Tronc Inc. (TRNC) , the newspaper owner formerly known as Tribune Publishing Co., is taking another page from its recent history.
In a move that would seem surprising were it made by any other publisher, Tronc has agreed to acquire the New York Daily News, adding New York to its holdings in Los Angeles and Chicago. Tribune's so-called three-legged chair strategy of owning newspapers in the country's three largest cities was at the strategic center of its acquisition of Time Mirror Co. in 2000. Similarly, the Daily News deal is also about cutting costs and selling national advertising, as my colleague Ken Doctor explains, though the real estate component of this deal adds a new wrinkle.
Just two weeks ago, Tronc rekindled memories of its recent past when it replaced the editor and publisher of the Los Angeles Times along with his top deputies on Aug. 21. Just as the Times newsroom was recalling the turbulent days following the Times Mirror acquisition, newspaper folks at Daily News are likely having their own. Tribune owned the Daily News from its birth in 1919 until it tried to break its labor union by forcing a strike in the early 1990s that nearly shutdown the New York City tabloid. Tribune sold the weakened newspaper to British media baron Robert Maxwell, who later fell off his yacht in an apparent suicide. Afterward, it was revealed that Maxwell had been stealing from the newspaper's pension fund.
Boston billionaire real estate developer Mortimer Zuckerman purchased the newspaper in 1993.
Back in 2000, Tribune was eager to regain its presence in New York, prompting CEO Charles Madigan to engineer an $8 billion cash-and-stock takeover of Times Mirror Co. in one of the largest newspaper takeovers in U.S. corporate history. The acquisition came at a time when Tribune was among the country's most prominent media corporations, combining a broad portfolio of newspaper and television holdings, led by the Chicago Tribune and Chicago's WGN.
Madigan confidently predicted that by combining his company's TV stations and newspapers with the Times Mirror's Los Angeles Times, New York's Newsday and other publications, the merged company would leverage shared costs as it sold advertising to national marketers looking for a presence in the country's three largest cities along with a handful of midsize metro areas. This was the era before the ascent of Alphabet Inc.'s Google (GOOGL) , Facebook Inc. (FB) and the turbo-charged Apple Inc. (AAPL) , a time when newspaper publishers like Tribune were media heavyweights. Cash flow was strong, and classified advertising had yet to be cut down to size by Craigslist.
But the deal struggled from the outset. The bursting dot-com bubble coupled with the 9/11 terrorist attacks strained revenue. Madigan's predictions of financial synergies also failed to materialize, overwhelmed by illusions of grandeur and the newfound company's intractable culture clash. The efficient and conservative managers in Chicago were an uncomfortable fit with the ambitious, Left Coast newsroom in Los Angeles.
I worked at the Chicago Tribune from 2003 to 2006, and the resentment from the L.A. Times' newsroom toward their penny-pinching owners in the Midwest was a long-running, always-simmering source of friction. To be sure, the Chicago Tribune newsroom wasn't particularly pleased with the relationship either, often chafing at the pretensions of Los Angeles. As Jim O'Shea, the genial, even-keeled managing editor of the Tribune wrote in his appropriately titled book "The Deal From Hell," the newsroom in Chicago never felt it got "the recognition it deserved from its snooty rivals on the coasts."
O'Shea was thrown into that fiery pit in 2006 when L.A. Times editor Dean Baquet, now executive editor of The New York Times (NYT) , refused Tribune CEO Dennis FitzSimons' demands to make yet another round of newsroom layoffs. Baquet's refusal forced his ouster just 16 months after Tribune had fired his mentor, revered Times editor John Carroll, who regularly clashed with his Midwest bosses over newsroom cuts and requests to run more stories from the company's other newspapers, including the Baltimore Sun, the Sun Sentinel of South Florida and Connecticut's Hartford Courant.
These were unusually trying days for newspaper publishers, an industry that had sat pretty for decades, banking a reliable flow of local advertising dollars and print subscriptions while comfortably compensating its top executives. Tribune's operating profit dropped 15% between 2003 and 2005.
Illustrating the peppery nature of the Tribune-L.A. Times relationship, Carroll actually approached Los Angeles billionaire Eli Broad to try to buy Tribune Co. in hopes of breaking up the star-crossed marriage. The boys in Chicago weren't happy about that. These were messy days.
And they got worse. The long and troublesome marriage between the Chicago suits and the L.A. Times newsroom deteriorated in new and different ways in 2007 when real estate mogul Sam Zell took Tribune Co. private in a deal that arguably was even worse for the company than the Times Mirror transaction. As the struggles of newsroom publishers intensified, Zell orchestrated an $8.2 billion leveraged buyout that saddled Tribune with $13 billion in debt.
Even business reporters without advanced business degrees surmised that Zell's buyout would end badly. Just 20 months later, Tribune was forced to declare Chapter 11 bankruptcy, leading to more newsroom cuts, lost pensions and lowered -- very lowered -- morale. A news company that had once staffed bureaus around the country and throughout the world had no option but to retrench.
Tribune's long slog back to respectability -- its Chapter 11 case alone took four years and saw the $845 million sale of the Chicago Cubs to the family of TD Ameritrade Holding Corp. founder Joe Ricketts -- culminated in splitting its newspapers from its TV stations in 2013, a path also taken by its longtime rivals, Gannett Co. (GCI) and E.W. Scripps Co. (SSP) . A year ago, Tribune Publishing was renamed Tronc, and while the rebranding prompted much snickering, it has so far done little to improve the fortunes of the company's newspapers. (The former Tribune's television holdings were split into Tribune Media Co. (TRCO) , which is set to be acquired by Sinclair Broadcast Group Inc. (SBGI) in a $6.6 billion deal.)
Tronc chairman Michael Ferro has a lot on his plate. In addition to a sweeping makeover of the Los Angeles Times, he now must try to figure out how to make the Daily News profitable. How this ends, no one knows. The L.A. Times clearly has aspirations to become the nation's fourth national newspaper along with The New York Times, The Washington Post and The Wall Street Journal, a unit of News Corp. (NWSA) .
Whether Ferro is willing or able to make the same investment in the L.A. Times or the Daily News that Amazon.com Inc.'s (AMZN) Jeff Bezos made in The Post is uncertain. The Daily News, like the L.A. Times, is a perplexing puzzle. Besides losing money, the Daily News has struggled to gain an online presence to match its tabloid rival, News Corp.'s New York Post.
Just as the L.A. Times newsroom is hoping that its Chicago owners will give it room and resources to grow, a newsroom in New York is eager for the same.
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