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Tribune chief emphasizes 'fundamental strengths' of newspapers

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Dec. 8--NEW YORK--Tribune Co. Chief Executive Dennis FitzSimons sought to emphasize his company's "fundamental strengths" at a financial conference Wednesday, even as he acknowledged that "clearly, the year hasn't been what we hoped it would be."

FitzSimons actually delivered essentially the same comments twice, at separate gatherings hosted by two different brokerage firms during the high-profile industry show-and-tell known as "Media Week."

In general, FitzSimons and the other top-level executives, particularly those from the newspaper publishing segment, have offered relatively cautious forecasts and paid particular emphasis to their efforts to rein in costs.

That's because, in addition to a longstanding but slow decline in circulation, the newspaper industry is now facing a much more immediate challenge from the Internet. Classified ads, historically a stable and crucial revenue source for newspapers, have come under pressure as consumers go online to look for jobs, autos and housing.

In addition, advertisers are funneling more money to advertising on Google and other Internet sites, crimping the amount of money available to advertise in newspapers.

"There's no doubt that the industry, and Tribune, are going through an important transition," FitzSimons told attendees at the UBS and Credit Suisse First Boston conferences.

Indeed, a growing number of investors are deciding that the newspaper sector's profit margins have been permanently compressed by the changing marketplace. That fear has driven down the stock prices of Tribune and most other major publishers, to the dismay of shareholders.

Tribune's strategy, and its plans for 2006, are designed to address those issues, including the "fragmenting media environment," FitzSimons said.

As part of its cost-cutting effort, he noted, Tribune has eliminated a total of 900 jobs, or about 4 percent of its total work force, primarily on its publishing side.

Tribune officials also disclosed the price tag associated with some of those belt-tightening measures: The company's fourth-quarter earnings will be burdened by a charge of as much as $50 million to cover the recently announced job cuts, and by another charge of as much as $60 million to cover the cost of a consolidation measure that calls for closing a Los Angeles Times printing plant.

Scott Smith, head of Tribune's publishing operation, said the group is "committed to leading the aggressive changes required to best serve our customers... and to deliver better financial results."

Tribune, which owns the Chicago Tribune, the Los Angeles Times, Newsday, the Baltimore Sun and a number of smaller dailies, isn't the only newspaper chain that has responded to the recent revenue squeeze by cutting its publishing staff. In recent months, the owners of numerous other papers, including the New York Times and the Philadelphia Inquirer, have instituted painful work-force reductions.

For Wall Street, the still-unanswered question is whether those cuts have gone deep enough to revive profit margins.

And while the financial community was approvingly toting up the benefits from the industry's job cuts on Wednesday, another group was loudly criticizing the reductions as harmful to U.S. society.

MoveOn Civic Action, an arm of the online political action committee, roundly attacked Tribune management, saying the company's staff cuts "mean watered-down coverage of local, state and national news."

A handful of MoveOn Civic Action members, some holding signs emblazoned "Let reporters do their jobs" and "Newspaper cuts hurt journalism," staged a demonstration in front of the midtown Manhattan hotel where the CSFB conference was being held.

After failing to catch FitzSimons as he entered the conference, some of the MoveOn Civic Action group entered the ballroom where he was speaking and tried to hand him an "online petition" that they claimed had been signed by 45,000 people who object to Tribune's cuts.

FitzSimons declined to accept the petition, and conference employees took the protesters' microphone away.

With that episode out of the way, the conference returned to a relatively listless question-and-answer session, in which most attendees focused less on the fundamental changes sweeping the industry and more on issues like the prospects for 2006 revenues at Tribune's 26 television stations and how many shares it will buy back in the coming year.

Given the depth of Tribune's recent travails, the sessions seemed relatively tame. That's because while Tribune has been socked by the ills that are afflicting most of its rivals, it is also suffering from some self-inflicted wounds. Specifically, the company has recently been suffering painful fallout from the $8 billion acquisition more than five years ago of Los Angeles Times parent Times Mirror Corp.

A simmering tax tiff between Times Mirror and the IRS blossomed this year into a billion-dollar tax bill for Tribune, for example. And last year an investigation found that circulation had been improperly inflated at Newsday, formerly owned by the Times Mirror, which caused advertisers to overpay. Resolving that episode was also costly for Tribune.

FitzSimons, who told the audience that it has been "a challenging year," opted to focus on how the company is "redeploying" resources and on in-house efforts to make its papers "more reader-focused."

Tribune officials said publishing revenues in 2006 are likely to be roughly the same as this year's. "Advertising revenue has been choppy all through 2005," said publishing chief Smith, "but particularly so in recent months."

Company officials also said the savings from Tribune's cost-reduction strategies will be used in part to expand the company's Internet operations.

Tribune rival Knight Ridder didn't address the conferences this year, because, in response to investor clamor over its lackluster financial performance, officials are currently evaluating a possible sale of the company.

But competitors that did address the media week convocations Wednesday offered generally low-key predictions for the coming year.

Gannett Co. Inc. said it expects "modest" growth in advertising demand next year. The publisher of USA Today also said it would take a "hard look" at any potential acquisition opportunities, including that of Knight Ridder.

McClatchy Co., which publishes the Minneapolis Star Tribune and other papers, and Dallas Morning News owner Belo Corp. offered similarly cautious forecasts. New York Times Co., echoing FitzSimons' phrase, said the media marketplace remains "challenging."

Tribune news services contributed to this report.


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