The Deal from Hell

Charlie Brumback beamed with pride as members of the Great Lakes Naval Station band struck up the “Chicago Tribune March” on the steps of the massive new staircase he had built—at the cost of $250,000—to link “upstairs,” the editorial department on the fourth floor of Tribune Tower, to “downstairs,” the business offices below. Newsroom staffers wandered over to the huge, glass-enclosed, three-story passage to sample ice cream and listen to the tune commissioned in 1892 to memorialize the newspaper. Ninety-three years later, the tune was music to Brumback’s ears for an altogether different reason. To complete the “Freedom Staircase,” a massive hole had been jackhammered in the floor of the newsroom in a not-too-subtle hint to the journalists on the fourth floor to get with the program.

In Brumback’s mind, the Chicago Tribune was a profit-churning business, not some highfalutin priesthood solely dedicated to truth, justice, and the First Amendment. If the paper didn’t make profits, there would be no journalism. Profits required teamwork, a concept that, Brumback thought, was alien to most journalists with their hold-your-nose attitudes about how the company made a buck. To make his point, the Tribune chief, a Korean War veteran and military school disciplinarian, physically connected the newsroom to the business offices. When the moment arrived, as a gaggle of slack-jawed journalists looked on in disbelief, Brumback cut the ribbon draped across the staircase in a symbolic move that heralded the dawn of a new era in upstairs-downstairs relations. The dedication of the Freedom Staircase in 1985 was typical of Brumback, a blunt, tough, callous accountant who in 1981 had been drafted to run the Tribune from the Orlando Sentinel, a Tribune paper in Orlando, Florida.

As newspaper families sold off their inheritances, went public, and hired the bean counters of the world to deliver returns that would keep stock prices high and dividends flowing, professional managers—men trained as accountants or investment bankers—joined newspaper company staffs across America. Few of the new guard were as mean, intelligent, or hard charging as Brumback, though. Frugal, taciturn, and nearly bald, Brumback wore baggy blue suits and undistinguished brown shoes. In Florida, he had earned a reputation for turning off lights left burning after business hours. A Princeton graduate and native of Ohio, Brumback grew up in a comfortable suburb of Toledo. His bland demeanor and casual smile masked a quick, impatient mind. Dismissive and often harsh, Brumback would often cut subordinates off in midsentence; he once told Tribune employees doing page paste-ups that they were engaged in “idiot work”; he referred to a Tribune-owned tabloid in New York as “a paper for immigrants”; and warned another gathering of employees to take a good look at the person to the right and to the left, because by the end of the year, one of them would be gone.

Although he had graduated from one of the nation’s best colleges, Brumback didn’t tout his Princeton credentials. He attributed his success in business to the Culver Military Academy, the Indiana military high school he had attended. “Culver was more important to me than Princeton,” Brumback said with pride. “The culture at Princeton was a little different. It was really training people for Wall Street, government service, and large corporations. Culver prepared me to take responsibility for my actions and [understand] what leadership [was] all about. I learned the importance of creating an environment where people work together as a team to accomplish something.”

True to his military school roots, Brumback approached his new job at the Tribune like a general leading troops. On the whole, he considered the Tribune he took over in 1981 a flabby, undisciplined organization, one that was unable to capitalize on its considerable power because of poor leadership, backward technology, and a bloated payroll. Almost immediately, he forced the paper’s editor, Max McCrohon, out of his job and replaced him with Jim Squires, a former Chicago Tribune Washington bureau chief and editor of the Orlando Sentinel under Brumback.

I had a friend who was a son of Jack Knight. The Knight family owned a newspaper in Akron, Ohio, near Toledo, where I was living. I went to high school with Frank Knight, who . . . was my age and in my class. Before taking the job in Orlando, I went down and spent some time with Frank in Akron to get an understanding of the newspaper business. I told him that the newspaper business seemed to be very complicated and I wondered how in the world anyone could get a grasp of it.

He said, “Charlie, this is not a complicated business. All you got to do is step back and look at it as four separate, independent businesses working together under one roof. First you have the most important, which are the [editorial] content creators, the people who create the content of the newspaper that readers and subscribers will pay to read. These are the people advertisers want to reach. The quality of the content is extremely important. [But] these people are different. They are creative. They tend to be introverts. They are smart and they tend to stick together. You must realize they are different from others. If they are not different [from] your advertising people or your production people or your distribution people, you want to be careful.”

