Mr. Zell's newspaper

So, Sam Zell has taken control of Tribune Company, taken it private, and set up trusted friends and confidants on the board.

The Chicago Tribune was the paper my maternal grandfather read faithfully, probably because those were the days when Col. McCormick ran the show and, bless his soul, served as a perpetual thorn in the side of FDR.  (Both sides of my family hail from a part of Illinois where as late as 1960 the local Congressman could win elections by running against FDR.)  Grampa passed on the tradition to my mother, who passed it on to me, and I carried it on during the years I lived in Chicago.  So in a small sense, this is personal.

Sam Zell is unquestionably a sharp guy, as our managing editor Chris Mayer attests.  But sheesh, $12 billion in debt?  True, newspapers still throw off 20% profit margins, and broadcast
stations 40%, and I'm sure that's what made the deal attractive to
Zell in the first place; the debt would be relatively easy to service.  And in ten years, hypothetically the whole thing will be paid off, and Zell (and Trib employees, through a wickedly-complicated employee stock ownership plan) will sit on the thing free and clear. 

But a lot of things can happen between now and December 2017 — like declining newspaper circulation and broadcast TV viewership.  (Two of my Agora colleagues working in the same room with me, both in their 20s, don't even own TVs!)  Can cost cutting alone make up the difference?

Another question: While the man unquestionably knows real estate, what does he know about newspapers?  Or broadcasting, the business that put food on my table for 20 years?  (Again, in a small sense, it's personal; I know folks whose paychecks he's signing now.)  

Of course one could make the case (and Zell undoubtedly did so behind closed doors) that the alleged publishing and broadcasting professionals who ran Tribune in recent years ran it into the ground.  The Times-Mirror merger — executed in those zany days of 1999-2000, when it seemed markets would rise forever and media companies sought "synergies" between print, broadcast, and online; remember AOL-Time Warner? — obviously looks like a turkey from the vantage point of late 2007.

It's at a time like this that I curse the government for making a mess of our mass media.  Time was your local newspaper and TV stations were owned locally, by people who knew the businesses of publishing and broadcasting inside-out, and who knew their communities even more intimately.  But it wasn't economies of scale that changed that.  As Slate media critic Jack Shafer notes in a recent column , it was 1960s-era tax laws.  Family owners found it easier to sell out and take a small piece of ownership in growing behemoths like Gannett than to take a big inheritance tax hit.

Fast forward 40 years, and Sam Zell owns a fair-sized media empire now.  For the sake of my former hometown paper, and my friends on his payroll, I hope it all works out.  But for a whole bunch of reasons, I have my doubts.

The Daily Reckoning