What the Zell just happened?

Posted by Mitchell - April 3, 2007 (entry 531)

Four years ago, the Tribune Company strode mightily in the media and policy sphere, expanding with little stopping it and with an eye to expanding further. The FCC stood poised to grant its controversial media ownership rule changes, with a pro-big-media court system, Congress, and the White House all aligned in support. Plus, the media -- despite their loud and influential voice -- said nothing about this issue on which they stood to cash in big.

But things changed, and very quickly. Activists organized. Millions rose up in anger. Congress and the courts rejected the FCC decision. Courts provided more rejection. Shares of the Tribune tanked. Investors demanded divestment, a change in ownership, or both -- so the Tribune was put up for sale. Meanwhile, tons of websites like Craigslist and 50 million blogs have helped change the very media environment in recent years.

Now, the Tribune's sale has ended, and area real-estate mogul Sam Zell is the winner. In more way than one. Most of the cost will be paid for by Tribune employees.

This sale could be counted a victory for localism, at least as far as Chicago is concerned, since Chicagoans get to have a local owner. But the problem of localism still remains for Los Angeles, New York, Baltimore, and dozens of other cities whose main daily Tribune-owned newspaper are still not owned locally.

Zell has little background in media, and (brace yourself!) he seems more interested in making money than in media. You've got to give him credit for candor, at the very least. One way to make money is to help break up the Tribune. The Tribune has already announced an impending sale of the Chicago Cubs (complete with Fred Merkle's Revenge).

There's "no plans" to sell the newspapers. Could Zell focus on making the Tribune a newspaper-only or newspaper-focused business? That might mean selling some (or all?) of the TV stations the Tribune owns -- which is exactly the opposite estimate of the Tribune's media fortunes four years ago. This also has the added advantage of having the Tribune actually obey the cross-ownership rule the company is currently breaking in four cities. They may try to pressure a pliant FCC to change the rule sometime soon, but don't count on that working.

Update: FCC Commissioner (and occasional loose cannon) Robert McDowell is hinting in ambiguous ways about cross-ownership waivers. Will they be automatically granted? Or will they be unnecessary because the FCC will look to abolish the cross-ownership rule?

Update II: Rather than engage in a massive sell-off, Zell may actually be eyeing a wider scope of consolidation. And you thought shareholders were pissed off last summer.

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