The third business under the roof—the production people, or those who actually manufacture the newspaper, “are not,” Knight told Brumback, “like editorial and advertising folks. Most don’t have college degrees.... Proofreaders, Linotype operators . . . paper handlers, mailroom and pressroom operators work with their hands and end most days with ink on their face, hands, and clothes. People who work in the production department are very important to the success of any newspaper.”

Knight compared producing a newspaper to:

the manufacture of 25,000 one-pound cakes of ice an hour. A printing press takes in raw material [large rolls of newsprint] in one end and puts out 25,000 one-pound products an hour from the other [during a ten-hour press run]. And you’ve got to get . . . 250,000 [of those] one-pound cakes of ice delivered to 250,000 different locations [every day] before they melt. Because once a certain amount of time goes by, the newspaper has very little value. The production process and the ability of your production people to create those 25,000 one-pound products an hour coming out of a press is extremely important.

Distribution was the fourth element in Knight’s model. Because the news’ relevance can melt like ice, Knight emphasized that the fourth business under the roof was important, despite its peripheral nature. Brumback recalled the way Knight had explained it. “You will find your distribution people are different,” Knight told him. “They get up in the middle of the night in all weather. For most of them, it is a second job. They are the people that deliver your newspapers to your customers. You need to spend time with them and get to understand how they do their work.” “This was the best advice I got before going to Orlando,” Brumback admitted. “It helped me understand newspaper publishing. It is important to understand that each of the four functions is staffed with four different types of people with four different types of skills.”

Brumback hated the idea of a wall and dismissed it as a relic:

Jack Knight [Frank’s father] was a genius, a marvelous newspaperman [who would go on to build the Knight Ridder newspaper chain, at one time America’s second largest]. But [Frank’s] Uncle Jim was different. Jack was Mr. Outside. He moved around. He was a good newspaper publisher but Jim was Mr. Inside, . . . the one who handled the business affairs of he newspaper.... The dual-headed form of organization worked for Jack and Jim Knight because they were brothers and Jack enjoyed . . . news gathering and editorial work and Jim was a good businessman. They divided up their business into what some people today call the business side and the editorial side. [But] I felt there had to be one person responsible for the entire newspaper. While a dual-headed organization worked well for Jim and Jack Knight, when that organization is transmitted to subsequent non-family generations, it tends to create barriers between all functions responsible for a successful operation.... I’m troubled when I hear someone talk about the “news side” and the “business side” of the newspaper. This divided organization is perpetuated mainly by editorial folks and, I think, it is taught in a lot of journalism schools. This model worked well for the Knight brothers during their lifetime, but it didn’t work well for their successors.

When the Colonel built the Tribune Tower, the elevator carrying ad salesmen, delivery men, accountants, and the corporate brass to their offices had been rigged so it wouldn’t even stop at the editorial department on the fourth floor. Even under the Colonel, who was a businessman to his core, editorial was considered the soul of the paper, a sanctuary where reporters and editors—though they might be subject to the Colonel’s antics—labored free from the pressures of commercial operations. The editorial department’s job was to create an audience by serving the public’s need and desire for information; the business side existed to sell ads to that audience.

But Brumback, a notorious miser who scrutinized every penny spent at the Tower, turned that formula upside down, arguing that a paper that didn’t make profits couldn’t afford to cover the news. Brumback’s attacks on the status quo didn’t stop at the newsroom door. In one way or another, he assaulted each of the four businesses Knight had outlined as key in a successful paper, dragging Tribune employees kicking and screaming into the modern age, arming them with computers, jettisoning some Tribune loyalists and rewarding others, and instilling a rigorous sense of discipline throughout the organization. Once, Brumback ordered all of the blinds on the windows of Tribune Tower to be lowered to the same level and then walked around the outside of the building to see who’d followed orders.

According to Brumback, he made clear to anyone who worked for him, including Squires, that regardless of title, they were executives whom he expected to be professional managers. “Editorial executives don’t like to be called managers,” Brumback noted. “They would rather be called editors. This is a quaint distinction that appears be to universal in the newspaper business. But that didn’t bother me. I looked on them—and they knew I looked on them—as managers and executives who had to manage their part of the business.”

Squires understood how to play the game; in Florida, he had cut a deal with Brumback that would dramatically affect the Orlando Sentinel and later the Tribune, one that Squires in retrospect described as a Faustian bargain: “[He] let me decide what goes in the newspaper, what its editorial opinions will be, what time it goes to press, and how it presents itself in the community, and I promised to run the tightest ship in the business. It was a deal designed to deliver both prizes and profits.”

