Culture Clash Exacerbates Efforts of the Tribune Corporation

question 75

Essay

Culture Clash Exacerbates Efforts of the Tribune Corporation
to Integrate the Times Mirror Corporation

The Chicago-based Tribune Corporation owned 11 newspapers, including such flagship publications as the Chicago Tribune, the Los Angeles Times, and Newsday, as well as 25 television stations. Attempting to offset the long-term decline in newspaper readership and advertising revenue, Tribune acquired the Times Mirror (owner of the Los Angeles Times newspaper) for $8 billion in 2000. The merger combined two firms that historically had been intensely competitive and had dramatically different corporate cultures. The Tribune was famous for its emphasis on local coverage, with even its international stories having a connection to Chicago. In contrast, the L.A. Times had always maintained a strong overseas and Washington, D.C., presence, with local coverage often ceded to local suburban newspapers. To some Tribune executives, the L.A. Times was arrogant and overstaffed. To L.A. Times executives, Tribune executives seemed too focused on the "bottom line" to be considered good newspaper people.

The overarching strategy for the new company was to sell packages of newspaper and local TV advertising in the big urban markets. It soon became apparent that the strategy would be unsuccessful. Consequently, the Tribune's management turned to aggressive cost cutting to improve profitability. The Tribune wanted to encourage centralization and cooperation among its newspapers to cut overlapping coverage and redundant jobs.

Coverage of the same stories by different newspapers owned by the Tribune added substantially to costs. After months of planning, the Tribune moved five bureaus belonging to Times Mirror papers (including the L.A. Times) to the same location as its four other bureaus in Washington, D.C. L.A. Times’ staffers objected strenuously to the move, saying that their stories needed to be tailored to individual markets and they did not want to share reporters with local newspapers. As a result of the consolidation, the Tribune's newspapers shared as much as 40 percent of the content from Washington, D.C., among the papers in 2006, compared to as little as 8 percent in 2000. Such changes allowed for significant staffing reductions.

In trying to achieve cost savings, the firm ran aground in a culture war. Historically, the Times Mirror, unlike the Tribune, had operated its newspapers more as a loose confederation of separate newspapers. Moreover, the Tribune wanted more local focus, while the L.A. Times wanted to retain its national and international presence. The controversy came to a head when the L.A. Times' editor was forced out in late 2006.

Many newspaper stocks, including the Tribune, had lost more than half of their value between 2004 and 2006. The long-term decline in readership within the Tribune appears to have been exacerbated by the internal culture clash. As a result, the Chandler Trusts, Tribune's largest shareholder, put pressure on the firm to boost shareholder value. In September, the Tribune announced that it wanted to sell the entire newspaper; however, by November, after receiving bids that were a fraction of what had been paid to acquire the newspaper, it was willing to sell parts of the firm. The Tribune was taken private by legendary investor Sam Zell in 2007 and later went into bankruptcy in 2009, a victim of the recession and its bone-crushing debt load. See Case Study 13.4 for more details.
-What would you have done differently following closing to overcome the cultural challenges faced by the Tribune? Be specific.

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Definitions:

Cournot Model

Oligopoly model in which firms produce a homogeneous good, each firm treats the output of its competitors as fixed, and all firms decide simultaneously how much to produce.

Output

Represents the quantity of goods or services produced within a given period by a firm, industry, or economy.

Competitor

An entity operating in the same industry or market as another, offering similar products or services.

Profit Maximizing

This is the process or strategy businesses employ to achieve the highest possible profit, where marginal revenues equal marginal costs.