With all of the hubbub surrounding Tribune Co. (NYSE:TRB), you would think that the company was some red-hot startup that throngs of companies were eager to buy. Of course, nothing could be further from the truth.
Sam Zell has emerged as an unlikely suitor for the Chicago-based media company. He's made his fortune in real estate and has no experience in the media though he reportedly told the Chicago Tribune that newspapers were just like any other business.
Zell, who earned the nickname grave dancer for his ability to spot undervalued companies, is right to a point. Media companies need to sell a product that people want at a price that they will buy. There is a big point that eludes Zell and the other guys who are interested in the newspaper business.
Good news organizations will anger their major customers -- advertisers -- from time to time. If Zell is successful, he will be besieged by people looking to influence the editorial direction of the Los Angeles Times, Chicago Tribune and Newsday. He has to ignore all of it.
Believe it or not advertisers -- the ones who aren't angry -- want to be seen in credible news outlets because it lends legimimacy to their brands. If a media outlet isn't credible, big advertisers avoid it. Check out one of the supermarket tabloids and you'll see what I'm talking about.
I realize that Zell has done just fine without my advice until now. Nonetheless, I will respectfully point out to the tycoon that he should be a little concerned that his wish may come true.
Tribune is a mess. Anyone who winds up buying it will be stuck with huge headaches including the floundering Los Angeles Times. Tribune apparently though wants to stay independent even though the Chandler family is clamoring for a sale.
The response to its auction has been underwhelming. The media company is putting together a "self-help" plan that would spin off its broadcast business, keep most of its newspapers and borrow money to pay shareholders a large dividend. the New York Times said.
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