Editorial

For some time, we have been saying that the printed newspaper in the United States was running out of time.

The reader base is literally dying. Young people will not read the print edition. "It makes my hands dirty" is a common assessment by the younger generation. Classified ads, the blood that sustains the host, have moved on to the Web. Display advertising, those full-page ads from the big department stores, is evaporating as those stores are driven out of business by Wal-Mart and Costco, which do not need newspaper advertising.

In a recent New York Times article, the sad story of the Tribune Company, the owner of the Chicago Tribune and the Los Angeles Times was unveiled.

In brief, The Tribune Company bought the Times Mirror Company, which was hemorrhaging money. No sooner had the new board been seated than the Chandler family, the longtime owners of the Los Angeles Times, struck back as draconian cuts were imposed on the West Coast paper. They put pressure on the Tribune Company to bring up profits on the parent paper. Before the owners of the Tribune realized what had happened, they found themselves on the selling block.

The problem was, no one was interested. Earlier this year, a real-estate billionaire, Sam Zell, made a bid for the Tribune Company. His offer?: 250 million dollars to buy a company with 5.5 billion dollars in revenue last year.

The Tribune Company had no other offers, so they agreed to this "fire sale."

To make this happen, when the deal closes, the company will go from being a public company to a private "S" corporation, which will pay no corporate taxes. Its owners will be an employee-owned stock ownership fund, or ESOP.

So what's wrong with that?

As an illustration, let us tell you about the Overseas Press Club. In the late 1960s, the OPC was one of the most popular retreats in the heart of midtown Manhattan for foreign correspondents. It was a beautiful five-floor brownstone on West 41st Street, behind the New York Public Library. At lunchtime, returning correspondents and photographers would sip martinis at its solid mahogany bar.

At some point the board decided to turn the club into a nonprofit, the better to foster some of their outreach programs to education. No sooner had the conversion to nonprofit been made, the new board decided to capitalize on its pricy location, and sold the club to make way for new skyscrapers. In a matter of months, the club closed its doors.

ESOPs at newspapers will come to the same conclusion. Close the paper, and end the constant cash drain to keep it going, then take the stock money and run.

The Zell scenario actually raises the "nonprofit" question. Why not turn the paper into a Class "C" corporation – instead of advertisers, get "sponsors"?

Well, the likely result would be that the paper would shrink to a few tabloid pages in short order. Sponsorships work if you are the Public Broadcasting Corporation, with 80 percent of your cost being borne by the government.

So what is the future for the Tribune Company? In the long run, probably not a print publication. Their biggest asset is their brand, and how they can develop their Web products. The business model is just starting to kick in. Earlier this spring Borrell Associates announced that local newspaper sites pulled 50 percent ($81 million) more ad revenue for Web video than local TV stations, which had a 20 percent share ($32 million).

That's what we call the bottom line.

Next month, we will talk about how this dismal scenario offers new opportunities for photojournalists.

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Since we wrote this editorial in mid-June, it appears that the Zell deal to buy the Trib is dead. Anybody want to buy a newspaper?

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