The Deal from Hell (39 page)

Frantz showed me the Lopez column, which concluded that Zell's property wasn't involved in the dispute, and I told him to run it. As I introduced the
Times
staffers present at the airport interview, I told Zell that Lopez had explained what had happened in a column the morning after the exchange with his housekeeper. He clearly hadn't read it, and I could see he didn't intend to. But as quickly as his temperature rose at the mention of Lopez's name, Zell reverted to his charming side, answering questions politely, smiling at reporters, particularly Sallie Hofmeister, then a deputy financial editor, who peppered him with queries about his plans. When she asked Zell what it was about FitzSimons that had impressed him, he dropped his bomb: “Did I ever say I was impressed with Dennis?” Zell shot back. “Did I ever say
anything
about Dennis? He is sincere. And I think he hopes the deal goes through.”

O
n June 4, 2007, JPMorgan Chase and Merrill Lynch made a series of wire transfers of just over $7 billion to Tribune Company. Tribune used the money to buy back 126 million shares of Tribune stock at $34 each; pay Citicorp the $2.5 billion it had borrowed to fund the company's 2006 stock buyback scheme; pay $1.46 million to the Wall Street law firm that had advised the banks involved in the deal; and fork over $161 million to the investment bankers that financed Zell's acquisition of the company. The transfers and fees paid only for the first phase of Zell's debt-laden takeover of Tribune Company, but that was enough for now: The transfer rescued Tribune shareholders of all stripes, including employees like me. The deal was on.

Love him or hate him, we all owed the grave dancer a vote of thanks. Without Zell in the picture, short sellers and other Wall Street sharks probably would have driven the company's stock on the open market far below $20 per share. Investors who responded to Zell's tender offer tried to sell back 90 percent of Tribune's outstanding stock to the company, but the two-phase buyback had been structured so that Tribune
would reacquire only half its shares during the first phase of the deal. So the company prorated the Zell offer and sopped up 52 percent of outstanding Tribune shares, leaving those still holding Tribune stock with the option to either sell them in the open market or hold them until phase two of Zell's $34 per share offer kicked in, probably six months down the road.

The fire sale on Wall Street had a bigger impact in Tribune corporate suites than in the company's newsrooms.
Tribune
journalists held stock in the company but not anywhere near the levels held by the people who had thrust the company into its mess. Many
Tribune
reporters and editors were just as interested in the comments that Zell had made at the airport as they were in the selling price of Tribune stock. Zell knew exactly what he was doing when he responded to Hofmeister's question about FitzSimons, and his answer fueled speculation that the Tribune CEO was doomed, which was fine with most journalists at the
Los Angeles Times
as well as at the
Chicago Tribune
.

FitzSimons had shown little respect for print journalists and newsroom leaders wedded to traditional journalistic values, but he was particularly hostile to editors who he felt had slighted him, like Wolinsky at the
Times
, a paper that FitzSimons really liked to disparage. Just after telling me over breakfast that he didn't think I'd accomplished much, FitzSimons came to a lunch with my top editors that Hiller had arranged. Hiller, who loved to attend gabfests, bowed out of this one, and I soon found out why. Midway through the lunch, FitzSimons asked everyone for their thoughts on the
Wall Street Journal
's recent decision to place ads on page one of its paper. He knew the mere mention of the subject would cause indigestion around a table of editors who immediately attacked the idea. But he clearly enjoyed upsetting everyone, arguing that all papers would have to consider the appearance of ads on prominent page one. As he left the building to return to Chicago, he knew he had left me to deal with the fallout. “Sorry to do that,” he said to me with a smile, as I walked with him toward an elevator. “But
I just had
to come out here and drop that bomb.”

