AJR  Features
From AJR,   May 1998

State of The American Newspaper
Synergy City   

Chicago’sTribune Co. is revolutionizing how it does business--but at what cost to its newspapers?

By Ken Auletta
Ken Auletta is the nation's best-known observer of media and publishing. His 'Annals of Communications? columns for The New Yorker have illuminated the corporate doings of industry giants such as Microsoft, Time Warner and Disney. He has written seven books, most recently 'The Highwaymen: Warriors of the Information Superhighway,? published by Random House.     

It was a long day at the annual PaineWebber Media Conference in New York last December--a mind-numbing procession of men in dark suits, with wall charts, overhead projections, spreadsheets, and supplements in sheafs. But it was a big occasion, nonetheless: a chance for America's newspaper companies to show off to Wall Street. One after another they trotted by, like thoroughbreds emerging from the paddock.

For the New York Times Co. and its young chairman, Arthur Sulzberger Jr., there was a prime slot to tell assembled analysts and managers that his company meant to "enhance society" with journalism of the highest order. Other entries preened for the buyers: Gannett, Times Mirror, Knight Ridder..strong runners all.

And there in the middle of the pack came four men from Chicago's Tribune Co. They wore dark suits that might have come from the same rack. None of them bore a well-known name: There was the chairman and CEO, John Madigan; the publishing president, Jack Fuller; the broadcasting president, Dennis FitzSimons; and the top financial officer, Donald Grenesko. Their company wasn't the largest, their newspapers weren't the best-read. But that didn't matter--because Tribune had a story to tell..and it was just the story Wall Street wanted to hear.

In charts and appendices, they showed a company that owns four newspapers--and 16 TV stations (with shared ownership of two others); four radio stations; three local cable news channels; a lucrative educational book division; a producer and syndicator of TV programming, including Geraldo Rivera's daytime talk show; a partnership in the new WB television network; the Chicago Cubs; and new-media investments worth more than $600 million, including a $10 million investment in Baring Communications Equity Fund, with dozens of Asian offices hunting out media investments. Tribune's profits were sailing past $600 million a year, and its stock price, as of that December morning, had soared to 58-3/4.

There was an internal logic and consistent language to their talk: Tribune, said the four men, was a "content company" with a powerful "brand." Among and between its divisions, there was "synergy." Whenever there was a bleak number on offer (say, Chicago Tribune circulation down 4 percent), it was coupled with a cheery number (ad revenues up 5 percent). Last year the publishing division brought in more than $430 million. And CEO Madigan said that broadcasting and education revenues would grow roughly twice as fast as newspaper revenues. The year 1997, said finance chief Grenesko, had been "a truly great year--a fitting way to celebrate our 150th anniversary... We expect to set several new records this year in revenues, earnings and cash flow..."

It was a well-scripted, well-rehearsed performance, thorough and thoroughly upbeat. And the word "journalism" was never uttered, once.

The Tribune Co. cannot match the sheer size of Gannett, with its 87 newspapers, or Knight Ridder, with its 31. It lacks the stature of the New York Times. It hasn't the cachet of the Washington Post or the visibility of Times Mirror. But Tribune has become a prototype for the cutting-edge newspaper company of the future. Tribune's profit margins, not Gannett's, lap the industry. Unlike most newspaper companies, which are reliant on print, its non-newspaper revenues account for more than half its profits. Its newsrooms are multimedia models, with robotic cameras, digital audio and video equipment, and a central command desk shared by editors from TV, cable, the Internet and radio. Without the bombast of Mark H. Willes, the iconoclastic publisher at the Los Angeles Times, Tribune has already done, quietly, what Willes loudly vowed: lowered the wall between news and business. Here, journalism is content.

Executives--and editors, too--go on about synergy and brand extension, about how their individual companies are not mere newspapers, broadcast stations or Web sites, but partners and information providers.

