Hell for Zell: The Bankruptcy of Tribune Company
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Case Code: BSTR317 Case Length: 19 Pages Period: 2000-2009 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.300 Organization: Tribune Company Industry: Newspapers Countries: USA Themes: Failure of Strategy, Bankruptcy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Troubles Begin
During the period 2000-05, the readership and ad revenues of newspapers began to decline. While readers started using the Internet to get access to news, advertisers increasingly began turning to online advertising...
The Zell Era
Zell was a multi-billionaire who had made his money mostly from the real estate business. He described himself as "the grave dancer"- someone who bought up distressed businesses or properties, to sell them later at a profit. He also had stakes in several companies around the world, with varied businesses like retail stores, wineries, barges, and compressors for the energy industry...
Filing for Bankruptcy
In September 2008, one current and five former employees of Tribune filed a case against Tribune and Zell citing mismanagement of the company. The lawsuit asked for broader representation of employees and a new ESOP trustee. It also sought information about the value of pension assets, which were being continuously accessed to fund the severance payments of laid-off employees. The lawsuit further stated, "Zell and his accessories threaten to destroy the Tribune Company and its assets. They are doing so illegally, without consideration for the employee-owners."...
Why Did the Bankruptcy Happen?
Analysts pointed out several reasons for the bankruptcy of the Tribune Company. According to some, Zell had entered the newspaper business without any planning. They also felt that Zell had looked internally and gone in for cost cutting, going in for new formats, reducing content, etc. instead of dealing with the external factors that were causing the fall in ad revenues.
Analysts felt that Zell's lack of journalism experience and knowledge about the media industry had prevented him from understanding the basics of the newspaper business...
Outlook
The scenario in the US newspaper industry as of late 2008 was grim, with most of the newspaper companies either trying to sell their newspapers or entering into negotiations with their creditors. In addition, the stock prices of almost all the publicly traded newspaper companies had fallen sharply. A noted columnist, Russ Smith said, "The demise of the print media industry has been evident for years, but its rapid acceleration in 2008 is still shocking on an emotional level."...
Exhibits
Exhibit I: Top Newspapers of USA by Daily Circulation as of 2008
Exhibit II: Tribune Company Business Units as of 2008
Exhibit III: Revenue Information for Tribune for 2008
Exhibit IV (A): Tribune Company Income Statement (2005-2007)
Exhibit IV (B): Tribune Company Income Statement (2002-2004)
Exhibit V: Details of the Tribune ESOP
Exhibit VI: The US Newspaper Industry
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