Democracy Soup

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Sam Zell’s crumbling of Tribune Company earns him the Media Putz

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Originally published on MediaPutz.com on December 11, 2008

Sam Zell

Usually we give a Media Putz to someone on the air, over the airwaves, in print, or online who compromises the integrity of the media. Well, this week’s winner doesn’t write, edit, or speak his way into the media world, but has clearly made his own stamp in a very short period of time.

Sam Zell is the owner of the Tribune Company, completing a leveraged buyout in April 2007. His previous media experience was when his Chillmark fund owned the radio broadcast group Jacor Communications, Inc. between 1992-1999. But what Zell has done to the media properties within the Tribune Company is why we honor him this week.

Slashing budgets, pages, and workers. Bringing in clueless radio people who didn’t know the first thing about print. Consolidating Washington bureaus, diluting local coverage.

On December 20, 2007, Zell took the company private, and the following day, became the Chairman and CEO. On December 8, 2008, the Tribune Company declared bankruptcy.

As for the financial mess Zell created, let’s hear from Harold Meyerson of The Washington Post:

Last year, when he purchased the Tribune Company, which filed for bankruptcy today, he put up $315 million of his own money and paid the balance of the purchase price, $8.2 billion, with the employee stock ownership plan – a move in which Tribune employees had no say whatever. But that actually overstates the amount of Zell’s investment. Of the $315 million he sunk into the company, it turns out that $225 million was simply a promissory note. Due to the vagaries of bankruptcy law, writes business analyst Mark Lacter on laobserved.com, that means that Zell has better protection for his stake than all his employees. Trib’s ESOP holds 100 percent of the company common equity – and it’s the holders of common stock who usually take a bath, or get wiped out altogether, in the debt restructuring that goes on under Chapter 11.

So Zell has worked very hard to slash the integrity of the newspapers in an industry that is struggling to not become another Wreck of the Edmund Fitzgerald. And he somehow escapes on a lifeboat, drowning the employees.

Yes, the company Zell bought had its troubles stemming from tax problems surrounding the Tribune Company’s purchase of the Times Mirror Company (e.g., Los Angeles Times) in 2000. And there were potential conflicts with ownership of both newspapers and TV stations in New York, Los Angeles, and Hartford, CT (The Chicago media properties was grandfathered but the Zell purchase has possibly put that in danger).

But what Zell did to those papers in a very short while far exceeded any damage from the tax issues of the acquisition over seven years.

Then we have the allegations from the Rod Blagojevich criminal charges. According to the transcript released by the Justice Department:

ROD BLAGOJEVICH asked HARRIS about the Tribune issue. HARRIS said that he met with Tribune Financial Advisor the prior day (November 10, 2008), and that Tribune Financial Advisor talked to Tribune Owner and Tribune Owner “got the message and is very sensitive to the issue.” HARRIS stated that according to Tribune Financial Advisor, there will be “certain corporate reorganizations and budget cuts coming and, reading between the lines, he’s going after that section.”…

HARRIS stated, “I had singled out McCormick as somebody who was the most biased and unfair.” ROD BLAGOJEVICH responded, “to [Tribune Financial Advisor] you did?” HARRIS confirmed that it was to Tribune Financial Advisor. ROD BLAGOJEVICH stated “that would be great,” and McCormick is a “bad guy.” ROD BLAGOJEVICH asked, “[Tribune Financial Advisor] is on top of this, right?” HARRIS replied that Tribune Financial Advisor said they would be “downsizing that division or changing personnel” and that Tribune Financial Advisor understands and “[Tribune Owner]” understands.

Those in the newsroom of the Chicago Tribune have flatly denied any requests from Zell. But is that because a potential plot fell through due to the exposure of the conversations?

In less than a year’s time, Sam Zell has taken a giant media empire, and reduced its efforts, short-term and long-term, to survive in an ever-changing media world. And if the allegations in the criminal charges against Illinois Governor Rod Blagojevich are true, he was willing to get rid of journalists under governmental pressure in order to get a better shake on a financial deal. For all of this, we gladly give Sam Zell the Media Putz of the week award.

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Written by democracysoup

December 11, 2008 at 6:00 am

Posted in media criticism, MSM

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