On the surface, this is a quiet, established company that takes no chances. For all the outward magnificence of the Tribune Tower on Chicago's Michigan Avenue, with its carved inscriptions from Abraham Lincoln and encrusted stones from the Parthenon and Colosseum, the carpets inside look industrial; the furniture could have come from a Holiday Inn. The extremely unfamous executives upstairs don't swashbuckle.

But the dull, gray uniform is a deception. The Tribune Co. swings from the trees.

Its four newspapers--the flagship Chicago Tribune, the Orlando Sentinel, the Sun-Sentinel of Fort Lauderdale and the Daily Press in Newport News/Hampton Roads, Virginia--enjoy 27 percent profit margins. State-of-the-art color printing plants have allowed the papers to shave costs, eliminate composing rooms and target dozens of zones for news and ads. Its newsrooms were the first to blur the lines separating print, TV, radio and Web sites. Its 16 stations put the company in second place among TV group owners, with operations in eight of the top 11 markets. In partnership with Warner Bros., Tribune owns one-quarter of the expanding WB Network, which boosts the ratings of Trib stations and reduces programming costs, and one-third of the cable TV Food Network. Tribune Entertainment has become a major producer and syndicator of television shows. And don't forget the Cubs, who don't win much but do provide free content for Tribune TV, radio and cable.

In Tribune's diversification, perhaps most startling--and telling--is its embrace of the new media that many newspaper executives still regard with fear and bewilderment. (When the Tribune readied a front page exclusive on the Chicago police superintendent's friendship with a felon, the news appeared first in its online edition.) Tribune is miles ahead of other companies that moved early into the electronic realm, including Knight Ridder and Cox. An early investor in America Online, Tribune now owns 1 percent of this 11 million-customer behemoth. Together they created Digital City, which vies with Microsoft's Sidewalk to offer online guides to restaurants and entertainment in cities across America. Again with an eye on Microsoft, Tribune started CareerPath, the largest online classified effort, in partnership with various other publishers. Another arm of the company, Tribune Ventures, has invested in an astonishing array of start-ups, including Excite, the Internet navigation network; StarSight, an electronic TV program guide; Peapod, an online grocery shopping service; and CheckFree, the leading electronic payment processing system. And it won't stop there. "We are spending $40 million on new Internet-related stuff in 1998," says Grenesko, up from $30 million last year.

Overall, the company generates annual revenues of nearly $3 billion. And the cost of new online investments was more than offset by a 1997 pretax gain of $188 million when Tribune sold stock from its Internet investments. Many publishers today insist they're in the information--not the newspaper--business. But Tribune has moved money, not just its mouth. "This is a strong company that looks to the future, not the past," says Robert Pittman, the president of AOL.

At Tribune, "synergy" is the mantra. "It's all over the company," says Madigan, the tall, silver-haired and bespectacled chairman and CEO. "It's just gotten to be a way of life." Synergy, Tribune-style, occurs in the Washington office, when James Warren, bureau chief for the Chicago Tribune, and Cissy Baker, bureau chief for Tribune Broadcasting, attend one another's story conferences. Synergy occurs when Baker feeds the same TV story to her 16 stations..when a TV or radio station, or 24-hour cable news channel, or one of the online publications, uses a story from the Tribune newspapers..when Tribune reporters "extend the brand" by appearing in different media..when the Cubs help transform WGN-TV into Chicago's sports mecca..when the WB Network saves Tribune TV stations $8 million a year in movie expenses..when the Florida papers share sports or legislative coverage..or when Digital City on AOL advertises beachfront real estate from the Sun-Sentinel's classified ads.

Synergy has its limits, but at Tribune they're not business limits. They're often matters of taste. Most stories that Jim Warren's D.C. bureau produces are deemed too long, complicated and verbal--too serious --for Tribune TV, whose stations tend to favor all the news that bleeds. "If all the TV stations want is live shots from the Marv Albert trial and I'm not even covering it, there's no middle ground," says Warren. Though each of the three non-Chicago papers has at least one correspondent in the D.C. bureau, they normally pursue stories with local angles. The papers get almost all their national and international news from wires.

