Chicago's Media: Tribune Company Sale and the Public Interest

VI. Tribune Company Sale and the Public Interest

In August 2007, Tribune shareholders approved a plan to take the company private for over $8 billion. In a mind-numbingly complex series of transactions, Chicago real estate mogul Samuel Zell will come to control Tribune. Zell, a new investor in the company with little background in media(1) and none in journalism, will contribute some 300 million dollars and will receive board representation and warrants for 40% of the outstanding common stock.

In Chicago, Tribune’s newspaper/broadcast cross-ownership of WGN, WGN-TV and The Chicago Tribune is grandfathered under the FCC’s newspaper broadcast cross-ownership rule. Although according to FCC rules this privilege is not transferable to a new owner – as in the case of the sale to Zell – Tribune is seeking a temporary waiver to permit the transfer of WGN and WGN-TV pending final action on the FCC’s review of media ownership rules. Tribune is seeking similarly extraordinary waivers in four other cities including New York and Los Angeles.(2)

A number of public interest groups are currently asking the FCC to deny Tribune’s waiver requests because they violate the newspaper broadcast cross-ownership rule and Tribune advances absolutely nothing even purporting to demonstrate that grant of its requested waivers will benefit the public. An FCC decision on Tribune’s waiver request is pending.

There are a number of ways the Tribune sale could impact the public:

  • The sale will result in $13 billion debt load, generating economic pressures that may result in layoffs. The media industry has established a pattern of targeting news departments for downsizing when they restructure, making it ever more difficult for news departments to thoroughly and accurately cover the stories that matters to local communities. In fact, shortly after announcing the sale, Tribune announced 250 job cuts in Chicago and Los Angeles. Allowing the waivers will further jeopardize the Tribune's ability to deliver quality news and information.
  • The sale represents a complex corporate restructuring that would allow Tribune to eliminate most of its corporate taxes. If a similar structure had been in place in 2006, Tribune would have avoided $348 million in taxes.
  • Tribune will not have employee representation on the board of directors. According to Teamsters President, "If given a chance, Tribune employee-owners could play a crucial role in enhancing localism and diversity for the benefit of the public served by the Tribune."
  • According to the Chicago Tribune, Zell has “little background in media and none in journalism,” which could negatively impact how the media empire is run.

Public interest advocates find that since allowing Tribune to own both WGN and the Chicago Tribune promotes neither diversity nor competition, the only argument left to support a waiver is that the benefits of common ownership outweigh the reduction in diversity and competition. Tribune has attempted to argue that its common ownership of WGN and the Chicago Tribune has allowed it to produce in-depth news specials and provide better news coverage. But a small increase in local news falls short of the extraordinary benefits that might justify waiving the rules.

Moreover, the reported “benefits” illustrate how common ownership actually decreases the diversity of stories available to the public. By time-shifting newscasts, viewers are simply receiving news from one voice, rather than an independent voice. Moreover, to the extent that there may have been benefits in relying on and collaborating with Chicago Tribune’s news staff, it is unlikely to continue considering Tribune’s downsizing of the Chicago Tribune. Further, by sharing resources and collaborating, instead of reporters deciding what stories to cover and gathering news on their own, they end up reporting the same stories already being covered by the paper or the broadcaster. Moreover, to establish this type of relationship there is no pre-requisite that the two entities be commonly owned. Finally, the various “public service projects,” such as promoting events and participating in food drives that many other businesses engage in are simply irrelevant to a waiver analysis.

The public interest advocates are urging the FCC to deny the requested waivers. As long as the cross-ownership rule stands, they argue, Tribune should not get special treatment. Upon transfer of ownership, they recommend, the FCC must ensure that the Tribune breaks up its holdings in cities where it is in violation of the cross-ownership rules. Requiring the break up of these combinations will promote diverse views by allowing new owners.


Source: In the Matter of Applications for Consent to the Transfer of Control of Tribune Company from Shareholders of Tribune Company to Samuel Zell (MB Docket 07-119) Petition to Deny at page 29. June 11, 2007. http://www.mediaaccess.org/filings/Tribune%20Petition%20to%20Deny.pdf

1. Zell once owned radio-network Jacor Communications until it was sold to Clear Channel in 1999. See Zappone, Chris. “Zell buys Tribune Co., Cubs to be sold.” CNNMoney.com April 3, 2007 http://money.cnn.com/2007/04/02/news/companies/tribune_zell/index.htm

2. Tribune also seeks a permanent waiver of the local-TV ownership rule to retain ownership of two Hartford TV stations and The Hartford Courant.