Tribune Company had acquired the Sentinel from Martin Andersen, a high school dropout who lived large, enjoyed martinis, and idolized the Colonel. Brumback, who had been hired, fired, and rehired by Andersen, came along with the paper in what he described as a golden opportunity: “Orlando was a market in those days where our mistakes didn’t show. It was growing so fast that even if we made a mistake or did something wrong, it generally would be covered up by the growth of the market. But overall the company was strong. We had good management. We had good people coming up in the ranks, and it was a very well run and successful newspaper.”

During the four years Brumback and Squires ran the Sentinel, they increased the paper’s operating profit margins from the mid-teens, the industry average, to the low twenties, among the industry’s best. Budgets were set in order for profits to rise by 15 percent to 25 percent a year, and soon, Squires noted, the Sentinel’s contribution to the bottom line was nearly as much as that of the Tribune, which was three-and-one-half times its size. As editor, Squires became much more involved in the marketing of the paper than many of his contemporaries thought acceptable, but he also used the money he got out of Brumback to engineer an about-face in the Sentinel’s journalistic reputation. He was a pioneer in creating zones to target local news and advertising, and he redesigned the paper into clean, well-organized sections that delineated main news from local, business, sports, and features. True to his bargain with Brumback, Squires whacked the editorial department budget. At the time he assumed the helm, the editorial budget was 15 percent of the paper’s overall revenue. It fell exactly 1 percent a year between 1976 and 1980.

The results turned heads in Chicago, where Cook was preparing to take Tribune Company public, and when, in 1981, he named Brumback CEO of the Chicago Tribune Company, the corporate arm of its flagship newspaper, Charlie decided to bring his editorial ace along. Brumback saw padded staff, retarded technology, and subpar revenues in Chicago, too. But, he also encountered unions—organizations that were decidedly hostile to his capitalistic instincts, and ones that he would eventually crush. The troubles that faced the Chicago Tribune in the early 1980s plagued many other big-city newspapers. The Tribune had substantial revenues, but they were not growing, particularly once inflation was factored in. Papers that tried to raise circulation or advertising rates to compensate for sluggish growth fueled counterattacks from new media—television, radio, free newspaper shoppers, and direct mail—all of which were growing, charged less for ads, or had greater audience reach. So, newspapers kept the prices low to prop up their circulation and the myth that they were a medium with a mass audience.

Meanwhile, costs at big-city newspapers had soared thanks to inflexible work rules, onerous labor contracts, and bloated payrolls. Brumback saw staffing levels as the root of most problems. Soon after arriving at the Tower, he started slashing jobs and taking on the newspaper’s unions, arguing that the paper needed more efficient press runs and more flexibility in dealing with lifetime job guarantees, issues that rankled union leaders. Within a few years, the unions staged a strike, a dramatic miscalculation that the Tribune’s new general capitalized on with a ruthless counterattack that broke their backs. “We had temporary replacements for all of the work necessary to produce the newspaper [when the strike started],” Brumback recalled. To compound the effects of this ready workforce, the drivers’ union, the Teamsters Union, didn’t honor the picket lines. As a result, Brumback could still successfully deliver the paper. Eventually, the scabs that had come in as short-term hires were slotted into permanent positions when the strikers disregarded the call to return to work under the proposed conditions. Brumback said:

The replacements came from some of the Tribune’s other newspapers that were non-union. Others came from friends in the industry. . . . The out-of-town replacements were here up to a year. After a few weeks, we began to bring in young people right out of high school and college. We trained them to run the new technology equipment and within a few months we had a lot of well-trained workers.... Everybody that came in was told that this was a strike situation and it was temporary.... They were able to make extra money because they worked a lot of overtime. But then it became clear that the unions were not about to agree to our terms under any conditions. Finally we sent a registered letter to all of the strikers at their homes and told them that they had twenty-four to forty-eight hours to get back under the conditions that we proposed before they struck or they would be permanently replaced. They didn’t come back. They were getting bad information from their union leadership who didn’t want to acknowledge that they had lost the strike.... So we permanently replaced them.

Brumback was no entrepreneur. He was a manager, a hired gun, and an expert in numbers. Prizes and awards didn’t impress him. But Brumback and Squires both realized long before their peers that the computer and the technological advances it heralded would revolutionize the delivery of information. In Florida, Brumback had been deeply impressed with how The Walt Disney Company, owner of Disney World in Orlando, had used technology to enhance its entertainment business. He had also mastered the Apple computer at home and incentivized his managers to adopt the new technology by offering a free computer to anyone willing to teach himself how to use it on his own time. In 1981, when he made the same offer at the Tribune and no one bit, he lost no time in removing the paper’s editor and ushering in Squires.