For the study of problems that beset American papers at the close of the century, Tribune is a lab-perfect culture. All the great questions of the business have been asked inside Colonel Robert R. McCormick's splendid old tower:

Can newspaper circulation grow dramatically, as Times Mirror's Willes asserts? (No, say the Tribune people: Growth must be found in other venues.)

If Tribune papers get 38 percent of revenues from classified ads--and an even larger share of profits, says Grenesko--can this precious franchise be saved? (They're working at it--online.)

Is old media dead media? (Old media is "flat," they say.)

Does the future of news lie around the world, or around the corner? This battle, too, has been fought in Chicago, and a winner crowned. The colorful old Colonel, who ruled the paper from 1911 to 1955, affixed this phrase to its masthead: "The World's Greatest Newspaper." He thought its domestic and foreign bureaus eclipsed those of the New York Times (which, in the Colonel's view, was a pinko paper anyway). Although Madigan professes great respect for those who risk harm to pursue stories overseas, his business heart lies elsewhere. "The emphasis on local news has been increased tremendously," he says. "The effort is to drive the paper down as much as we can and to get as much local news as we can."

The company has also fought the battle between Wall Street and Main Street, the latent conflict between shareholders and subscribers. Tribune executives focus unapologetically on their stock price. Grenesko says that every August each business unit is asked to sketch proposed revenues and expenditures for the next year. In September an 11-person operating committee reviews these figures. The committee usually bounces them back, insisting that spending be held down and numbers be presented again in November, before seeking Tribune board approval in December. What criteria do committee members employ to determine that the first sketch is unrealistic? They do it, says Grenesko, by carefully talking to Wall Street and gauging its response. "The operating committee decides the goal--say, $2.40 a share." Then, he says, they tell the divisions, "This is what Wall Street is expecting from you."

What if Wall Street is unrealistic?

"They have not been unrealistic," says Grenesko.

Even apart from TV and new media--at the Tribune papers themselves--the editor in chief rarely presides at the daily page one meeting. The editor's gaze is fixed on the future, on new zoned sections, multimedia desks, meetings with the business side, focus group research..on extending the brand, or opening new beachheads in affluent suburbs. "I am not the editor of a newspaper," says Howard Tyner, 54, whose official resumé identifies him as vice president and editor of the Chicago Tribune. "I am the manager of a content company. That's what I do. I don't do newspapers alone. We gather content."

Perhaps, as Tribune's financial success suggests, the newspaper company of the future will not be a newspaper company. Or as Executive Vice President James C. Dowdle has told Wall Street analysts, "We believe that content alone will not be enough as the Web develops. It will be more than words and pictures. It will be audio and, most important, video. Customers want the whole package. And pretty soon they're going to want it on demand. Tribune is the best-positioned media company to do this." Boasts David D. Hiller, senior vice president for development, "We believe we are building the media network of the twenty-first century--the next NBC."

But at what cost to its newspaper franchise? The Chicago Tribune's circulation, like that of most metro papers, has been slipping for years--down 30,000 in the second half of 1997 alone, to 654,000. More ominous to some is a perceived decline in that venerable paper's editorial quality. Last fall, Time magazine wrote about the most compelling newspapers in America--a subjective exercise, to be sure, that even Time hadn't tried for 13 years. Still, it should be noted: In 1984, the Chicago Tribune ranked solidly on the magazine's 10-best list. In September 1997, the Trib wasn't even mentioned in the discussion.

Entering the newsroom of the Chicago Tribune, your eye is drawn to a massive multimedia desk, around which are arrayed editors from WGN-TV, WGN radio, ChicagoLand TV (or CLTV, the 24-hour local cable news channel), the Tribune's Internet edition and the Chicago Digital City affiliate..all working together to disseminate news around the clock. Behind them looms a 26-by-24-foot TV studio, with an elevated set for an anchor and three cameras. In most companies, a Berlin Wall separates the different media; at the Tribune, all media units report to David L. Underhill, vice president for video and audio publishing. "The goal of our unit," says Underhill, a former engineer and broadcast executive, "is to be a synergy group. I love the word. It implies working across group lines."

