weakened by years of circulation and advertising declines. Pile a mountain of debt on top of a three-legged dinosaur like Tribune, a newspaper company first and foremost by measure of revenues, and watch for the vultures to circle.

The Sentinel is a much weaker newspaper today in the aftermath of Zell’s Tribune takeover. The local daily has made drastic cuts in staff and news pages, leaving readers with a Calista Flockhart-thin paper filled with a low-cal diet of staff stories (mainly on section fronts), charticles (information in graphic form), and lots and lots of wire service content throughout. The paper is still covering the beat reporting basics such as crime, local government and local education. But it’s all but given up on enterprise reporting—the big exposés and explanatory pieces that often serve the public good and can lead to reforms. Projects, as they’re called, take time, money and people to produce, and require substantial amounts of print space to run. In other words, they’re unlikely to happen in the Zell era.  

When Zell took over Tribune, he said he would not interfere with editorial policies at his newspapers. But by cutting operational expenses to the bone and shrinking the news hole, with a greater percentage of space devoted to advertising, Zell replaced editorial policies with business strategies. 

Short on resources and squeezed for cash by its corporate master, the Sentinel no longer has the bark of a vigilant public watchdog. At best, it is a tired, old Rottweiler sleeping on a couch inside a house with a Beware of Dog sign taped on the front door. Only an intruder need worry about the ferocity of the dog beyond the door. 

More people in the area don’t read the Sentinel than do, but everyone benefits from having an unfettered and aggressive press. The Sentinel is neither under the Zell regime.

Categories: Column