The Tribune Co.   

The Tribune Co. turmoil doesn’t necessarily mean the company is history.

When a company like Tribune Co. hires financial advisers to help it explore "strategic alternatives to create additional shareholder value," nine times out of 10 it means the company eventually will be sold (think Knight Ridder).

That may not be true this time, for reasons I'll discuss later, but the company's action may presage a more aggressive disposal of some of its assets than it had previously announced.

The uncertainty about Tribune's future flows from the unhappiness of the three Chandler family directors on Tribune's board. The family had received about 12 percent of Tribune's shares and the board seats as part of Tribune's 2000 acquisition of the Chandlers' Times Mirror.

Earlier this year, unhappy that Tribune's stock price had dropped 45 percent from its peak of nearly $53 in early 2004, the Chandler directors objected to Tribune's decision to borrow $2 billion to buy back 25 percent of the company's shares. Taking on so much debt would diminish Tribune's value as an acquisition target, the Chandlers said, and instead the company should consider selling all or part of its operations because the strategy it had pursued since the Times Mirror acquisition had failed.

That strategy, and whether it can ever be successful, is at the heart of the Chandlers' unhappiness with Tribune's management. It also is at the heart of why I doubt that Tribune's exploration of "strategic alternatives" will lead to the end of Tribune as a separate company.

Tribune's management viewed the Times Mirror acquisition as an opportunity to take advantage of synergies — in newsgathering and advertising — it believed would stem from owning both newspapers and television stations, and their Web sites, in major markets (see "Tribune Tribulations," page 22). There would be obstacles to be overcome, though, notably the Federal Communications Commission's long-standing ban on creating new cross-ownerships of newspapers and television stations in the same market.

But Tribune was fairly confident that the FCC would soon remove the ban, which would free up Tribune's new cross-ownerships in Los Angeles, New York and Hartford (where the company's television stations were joined with Times Mirror dailies), as well as an earlier cross-ownership in Ft. Lauderdale-Miami unrelated to the Times Mirror deal. Tribune also has a cross-ownership in Chicago that is excluded from the FCC's ban.

Indeed, the FCC subsequently did vote to relax the cross-ownership ban. But a U.S. Court of Appeals, responding to complaints from advocacy groups, sent the rules back to the FCC for reconsideration. From the tenor of the court's language, though, it did not appear that the court opposed the cross-ownership change. The FCC has yet to issue new rules.

Thus the very foundation of Tribune's strategy has been in limbo for more than six years, and it is understandable if the company has not been aggressive in seeking the full benefit of the new cross-ownerships. But the biggest restraint on implementing the strategy was the recession that hit within a year after the Times Mirror acquisition, from which neither Tribune nor any other media company has wholly recovered.

The 2001 recession was sharp and short, but the economy's recovery has been slow, especially for media companies plagued by advertising losses from bankruptcies and consolidations of department-store chains and telecommunications companies. And looming over all, especially for newspapers, is the growing migration to the Internet that has hurt advertising and circulation.

Instead of benefiting handsomely from the recovery, newspapers have found themselves scrambling to hang onto existing revenue streams and readers. It's not an environment conducive to investing in new modes of doing business, especially for publicly owned companies like Tribune that are being hammered by Wall Street for sluggish growth and diminished profit margins.

Tribune's strategy of reaping synergistic benefits from its new cross-ownerships hasn't failed; it just hasn't been fully implemented because of FCC uncertainties and weak market conditions. The strategy is still sound, for it is clear that information businesses will converge. Local media operations that in the future offer the most options will have the most success.

Still, there likely will be changes at Tribune greater than those already announced. When the company launched its stock-buyback program it also said it intended to sell off "non-core" assets worth an estimated $500 million. About 85 percent of that has already been realized from agreements to sell television stations in Atlanta, Boston and Albany as well as other assets.

Now, under the more recent "strategic alternatives" exploration, Tribune conceivably could sell more television stations in markets where it does not own newspapers and some of its smaller dailies where it does not have television stations. But the core cross-ownerships would remain.

One tantalizing outcome is that Tribune could use the proceeds of its sales, more debt and an equity investor or two to take the company private (Tribune has declined to comment on this possibility). That would eliminate the Chandlers as well as the Wall Street pressures that have proved so inimical to quality journalism, at Tribune and everywhere else.