This breach of group lines was first achieved at Tribune's Washington bureau, housed on the second floor of an office building at 1325 G Street NW. The 16,000-square-foot newsroom was converted in 1995 to a joint facility for print, TV, radio and online. "We are the first bureau to combine newspapers and broadcasting into one newsroom without a wall," says Cissy Baker, a former CNN producer. "Everyone knows each other. Every day, Jim Warren knows what we're covering."

Warren, the Chicago Tribune bureau chief, is an intense and thoughtful man who came to the paper in 1984. He's best known in Washington for his campaign against celebrity journalists who accept pay for giving speeches to organizations they cover. But on this December morning he's talking synergy. Shortly before my visit, the Tribune ran a joint-byline piece by print reporter Frank James and TV reporter Shirley Brice about a three-day conference on Web pornography. "There's an example of added value," Warren says. "We turned out a newspaper piece and a TV magazine piece."

He ticks off other bureau synergies. Every Sunday night he and national correspondent Michael Tackett air a one-hour radio show for WGN. Warren orchestrates a weekly "D.C. Journal" for CLTV. National columnist Clarence Page, who has an office in the bureau, is a commentator for WGN. When Warren's 13 reporters break stories, the Tribune's TV stations interview them in the newsroom. Stations also use reporters as commentators.

TV exposure provides subtle synergy. For Washington reporters who aren't from the New York Times or the Washington Post, the most common frustration is not getting noticed. "One of the big problems for a paper like us is getting your calls returned," says Page, whose political and social commentaries won a Pulitzer Prize in 1989. "That's one of the reasons I came down here." It's also one of the reasons he appears on TV shows like "The NewsHour with Jim Lehrer" and "The McLaughlin Group." Page's calls get returned. "I attribute that to my tireless propensity for self-promotion," he says with a smile. "I'm kind of Mr. Synergy."

Warren has often ridiculed the Washington talk shows, but he himself became a regular panelist on "Capital Gang Sunday," a former CNN shout-fest. "You have no illusions about the frustrations of not being read here," he says. "But to me that's been a challenge. To us it's a reason to try and take a more combative stance toward Washington and the culture." He says he was recently invited to a private party whose host was Washington insider Robert Strauss. "I'd never met him. Why was I invited? It had to be TV."

But even in the Tribune's multimedia newsroom, synergy has its downside. For all the fanfare, Baker has only three full time reporters, and each averages a single story a day. She concedes that on most subjects they "don't have an opportunity to become well-versed." They're also limited in the kinds of stories they can pursue. "The Tribune stations are dedicated to local news," says Baker, who tells me that Denver's 10 p.m. newscast is typical--three minutes a night for national and international news. New York, Chicago and Los Angeles might use "a bit more," she says. Today, the big story she'll pitch to her stations is, again, smut on the Web. "The Internet story is an instant local story," she explains. "Viewers have children, and they have computers."

The grim synergy/ exigency calculus is much the same at CLTV. The cable news effort began in Janu-ary 1993 and now employs 146 souls in a squat, glass-walled office building in suburban DuPage County. What viewers get is News Lite: seven live 30-minute segments a day, with regular weather and traffic spots. Reporters can update stories seamlessly because studios are being made fully digital. But the seven segments are repeated continuously to fill 24 hours. "I'm just proud of the fact that we are not sensational," says Barbara Weeks, the general manager. "We try and present straight news." But there are only five to seven reporters on an average day. By 5 a.m., when the first newscast airs, there is one working reporter; by 8 a.m. there are two. "We can only spend an hour or two on a story," admits Bill Moller, a reporter and anchor who is troubled by this superficiality. Once again, synergy is a goal. WGN radio contributes traffic reports. The Trib provides Alicia Tessling, who prepares cooking recipes for cable as well as the paper. The Trib, in turn, plugs her cable appearances.

