12
REVOLT
TO SAY THAT Zell’s legendary nonconformist ways were not easily accepted in the world of big media would be an understatement. For those trying to get a true reading of the man, the real book on Sam Zell is one of polarization. There are those who admire his raw, unvarnished temperament and business success, and those who see him as a modern-day pirate, complete with a sailor’s lexicon.
The latter opinion was starkly displayed early on, in public, shortly after Zell took over Tribune. Zell ordered a new banner hung in the lobby of the Los Angeles Times, reading “You own this place!” He thought it would be well received as a rallying call to the troops. He was wrong. The next day, a group of Times employees hung a huge placard down one side of the Times parking garage reading “ZELL HELL Take back the Los Angeles Times.” Now that’s loyalty for you.
While Zell knows how to roll with the punches, at times, it seemed that the constant jabs and criticism hit his rawest nerve. “You think I need to do this?” he snarled in a town hall-style meeting with Tribune employees back in Chicago. “You think I needed to take on the Tribune because this is my way to maybe get a plane, or maybe I can live in a penthouse, or maybe I can have a house in California if this works? I got all that shit, OK? So I’m out here busting my ass and I’m swearing at you and you and you and everybody, and I’m saying get the fuck up and realize that this is it, man. This is our chance. And we either make it or we don’t make it. And I can pussyfoot about it, I could tell you nice little stories and we can all go off into the sunset and down the elevator shaft loving all the vignettes. But you know what? At the bottom of the elevator shaft, they have this special room called ‘politically correct.’ ”
1Zell’s unconventional methods of communicating with Tribuners won him countless detractors as the early weeks of his regime change rolled across the company like a Midwestern F5 tornado. One telling example became a daily reminder for all Chicago-based employees at the Tribune Tower headquarters. Zell, a fan of Oregon modern artist Michael Speaker, installed a statue of a harried businessman adorned with eighteen legs and six briefcases in the ground floor lobby. It came to publicly symbolize Zell’s distaste for all things red tape and wanton decision making.
“I thought maybe it would catch your attention,” said Zell. “But what is it saying? Here’s this guy and he’s running around in place, he’s got eighteen legs and six briefcases and he ain’t getting nothing done other than creating process. We can make our organization flatter, more responsive, capable of making decisions faster, responding to environment, eliminating bureaucracy.”
2Zell quickly decentralized decades of budgeting and accountability, pushing those functions away from the Tribune Tower and down to frontline managers. Shortly after taking over, Zell recounted a conversation with the publisher of the
L.A. Times. “I had breakfast with David Hiller this morning, and basically what I said to him is I’m expecting him to be president, CEO, and publisher of a business called the
L.A. Times. To the extent there are benefits that come from collective purchasing, maybe collective sale of ads and various other things, he will benefit from that. But in the end, he and his team have got to be responsible for the
L.A. Times and responsible for the P&L of the
L.A. Times.”
3Hiller’s New Year’s resolution list included firing L.A. Times editor James O’Shea, the former Chicago Tribune editor who’d relocated to his Los Angeles post little more than a year earlier. To say the dismissal did not go over well would be an understatement. Zell would soon come to see firsthand the deep-seated resentment that the L.A. Times staff held for his cost-cutting measures and nearly any other move that emanated from Chicago.
O’Shea’s outgoing (and lengthy) diatribe to his fellow journalists spoke volumes about the pent-up animosity toward Zell and Tribune management in general. In certain passages, he made it plain that the manifesto was his going-away present to both the L.A. Times newsroom and to Tribune management.
Not surprisingly, Zell’s reaction to O’Shea’s missive was swift and terse, but O’Shea’s ousting was just the beginning of a larger wave of staff reductions brought on by what Zell described as a deeper slump in advertising revenue than anticipated. As Zell promised, within sixty days of closing the Tribune purchase, the formal cuts began on February 13.
Zell reiterated his “we will not achieve success by just cutting costs” stance, but the reality was that Tribune was not making enough money and something—people—had to give.
