Opinion

Jack Shafer

Buzz off, Waxman — Congress can’t tell a newspaper how to do business

By Jack Shafer
January 8, 2014

Oh to be a fly on the wall Jan. 15, when Tribune Co. executives meet with the staff of Rep. Henry A. Waxman, D-Calif., in a command performance to explain the media conglomerate’s plans to spin off its newspapers — which include the Los Angeles Times, the Chicago Tribune, and the Baltimore Sun — into a separate company named Tribune Publishing.

Waxman called for the meeting in mid-December after Tribune filed its blueprint with the Securities and Exchange Commission, arguing in a letter that the restructuring may not “be in the best interests” of his constituents, who live in the Pacific Coast-hugging congressional district that runs inland to include Beverly Hills. The spin-off will essentially defund the newspapers, Waxman argued, specifically the Los Angeles Times, which his district depends on for news. Under the terms of the restructuring, the Tribune Publishing newspapers will pay a cash dividend to Tribune Co. The newspapers will also lose their real estate holdings, forcing them to pay rent for their current facilities.

Waxman worries that the deal endangers the long-term survival of the Los Angeles Times, which like most other newspapers has shrunken its newsroom as advertising and circulation have fallen over the past decade. In a second letter to Tribune, which he also made public, Waxman wrote, “At a minimum, you appear to be putting the profits of the Tribune Co. ahead of the interests of the public in viable local newspapers.” In it, he asked Tribune to forward to his staff a raft of relevant spin-off documents before the Jan. 15 meeting.

Absent evidence of law-breaking by Tribune, how can the company’s restructuring be the business of Congress or Henry Waxman? So far, Waxman hasn’t deployed any bogus rhetoric about the “stakeholders” who read the Los Angeles Times having rights equal to those of the shareholders who actually own the property. But it’s early yet. Waxman may get there soon if Tribune’s executives don’t acquiesce to his charms.

So why doesn’t Tribune tell Waxman to go find a hot place and jump into it? Probably because after it sheds its newspapers, its primary assets will be in the highly-regulated business of broadcasting, where it owns 23 television stations. As a member of the House minority, Waxman can’t cause Tribune much in the way of regulatory trouble now, but what if the House flips? (Waxman was, after all, the chair of the Energy and Commerce committee.) Game theory encourages the Tribune to act the supplicant, perhaps giving Waxman some cheap token for his blessing, and then do basically what it was going to do in the first place.

If the property rights argument doesn’t grab you, maybe the First Amendment one will. Again, in the absence of law-breaking, such as violating anti-trust or defrauding stockholders, it’s not within the power of Congress to determine how newspaper properties can be sold. Unlike the Federal Communications Commission’s adjudication of broadcast license sales, no Federal Newspaper Commission exists to rule on who can own and who can sell a newspaper.

Let’s say the Tribune Publishing spin-off that Tribune envisions is as unviable as Waxman imagines it is. Tribune Co. can’t force people to buy stock in Tribune Publishing if, as Waxman imagines, it has been ransacked on the way out the door and loaded up with too much debt to survive. It’s in Tribune’s interest to make the spin-off attractive to investors, not repulsive. Likewise, it’s also in Tribune’s interest to avoid marbling too much fat into the newspaper meat as it prepares them for sale. That’s a sure way to fail to capture the highest value for its assets. It’s safe to say that the “uglier” the deal looks to somebody like Waxman, the lower the price Tribune will be able to command for the papers and the more money the new owner will have to invest to make them more profitable.

As for Waxman’s horror that the Los Angeles Times will be paying rent to Tribune to operate out of the palatial Los Angeles Times Building under the new order, who says its new owner must keep it there? The paper can move to a cheaper place. Besides, I’m guessing that the first thing the new Los Angeles Times would do with the Times Building if it conveyed with the sale would be to sell it. Newspapers across the country — Miami Herald, Washington Post, Seattle Times, Minneapolis Star Tribune, Boston HeraldKalamazoo Gazette, Philadelphia Inquirer, et al. — have left or have announced departures from their old buildings for more modest addresses as their workforces have dwindled and their office space needs have declined. So what’s the big deal here?

In abandoning newspapers, the broadcasting-centric Tribune is wisely exiting a business that is already sunsetting. Although no almanac predicts the precise date and time that sunset will arrive, almost nobody thinks metropolitan dailies like the Los Angeles Times have more than a decade (or two, if you’re an optimist) of life left in them. Henry Waxman can request all the documents he wants from Tribune, but not even he can roll back the Internet, smartphones, and BuzzFeed.

I worry about the news needs of Henry Waxman’s constituents as much as he does — those wealthy citizens of Malibu, Santa Monica, Rancho Palos Verdes, Pacific Palisades, Topanga, Calabasas, Manhattan Beach, Marina del Rey, and (I’ve got to say it again) Beverly Hills. But unlike Waxman, I’m convinced that should the new Los Angeles Times fall from its current state of excellence, his constituents have resources aplenty to support quality news and information should they desire it. If they don’t, that’s not Tribune’s problem and it’s not Waxman’s concern.