Although 1.7 million cable viewers get CLTV, it reaches an average of only 31,000 homes each hour. The channel has yet to earn a profit. Nevertheless, advertising sales have more than tripled in the past four years. And, says Weeks, by bundling the only local cable news channel with the number one newspaper in Chicago--not to mention the number one radio station, the number one independent TV station (which doubles as a cable superstation), the Chicago Cubs and various online offerings--"any of the Tribune business units can get together and offer a super-synergistic effort. It's very compelling to an advertiser."

Dowdle, the executive vice president, says CLTV should turn profitable this year and will blast off within a few years when technology enables cable to "multiplex"--that is, to multiply ads, just as the newspaper does, by selling zones. For an advertiser, TV becomes an efficient purchase when it can aim a rifle at a specific audience rather than hitting everyone with a shotgun. In "addressable advertising," the size of the audience often matters less than the ability to target it. "If we can regionalize the signals," Dowdle says, "and divide Chicagoland into five or six different regions, which could possibly correspond with our newspaper sections--Northwest, Southwest--we could then have information that would be relevant to the Northwest section. We could sell ads to the Northwest section. That's the upside of it."

For the moment, in all areas of the Tribune Co., synergy seems to herald "fill-in-ergy." If reporters help out on TV or radio, they enjoy the exposure--and the company benefits from their extra work--with no extra pay. If Jim Warren works harder, he really doesn't need a secretary, so he goes without. The bureau operates without its own copy editor. Warren says he has lost a handful of positions in recent years to expanded suburban coverage in Chicago. So now no one in the bureau covers the Pentagon; they fill in. Page says the bureau has shrunk from "24 people, at one point" to 20.

Tackett, who became a national correspondent in 1986, says he was told only once that he "couldn't go somewhere because it cost money." Still, he feels the squeeze: "I'd like to see more people hired here." Ernie Cox Jr., a top Trib photographer for four decades, told me just before his recent retirement, "I'm not able to travel as often as I used to... I travel nowhere unless I can get in a car and cover it. I used to get on a plane and cover anything up and down the West Coast. Now they just use the AP." When President Clinton came to Akron, Ohio, last December for a town hall meeting on race relations, the Trib wasn't there. It published a front page account by James Bennet--of the New York Times.

Cost-cutting has trimmed the Tribune's once-vaunted network of bureaus. The paper has gone from 11 domestic bureaus and 32 correspondents in 1987 to six bureaus (Washington, New York, Los Angeles, Atlanta, and Springfield and Bloomington, Illinois) and 27 correspondents today. Overseas bureaus have been trimmed from 11 to 10--offices in Toronto and Berlin were shuttered, although Manila was added. Plus, the Moscow office was reduced from two reporters to one. (The New York Times, by contrast, maintains 27 overseas bureaus.)

Tackett, for one, sees advantage in a homier Tribune. "I don't have to worry about a bureau chief who fought in the last war sitting over my shoulder and telling me what to do," he says. Tackett goes out of his way to praise Warren, as do others, for refusing to "bigfoot" his minions and snatch the best assignments. "I don't have people in Chicago looking over my shoulder. You have fewer layers." Reporters also say they appreciate not being pigeonholed. "I'm the New York bureau chief," says Lisa Anderson, "but I just spent one month in Africa doing a team report. I've had the luxury of only writing three stories since May. Why? Because I'm part of a team of 12 working on a series." That team traveled throughout Africa, South America and Asia to investigate child-sponsorship agencies.

In fact, raw figures show the Trib staff hasn't shrunk at all. In the last decade, the number of full time editorial employees has risen from 613 to 662. And it's no mystery where the troops are headed. For example, there's that glass-walled office amid the parking lots in DuPage County...

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