Zell was cutting staff positions in the publishing group and corporate office through a combination of voluntary separation, involuntary layoffs, attrition, and closing open positions. His goal was twofold—cut costs while flattening the organization’s structure to foster nimbler decision making.
In Los Angeles, in the midst of the cutting, the one position Hiller couldn’t live without was an editor, and he had that gaping editorial hole to fill. Newspaper editors have traditionally earned their stripes via Pulitzer Prizes or breaking big investigative stories in Washington, D.C. But on Valentine’s Day, Hiller quickly tapped Russ Stanton as the paper’s new editor. Stanton was a ten-year
L.A. Times veteran and the leader in turning around the paper’s
LATimes.com Web site. He was the paper’s fourteenth editor and fourth in less than three years.
Though lacking the traditional reporting pedigree, Stanton’s experience in the online realm was a deciding factor in his promotion. But more changes, i.e., staff cuts, were on the way. Throughout the summer of 2008, the deep staff cuts kept coming as Zell and Michaels took every opportunity to trim what they viewed as unnecessary layers of management and resources that were impeding decision making. July 14, 2008, was quickly dubbed Black Monday. Early in the day, Hiller announced his resignation as publisher of the L.A. Times in a slightly more gracious note than O’Shea’s.
While it would be easy and expedient to say the cuts were deepest with Tribune’s West Coast problem child, hours later the contagion had spread eastward, as veteran Chicago Tribune editor Ann Marie Lipinski resigned. In an e-mail to the paper’s staff, she never directly addressed her reasons for leaving, but the timing was more than coincidental.
FORCED TO ACT
By the end of the bloody summer of 2008, staff cuts had been deeper than originally anticipated. Tribune had chopped more than a thousand jobs across the company’s newsrooms, mostly at the Los Angeles Times, and Zell seemed to have contradicted a few earlier statements about cost-cutting measures.
Asked if he was as optimistic in June 2008 as he was just six months earlier, Zell opened his kimono a bit. “When we bought the company, we believed that the future of the newspaper was going to have to be different than it had been in the past. We underwrote the investment on the thesis that we would have a period of time to make the transition. As everybody knows, advertising revenues in the newspaper industry have drastically dropped, particularly classified advertising as it’s moved to the Web. The result is we have been forced to act much quicker and take what we had originally envisioned as our 2010 plan and implement it in 2008,” said Zell. “I still believe there is a good future for the newspaper business. There is a need to recognize that the role of the newspaper has dramatically changed in the last twenty-five years. Our goal is to define what role a newspaper can have in the future and to produce a newspaper that economically justifies its existence.”
4Media analyst Lauren Rich Fine wished Zell had done more to shake things up. “We did know we were at the edge of a cliff, we just didn’t know how high,” said Fine. “It was not a well-timed purchase; it dragged on longer than he might have liked. He probably himself will come out OK. But the biggest surprise to me is that he didn’t come out shooting faster. He had a lot of time to look at this, and given that he’s trying to break the cultural barriers anyway, I don’t know why he didn’t move even faster. He was going to get criticized for what he did, so he might as well have gone faster.”
5Long-time confidante Peter Linneman summed up Zell’s predicament best. “He is running a race with the capital markets and the economy, and the trend is moving against him. If he can get his fundamentals from the operating side improved fast enough, he will survive, but he’s got to do it faster than he originally planned, and that’s going to be a challenge that everybody in the business has got.”
6
WELCOME TO MOGULVILLE
Once upon a time, owning a newspaper was akin to owning the crown jewels, only more valuable. Thomas Jefferson noted their importance back in 1787, saying, “Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter.”
Whether willingly or not, Sam Zell joined a cast of media moguls who have graced and disgraced newspapers around the globe for decades. He is certainly not the first larger-than-life personality to stir the ranks of journalists. Who can forget the likes of flamboyant British investor Robert Maxwell, who bought up the New York Post as his virtual plaything, then thanks to hubris and greed lost it all, including his own life, in a mysterious yachting accident.
