$13 Billion in Debt – Can't make
payments after about one year.
Last June Harold Meyerson of the
Washington Post suggested that Sam Zell be tried and sentenced to a
life sentence. In a more telling note he pointed this out as he
talked about obscenity filled threats given to staff by Zell:
"It's Zell's money, some would argue --
only, it's not. Of the $8.2 billion he used to take the paper private
last year, Zell put up $315 million of his own money and used the
employee stock ownership plan (without the consent of any employees,
of course) to finance the rest."
So the employee stock ownership plan
finances provides a down payment on a multi billion dollar deal that
doesn't hold together more than a year.
As usual everyone runs the same story
that lays the blame on falling ad revenues. But ad revenues were
already falling, had fallen precipitously, as they like to say,
before this deal was put together. No lender in their right mind
would have lent on future newspaper ad revenues. Or would they?
There must have been lots of very sweet commissions on the package of
deals that made this possible.
The various statements made by Zell and
others in the company say that Tribune will continue to do business
responsibly. What does that mean? Mainly, that if you are an
employee who was laid off since the takeover, a significant number
(quick, somebody tell us how many), you will no longer get your
severance or delayed deference payments. As usual, the real people
who relied most on the integrity of the company and need the daily
income the most are the first to get taken – again. Zell probably
will not miss a paycheck, a car payment or a house payment or have to
skip lunch over this at any time.
Today's Washington Post story puts it
this way:
"As part of the bankruptcy proceedings,
Tribune will cease all severance payments and deferred compensation
to employees who have been laid off since Zell's takeover of the
company, according to an internal document sent to Tribune employees
today."
How many individual homeowners have
$13billion of debt on their homes and couldn't make the payments
after one year? How many homes does that add up to? If the average
home mortgage balance was $400,000 that equals 32,500 homes.
But this is not really the story.
Other newspaper chains will soon follow. Take for example The
McClatchy Co. out of Sacramento, California, which also bought Knight
Ridder Inc. just two years ago. Their flagship, The Sacramento Bee,
has been offering buy outs and looking for ways to reduce payroll
desperately. Their management must be watching the Tribune moves
very closely. I'm surprised that Newspapers haven't take the road
that automakers have, begging Congress for money.
The Christian Science Monitor is the
first major paper to make a necessary and smart move – get out of
the physical paper printing business. Ad revenues were based on a
Pre-Internet business model where news was scarce and you had to buy
a paper or watch TV to know what was going on – but that model is
dead. The Internet has changed all of that. The value of physical
newspaper delivery has rapidly Deflated and along with it the value
of the Ads that run in that physical paper.
The Abundance of News on the Internet
and the Deflation of the dollar value of news Advertising can only be
countered by moving the news to the Internet and severing the
expenses of physical printing plants, paper, ink, printers (the
people who run the presses) and anything physical associated with a
daily paper.
Zell had one good idea – Get rid of
expensive real estate, no matter how traditional or prestigious it
may be. Put reporters in the field, give them wireless access and
laptops (which they already have), cell phones (which they already
have) but shut down the offices and news rooms. Most reporters don't
need to sit in the newsroom or a newspaper supplied office anyway.
They get paid to produce their stories, so pay them by the story,
based on the depth and importance of those stories. No, I don't have
the formula – yet – but someone will figure it out.
This is part of the Collapse of Debt Based Economy news reporting. It won't end here. There is more to come with the rest of the major newspapers and with broadcast media as well. Stay tuned.
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