A gifted editor, Squires wanted to bring a more cosmopolitan approach to the Chicago Tribune’s news reports, whether it involved foreign, national, or even fashion coverage. “He thought big,” remembered Lisa Anderson, a New York native and former reporter for Women’s Wear Daily, whom Squires hired to write about fashion for the Tribune. “He told me he wanted to make the Chicago Tribune a world-class newspaper and to do that he needed sophisticated fashion coverage.”

The Tribune’s journalistic reputation grew with Squires at the helm. The paper’s parochial ways and tarnished reputation from the days of the Colonel and his successors were no more. As editor, Squires created the illusion of a paper with an expanding staff. For every two obscure middle-management editor positions he eliminated, Squires turned heads by hiring journalists with high-profile reputations, people like Douglas Kneeland, then the Chicago bureau chief for the New York Times, who then recruited fellow Times writer John Crewdson, a brilliant reporter from the paper’s Houston bureau, and Nicholas Horrock, a combustible investigative reporter who had worked at the Times and Newsweek magazine. He changed the focus, purpose, and direction of the paper toward deeper reporting, more ambitious coverage, and a more sophisticated view of the world.

During Squires’ initiative to beef up the Washington bureau, I landed my correspondent job in 1982. Meanwhile, he worked hard to open high-profile news bureaus in other cities across the nation and world. He folded the paper’s suburban and local news inserts, replacing them with a zoning scheme that could provide local news and advertising more efficiently and give the paper a more refined feel. “Brumback’s goal,” as Squires explained in a book he wrote about his Tribune career, “was to make more profit than last year, not just a little more but the most possible. When these goals collided, our respective rank within the company decided the outcome. His always took precedence over mine, no matter what.”

But Squires underestimated the difficulty of sustaining a journalistic shell game in which his high-profile hires and new bureaus obscured a squeeze on the newsroom budget. “I [became] a ‘smoke and mirrors magician,’” he said, “juggling from the right hand to the left, robbing Peter to pay Paul, and lying to myself and my staff about how successful we were.” To help finance his journalistic sleight of hand, Squires implemented policies that subordinated the interests of the reader to that of the advertiser, and focused his gun sights on the Chicago Sun-Times , the scrappy tabloid that was the Tribune’s only real competition.

Squires bragged:

It was the last of the great newspaper wars on one of the greatest battlefields of them all.... It was an advertising driven contest in quest of the highest quality readers. We didn’t hire more reporters, or include more news or print any more papers. We just shifted available resources to a day when circulation and advertising rates were the highest to generate more revenue. And the higher demographic profile of our readers combined with better reproduction of the advertiser’s image by high-quality offset printing led to a better and more desirable response to advertising, tipping the balance to our side of Michigan Avenue once and for all.

Squires’ strategy enabled Brumback to live up to his part of the bargain and more. “Productivity accelerated. Production costs decreased because we had fewer people,” Brumback said. “The productivity per man hour skyrocketed, and within a couple of years, the Tribune became probably the most productive big-city newspaper in the country. And for several years, it was the most profitable newspaper in the country.” Thanks to the higher ad rates, revenue jumped, too, because the paper could charge for an audience that had the kind of demographics that advertisers loved.

The Tribune wasn’t the only paper with plunging production costs. Across America, newspaper productivity soared as professional managers replaced humans with machines. Squires noted:

Between 1975 and 1990, newspaper production work-forces would be cut by 50 percent or more. Presses that once required ten to twelve workers would now run with six or seven. Typesetting that used to demand huge departments, employing from thirty to three hundred skilled, unionized craftsmen, would disappear completely. Paper handling and loading, which once required waves of manual laborers, was replaced by computerized conveyer systems, robotic cranes, and remote-controlled flatcars. Human photoengravers would be replaced by laser beams, and film processors by computer processes.

The decline in the cost of production of the newspaper was not as dramatic as it seemed. Technology enabled managers to shift work that was once done on the floor of the printing plant to the newsroom, just as editorial budgets came under equally intense pressure to be cut. The burden of producing the newspaper fell more heavily on the shoulders of editors, but it also made them more indispensable to the operation. Meanwhile, those coveted cash flow margins at publicly held newspaper companies jumped to the 20 percent range by the mid-1980s. Nowhere was the trend more evident than at Tribune Company. Brumback continued his string of thirteen straight years of improving profits, tripling margins at the Chicago Tribune in just eight years from the 5 percent to 10 percent range to the mid-twenties. Buoyed by the profits at its flagship paper, Tribune Company’s stock soared 23 percent a year, triple the average of the rest of the industry.

