Tribune Empire Could Crumble

Recent Stock Slide Leads to Boardroom Battles, Fuels Anxiety Among Investors, Newsrooms

When the Tribune Co. acquired the Los Angeles Times, above, it also brought in the Times' longtime owners, the Chandler family. Their presence in the Tribune Tower, left, has not always been welcome. (By David Mcnew -- Getty Images)

Imagine buying the most expensive house on a good-looking block that appears to be on the upswing. Within three years, the neighborhood craters, your oldest kid starts backtalking and your spouse pesters you to sell the house and get out. Meanwhile, you're stuck with a fat mortgage.

That's pretty much what life is like at the Tribune Co. these days.

A boardroom fight over the company's limping stock price has caused anxiety in Tribune newsrooms around the country, from an open revolt by the top editor in Los Angeles to "fear and loathing" about potential job cuts among reporters and editors at some of the company's Washington bureaus, according to staffers there.

Dissident board members have lost confidence in Tribune management and seek to break up the company to boost stock price. At a board meeting last week, they forced the rest of the board to explore restructuring and divestiture plans, setting a quick Dec. 31 deadline for options. Tribune has 11 newspapers and 26 television stations; the stations appear the most vulnerable to sale.

Chairman and chief executive Dennis FitzSimons is scheduled to visit Tribune's local paper, the Baltimore Sun, for an all-hands staff meeting today. He arrives after delivering a less-than-reassuring statement to employees after last week's board meeting: "Everything is on the table."

The same problem has been plaguing the nation's other iconic nameplates of the print industry over the past few years. Slumping Knight Ridder Inc. was forced to sell out to McClatchy Co., which dismantled the venerable chain. The New York Times Co. just reported August revenue numbers, company executives have taken a pay cut, and the company dumped its television stations to raise cash.

The hard times have been toughest on large newspapers, where readers have a variety of sources for their news and advertising. Some papers in smaller markets are actually growing.

For nearly a century, newspapers were unrivaled in their ability to deliver news and sell advertising. News staffs grew fat as hiring decisions were made on coverage needs rather than bottom lines.

Now, as newspapers lose readers and advertising to other media and struggle to transition to Internet and other digital forms of delivery -- while attempting to maintain profit margins of more than 20 percent and mollify Wall Street's need for growth -- cuts in jobs and newsroom budgets are coming fast and deep.

All those factors alone would make things tough enough on Tribune. But, like an unlucky home buyer, Tribune purchased a group of newspapers at the height of the market only to watch the market nose-dive.

In 2000, Tribune paid $8.3 billion for the Times Mirror papers, gaining the L.A. Times, Newsday, the Sun, the Hartford Courant and others. It became a media giant whose goal was to own the biggest newspaper and television station in several large cities, saving costs, sharing content and boosting stock price.

Six years later: Newspaper circulation is down across the industry. Advertising revenue is still recovering from a 2001 depression and moving to the Internet, which Tribune has not fully exploited. Increased cable television viewership is undercutting the value of local television stations. Federal regulators have not eased restrictions on media ownership, stalling Tribune's newspaper-television strategy. Finally, Tribune's stock price is stuck around $35 a share since hitting $60 at the time of the merger. Wall Street rating houses have cut the bond status to "junk."