Despite his self-professed sales bravado, Zell values his privacy and his roots, and he is anything but the stereotypical media mogul. He doesn’t live in New York, preferring the broad-shouldered streets of his familiar Chicago. He does own the perquisite corporate jet, in which he logs some 1,200 hours annually, but in business he flies decidedly under the media radar.
Before Zell’s takeover of Tribune Co., the dominant media figure in the United States was an Australian, Rupert Murdoch. Four years Zell’s senior, Murdoch arrived in the United States in 1974 and has been squarely in the media’s bright gaze ever since. Unlike Zell, Murdoch was schooled early in life as a journalist—his father ran the evening newspaper in Adelaide during his youth. An acknowledged conservative, Murdoch for decades has worried media critics who are concerned that he is more interested in harnessing the power of his media brood to further his own political and personal agendas.
Murdoch drew near-Zell-like ire after closing his own $5 billion purchase of Dow Jones & Co. in 2007. The great fear was that Murdoch would, in short order, dramatically transform the Wall Street Journal’s content in his own conservative political image. However, the worry appeared for naught, particularly since Murdoch was under certain constraints imposed by the paper’s founding Bancroft family that helped insulate editorial functions from his direct influence. Zell, on the other hand, had potentially free rein to do as he pleased with his own editorial control over Tribune’s media properties.
Prior to buying Tribune, Zell addressed potential media-control issues this way:
Within the world of conspiratorial thinking, the obvious assumption is that I have some extraordinarily devious path and as soon as I get control, I’m going to turn the newsroom over to the elephants or I’m going to bring the American Conservative Union into the pressrooms. But the answer is, I have the self-confidence to believe that given the right structure, given the right kind of analysis, and given the right kind of management, we can succeed.
7In the final analysis, comparing the two might be akin to stacking a vintage Merlot up against a bottle of Ripple. “I don’t think Zell belongs in the sentence with Murdoch yet,” said Fine. “Rupert Murdoch is the guy to watch right now. He bought Dow Jones for a fortune and had the same insight that it was going to be a challenging environment. And he keeps investing, and at the same time he’s had some rough moves along the way, too. He grew up in the business and really understands what he’s doing, but he’s not awed by the way it used to be. I love watching his strategic moves, because he’s thinking so far ahead of everybody else in terms of what he’s going to create. I don’t see that kind of vision coming from Sam Zell.”
8
VENDET TA?
To most journalists, Zell’s vision was clearly muddied, not to mention hopelessly trapped in a time warp. “He just appears to be prosecuting old grudges and bringing old baggage to it, not creating a vision of what the future of newspapers would be,” said Kevin Roderick with LA Observed. “Even before the layoffs, people were fleeing because they were seeing there are other media executives out there who have a clue of where things may be headed. Even with the
Wall Street Journal, Murdoch is building for the future and is creating a path to future prosperity. Then they look at Zell, who didn’t have a path to anything and was more about tearing things down.”
9To Roderick and other Los Angeles journalists, Zell was on a mission all right—to get even. “In L.A., the view was that he was getting even, that he’d somehow drunk some Kool-Aid from dissidents within the Tribune culture in Chicago and was going to exact revenge in Los Angeles against journalists, whom he clearly doesn’t like or respect. Everything that he signaled is that he doesn’t view the Los Angeles Times as a major asset within journalism, as if they’ve been straying off the reservation and need to be brought back into the Chicago way of thinking about things. It was disappointing to most people,” said Roderick.
There was also an unmistakable sense that Zell had only a single chance to win over his journalist partners, and he failed on numerous occasions, largely because he recognized but failed to fully comprehend the depth of skepticism inherent in the breed.
“Clearly he liked to be thought of as a cowboy and outside-the-box thinker and actor, and I guess he is,” said Roderick. “I think it is an essential question to answer—how much of the style that he puts on is an act and how much is real? When he went to the newspapers and was cussing and then he came out and said that was all just an act, I didn’t talk to one person who was there that believed him. They said it was not an act, it was flashes of anger. It was authentic anger, not leadership, not trying to change any culture. He’s got some things that haunt him about journalists, and he was going to act on them.”