Zell's Bad Trib

Zell's strategy: Buy cheap, cut mercilessly, consolidate until you're the only game in town, and you can charge what you want. It worked for shipping; it would work for radio. Media: just another undervalued asset class. It all works the same way. Except, it doesn't, as Zell and the rest of us found out unequivocally Monday with the implosion of Sam Zell's latest media venture in the bankruptcy of the Tribune Co. When it comes to the LAT and the Chicago Tribune—and now pretty much any other media—those rules don't hold at all. Cutting-and-consolidating doesn't keep advertisers from departing in droves to search for ever-cheaper eyeballs. When Tribune or whatever is left of it emerges from bankruptcy, it will wake up still staring at the problem of how it can make money in anything like its present form when advertisers think they can get the same eyeballs elsewhere for less. The bottom line that's now clearly emerging is that cutting-and-consolidating, the model that's worked for Zell before, isn't going to be enough to keep media companies afloat in a world in which there is no shortage of forums in which to buy ads on the cheap. What the Los Angeles Times is seeing in real estate is going to be repeated again and again, and if newspapers really think that they can deliver something to advertisers that Google and the local Pennysaver can't, they're going to have to turn to models like ZetaBid to prove it. Let's hope they succeed, because there's a lot more than just Sam Zell's money on the line.