Sam Zell at CU

Sam Zell, real estate baron and owner of The Equity Group, which includes the Tribune Company, did a Q&A at CU’s law school today. People wanted to know what makes a good entrepreneur and a good businessman. They also asked him about his massive media subsidiary. Clearly, the Chicago Tribune has not been doing well lately (they filed for bankruptcy in December). So Zell, a master at making money, had some interesting insights into the newspaper industry. 

• “When we bought the Tribune (in 2007), we underwrote it with an erosion rate that was twice the rate of the past five years.” It turns out the true erosion rate was 10 times that much. “It was a tsunami from an economic point of view.” Oops.
• The metrics the news biz operates under don’t work. For example, it costs 75 cents to buy a paper on the street, and 45 cents to get it delivered 45 miles away at your house. “We’re losing on every subscription sale.” 
• People don’t realize newspapers have been a monopoly, with profit margins of 20% – 40% because there was NO competition. “Newspapers were impervious.” 
• This bred a culture of arrogance among journalists. “Journalism is about writing, not revenue,” he mocked. “Without revenue, there’s no writing! 
• This arrogance caused editors and journalists to stick to ideals rather than catering a product to their customers. “How do we fix this? The industry has to appeal to its customers. Can anyone in this room name me a company that’s successful by pissing on their customers?”  Point taken. 
• The Tribune, for one, ignored 10 years of focus groups that said people wanted 1)local,local,local news ;  2) easy navigation;   3) shorter stories (You won’t start reading a long story bc you feel guilty for not finishing it) 
• Lastly, newspapers made a grave error in putting content online for free. “Now they’ve got to fix it.” 

As a journalism grad student, I view the purpose of journalism differently than Zell. I see the service journalism provides as watchdog of power and gatekeeper of newsworthy info in a democracy. But it was awesome to hear an assessment from a purely capitalist, businessman’s point of view. The dynamic between the two is captured in this story from Zell: 

Today, the LA Times put an advertorial on the front page. Managers and editors balked at Zell’s proposal of placing sly advertising on the cover. “I thought God was gonna strike me down. Our revenue is down 30%. Do you want me to fire 20 reporters or print the advertorial?” 

Case in point: it’s great for journalists to have high standards, as they have an important job. But in a recession, or the industry meltdown journalism is experiencing, you have to make tough decisions. Zell, for one, has no qualms serving his highest calling – making money and maximizing shareholder value. 

I would love to think that journalists should cling to their principles. But our society dictates that you conform – or play – the market in order to succeed. And you can’t eat and pay the bills with principles.