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12.02.08

What Zell Doesn't Understand About Newspapers

When he purchased the Tribune Company last year, it was clear he loathed the business. The feeling is mutual.

By now, it is clear that Sam Zell loathes the newspapers he acquired when he took control of the Tribune Company. In every interview, he is contemptuous of what he says has “historically been a non-business business...I can tell you unequivocally that model is a failure.” He sneers at the Pulitzer Prize and mocks coverage from places such as Afghanistan. “Local, local, local” is what readers want, he said at a media mogul conference last month. On the Chicago Tribune website, that means, under the banner of news: “Woman says ex-husband stole half of their bed.” Elsewhere on the homepage is a key to a calorie counter for turkey and a report on the finale of Dancing with the Stars.

If Tribune goes down, Zell will still be very rich, but he will have presided over the evisceration of some of our best newspapers.

When Zell bought the Tribune newspapers and other properties in 2007, he said, “Do you think I want to put my name on anything that is short of excellent? Certainly not on purpose...I can assure you I have no interest in being a rich charlatan.” For all I know, Zell thinks his revamped newspapers are or will be excellent in their strategy of catering to popular taste with what is white bread and circuses. Aside from the leadership team he recruited out of commercial radio and local television, and presumably the surviving editors who are carrying the Zell banner, the news business despises Sam Zell. It is increasingly clear that Zell was cynical (the unlikely alternative is that he was stupid) when he put what amounts to a token amount of his own money into a company now supposedly “owned” by its employees, who are losing their jobs in droves so he can pay down the debt he amassed on their behalf. This is truly a mess for all concerned. Yet Zell argues that it is all the fault of the bloated, boring newspapers he bought and not the deal he structured at what turned out to be the worst possible time.

All of the above will surprise no one following the agony Tribune is living through. But the more he talks about the catastrophe, the more obvious it is that Zell was clueless about the role of journalism in a democratic society. Sam Zell bought a company whose revenue came from advertising and circulation, while much of its intrinsic value came from reporting the news, an indispensable asset he did not understand or respect. “You want to tell people what they should want, become a professor,” he told BusinessWeek last summer; “In the newspaper business...you have to respond to what the customer wants.” Okay, but Zell misses the crucial fact that news organizations do best with their “customers” when they do what no one else does as well: cover the damn news with brass and courage. Ignorance about the main commodity is Zell’s fault and not the newspapers’.

Alas, it is also true that much of what Zell says about the way newspapers were run in the past is not wrong, even if it is somewhat oversimplified. “The newspaper business basically grew up as a monopoly,” he told Joanne Lipman, editor-in-chief of Portfolio magazine, “and like every other monopoly, it built processes and approaches that reflected its monopoly status.” Advertisers paid the going rate. Circulation was relatively cheap to maintain. The big battle in many cities was with the unions, which was a long-term struggle, and when they were tamed, the newspapers that survived sailed along with comfortable margins and missed some of the early signs of trouble. Having made it past television as a competitor, newspapers underestimated the power of the web, and the notion took hold that you could do what the broadcast networks did successfully for decades: give news and entertainment away and get sky high revenues from the advertisers.

In one of his early comments, Zell asked why Google and other search engines were getting newspaper and magazine content without paying for it. “If all the newspapers in America did not allow Google to steal their content,” he said to students at Stanford, “how profitable would Google be? Not very.”

So there is truth in the criticism that when newspaper proprietors found themselves in a new realm of delivery options, they did not grasp change quickly enough. Then along came Zell, who thought he’d shake things up on the money-making side, but apparently didn’t think much about his implied commitment to news, or, at least on the record so far, dismissed the role journalism has in monitoring the world, near and far.

So what now for Sam Zell? The question is whether he believes that by cutting his news resources drastically (among other expenses) he can turn around the business. Combined with the broader economic crash, the odds are heavily against Zell succeeding. If Tribune goes down, he will still be very rich, but he will have presided over the evisceration of some of our best newspapers. In his session with Lipman, Zell singled out The New York Times (with Arthur Sulzberger Jr. apparently in the audience): “If you want to be a charitable trust, be a charitable trust. If you don’t want to be a charitable trust, then you’ve got to focus on producing a return for investor’s capital.” Fair enough. But what if you are a lousy business and a newspaper that is no longer much good at real newsgathering? Then, Sam Zell, you are nothing.

Peter Osnos is a senior fellow for media at The Century Foundation, where he writes the weekly Platform column. Osnos is the founder and editor-at-large of PublicAffairs Books. He is vice chair of the Columbia Journalism Review, a former publisher at Random House Inc., and was a correspondent and editor at The Washington Post. Visit TCF.org for a full archive of Platform columns.