Although overall profits rose at a 23 percent clip in the five years after the company went public, revenues rose only 9 percent, putting pressure on Squires and others to squeeze their budgets to finance earnings growth. To Squires’ credit, the situation didn’t really affect me or most of my colleagues at the Washington bureau. When American sailors began escorting oil tankers threatened by Iranian missile attacks out of the Persian Gulf in the shadows of Iranian missile batteries along the Strait of Hormuz, I hopped on a plane bound for the Middle East to cover the “tanker war.” When the paper needed investigative profiles of George Herbert Walker Bush or Senator Robert Dole’s campaign for the White House, no expense was spared. With Washington as a base, I traveled America, writing stories about everything from the financial scandal that drove House Speaker Jim Wright from office to budget excesses in the Pentagon’s Los Angeles–class attack submarine program. Those kinds of stories brought the Chicago Tribune high-profile journalistic accolades, particularly a series of stories I did on the savings and loan scandal.

Squires didn’t fare as well, though. He faced incredible pressures to deliver budgetary miracles to meet a demand for higher and higher profits, pressures that would never cease. After he left the company, Squires blasted Tribune and the industry for its failure to reinvest in their newspapers to finance improvements that would have better served readers. “The profitability of newspapers,” he wrote, “has come to depend on an economic formula that is ethically bankrupt and embarrassing for a business that has always claimed to rest on a public trust: the highest profitability comes from delivering advertising sold at the highest rates in a paper containing the fewest pages and sold for the highest possible retail price to the fewest high income customers necessary to justify the highest rates to advertisers.” Zeroing in on the hypocrisy of newspaper publishers who ask for special legal and political rights on the ground that they exist to protect the people’s right to know, Squires noted, “Nowhere does the Constitution define the ‘people’ as the predominantly white upper 30 percent of the population between twenty-five and fifty years of age who make $50,000 a year.”

Yet manipulating newsroom resources to maximize advertising revenues is how Squires battled the Sun-Times. Like many before and after him, Squires allowed his bosses to capitalize on his reputation as a solid, professional journalist, essentially ushering in the policies he later described as bankrupt. To Squires’ credit, he always pushed the staff to cover issues that affected the rich and poor—minority housing, Chicago’s bankrupt schools, the plight of the underclass, and corruption at City Hall. When Cook decided to step down, the two contenders for his job were John Madigan, the investment banker brought in to take the company public, and Brumback. Charlie often frustrated Squires with his miserly ways, but Madigan was someone Squires thought was far worse. “Squires never liked Madigan,” Brumback recalled. Squires said he openly campaigned against Madigan for the top job. Meanwhile, he made a speech to the board extolling Brumback’s business acumen, his value as a mentor, and his wisdom in leaving editorial decisions to journalists. “I just made the case that Madigan had never run anything. Actually, Charlie was a pretty easy sell. None of them [company directors] liked Madigan,” said Squires.

Instead of thanking Squires, Brumback reneged on a budgetary pledge he had made to his editor in order to post record profits. When he was named Cook’s successor, Madigan was given Brumback’s former job—Squires’ nemesis was now his boss. “There was no way for someone who had fought Madigan’s ascent to power as vigorously and openly as I had to remain a power at the newspaper,” Squires said. “I lost the war. I knew I was dead.”

After he wrote his report, one of Squires’ friends in the corporate office said Squires’ enemies, led by Madigan, used it to brand him a “dangerous heretic.” At the time, he was not even fifty. Despite his ego and his faults, he was a fine editor and leader, a man who had a vision for the paper that was bigger than himself. He acknowledged that in his drive to adjust to a new “business paradigm and to excel at cost cutting and profit making in exchange for total control of editorial policy and news content, . . . I stayed too long and accepted too many bonuses to make a martyrs’ list.” Nonetheless, he gave journalists a powerful object lesson in grappling with the real power of the press as we struggled to save the journalism that we cherished.

On his last day at the Tribune, Squires visited Brumback, who informed him that his problem was that he didn’t “talk like us.” When told in retrospect that Brumback admitted Squires would probably have been the better choice to run the company than Madigan, Squires laughed: “Well, at least the old son of a bitch finally admitted it. All he ever did was add up the numbers and turn out the lights. All of the ideas of what to do were mine.”