******

In the old days before the Internet happened, the Los Angeles Times published a print edition in Washington, which I savored daily. Send your special Los Angeles Times memories (Jim Murray, anyone?) to Shafer.Reuters@gmail.com. My Twitter feed would also like to be a fly on the way of that Waxman-Tribune meeting! Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns.

Comments
12 comments so far | RSS Comments RSS

Spot on, Jack!

Posted by BenMC | Report as abusive
 

Tribune now has 39 TV stations because of its purchase of Local TV, making it the self-described largest independent network in the country. Divesting TVs from print also resolves longstanding FCC and political issues in markets in which it owns both TV and print, although is grandfathered in some and has temporary waivers in others. http://corporate.tribune.com/pressroom/? p=6470

Posted by SBAnderson | Report as abusive
 

Displaying his understanding of free enterprise capitalism Waxman wrote, “At a minimum, you appear to be putting the profits of the Tribune Co. ahead of the interests of the public in viable local newspapers.”

Isn’t putting profits first what private companies are supposed to do? Without profit you have no private company.

In Obama’s “you didn’t build that” America profit is a 4 letter word and should take a back seat to the public interest, whatever that is.

Posted by LorneRussell | Report as abusive
 

Ordinarily, I’d agree. However, Waxman is right, and as it is now, we don’t have a means of protecting the integrity of the information we receive from our “news” sources, or any other sources for that matter. Couple this with a culture that shows an increasing willingness to use “information” as a means of controlling the populous and we have a situation that threatens the legitimacy of our Republic. “Buzz off, Waxman — Congress can’t tell a newspaper how to do business.” The other half of that op-ed title should read “Only the ruling executives can do that,” and we know what motivates them. At least Waxman has to answer to the people. Not so the executives.

Posted by flashrooster | Report as abusive
 

I was with you, Jack, until “should the new Los Angeles Times fall from its current state of excellence.” The current state of the LA Times is not excellent; it’s not even good (Jim Murray was a long, long time ago). All too often, it can’t even manage mediocre and deserves to go the way of the dodo.

(What is with Los Angeles, anyhow? A market of over 10 million and only one major daily?? Heck, it doesn’t even have a football team.)

Posted by SukieTawdry | Report as abusive
 

Are you the same guy who wrote this column a year-and-a-half ago: http://blogs.reuters.com/jackshafer/2012  /06/05/the-great-newspaper-liquidation/  ?

And as for this potential issue – “it’s also in Tribune’s interest to avoid marbling too much fat into the newspaper meat as it prepares them for sale“ – I think Sam Zell, Randy Michaels and now Peter Liguori already have taken care of that possibility.

Posted by Tipitina | Report as abusive
 

@flash The internet, on which you post regularly, eliminates the screening of opinions in broadcast and print. Our sources of information, that you believe are “diminished” are actually magnitudes greater than even 10 years ago. Berghazi is a perfect example where the political control of news distribution was superseded by the real facts reported on the internet, contrary to the spin of the President and SOS. It serves to reinforce the forces behind print and network television losing market share–their ability to control the flow of information is eliminated. They are no longer the primary sources.

As for LA only having one major newspaper, it’s basically a sign of the times. Advertisers have more places to secure mindshare–starting with your smartphone. They no longer have to publish 500,000 copies to reach their target audience of 10,000.

The death spiral they are in has been well earned, if not deserved as they failed to adapt. Too many other sources of “news” that they could not compete with. see Newsweek, Rocky Mountain News (Denver), US News and World Report–the world passed them by.

BTW, is this not the same Henry Waxman who said the deferred taxes your 401K was “my money” (meaning, the government)?

Posted by COindependent | Report as abusive
 

And John Madigan before Zell. (I think the credit line was tapped by the time Liguori came on board.)

Posted by Tipitina | Report as abusive
 

they should tell waxman to go to hell

Posted by CharlesHoffman | Report as abusive
 

@SukieTawdry: “What is with Los Angeles, anyhow? A market of over 10 million and only one major daily??”

Had the misfortune of living in L.A. for a time. Zombies in cars only read billboards. Kind of the same reason Houston is now the 4th largest city in America…. and 95% of Americans could not tell you the name of Houston’s newspaper without googling it first. Papers grew up with train rides.

Posted by AlkalineState | Report as abusive
 

Businesses have ONLY two key drivers: 1) shareholder value and 2) executive compensation. That’s it!! Nothing else matters. When will people learn this fundamental truth. ‘Twas ever thus. Whether it is right or wrong, from a moral perspective, is completely immaterial. Businesses are neither moral nor immoral – - they are amoral.

Posted by explorer08 | Report as abusive
 

@explorer80: “Shareholder value” is so 1980′s. As we have seen with countless examples now from CitiBank to AIG to Bear Stearns, the executives will pay themselves 300% bonuses whether the shares gain value or not.

So you can cross out your number one above :)

Posted by AlkalineState | Report as abusive
 

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