By then, the journalists in the newsroom of the
Los Angeles Times
had done what I asked of them on my first day: They had given me the opportunity to earn their respect, despite their skepticism about my ties to Tribune. And I had tried to live up to my word to make tough but fair decisions. Not everyone agreed with my approach, and some journalists probably agreed with FitzSimons. FitzSimons, after all, wasn't the only one urging me to dump Wolinsky and editors like him who adhered strongly to the values that had been championed by Otis Chandler. Some of the more Internet savvy journalists saw the Wolinskys of the world as “old school”
Times
stalwarts who fought change simply to preserve their positions of power and influence. There was a kernel of truth to that. Wolinsky probably would have benefited from a change. But removing Wolinsky was hardly a priority for me at the time.

Some in the newsroom compared me to Baquet and thought I came out wanting. Baquet had spent more time talking about stories, signaling that he cared deeply about quality journalism. And it's true, I didn't walk the floor enough. It wasn't as if I didn't care about good journalism, as anyone with whom I'd worked at the
Chicago Tribune
could attest. But I had to face head on some of the issues that Baquet had deferred. Days after I'd arrived in Los Angeles, I had a long dinner and cigars with Baquet. He forecasted what I'd face when I arrived—of the strengths and weaknesses on the staff, the changes he'd put off because he spent so much time wrangling over the budget. At one point, I told my assistant Polly Ross to set aside one hour a day for me to roam around the newsroom to talk to reporters and editors. But inevitably, she reassigned those sacred hours for more pressing items of the day. All too often I agreed because I knew Ross was one of the few people I could count on to watch my back. I should have done better.

I also knew that running a newsroom was no popularity contest. I deeply respected Baquet. But I was not going to get anywhere trying to be like him. I had to be my own person, make my own decisions, follow my guts, and live with my decisions. I actually dealt with many of the issues that Baquet and I had discussed, like the paper's Sunday
magazine, which was losing $6 million a year. I cut the magazine staff, appointed a new editor, made it a monthly magazine instead of a weekly, renamed it the
Los Angeles Times Magazine
, and reoriented it to showcase profiles written by some of the paper's best writers. By the time I left, it was nearly in the black.

But the biggest change I made at the
Times
involved the relations between the printed newspaper and
www.latimes.com
. Both Baquet and Carroll agreed that they, like a lot of editors around the country, had failed to pay enough attention to the Internet as a medium for news. When I took over, relations between the paper and its online effort were awful. Many Internet journalists viewed print reporters at the
Times
as stodgy old coots who didn't get that the world had evolved to a new diet of news with more liberal standards. Journalists could no longer wait for the daily deadline to post a story; they had to do it now and be judged by how many people clicked on the story, not by how important it was deemed by some ivory-towered editor. Print journalists viewed their online brethren as a bunch of naïve kids unschooled in the basics of journalism and the standards that made the
Times
Otis Chandler's newspaper. Both sides ignored one another, and almost all stories had to run in the newspaper before they got posted online. I knew that things had to change.

Baquet had created a group of top-notch reporters and editors he dubbed the Spring Street Project to explore a way forward for the paper. I met with the group soon after I'd arrived, just as they were drafting a report that called for a vigorous renewal of time, effort, and money for the paper's floundering online efforts. Capitalizing on Baquet's report, I decided to launch an initiative to change the staff 's thinking about
www.latimes.com
. I replaced the editor in charge of the newsroom's online efforts and scheduled a speech to announce some major changes to the staff. I told the journalists in the room some of the unpleasant truths I'd discovered in my initial months at our paper—about how journalists needed to get concerned about precipitous declines in ad revenue that paid their salaries; about the cold, defensive, bunker mentality I had encountered in an otherwise skilled
newsroom; about the crucial need for a change in attitude. From that day forward, I said the
Times
would break news on the Internet twenty-four hours a day and explain or analyze it in the newspaper, a complete change in thinking.

I appointed Russ Stanton, a
Times
business editor who had displayed an interest in online news, as a special editor for innovation. Stanton would report directly to me. One of his first tasks would be to create a crash training program to turn every journalist in the newsroom into a savvy, multimedia journalist. I would be his first student. I launched a redesign of the print newspaper with a twist that made many in the room with memories of the Staples incident squirm. The redesign committee I created would be led by people schooled in the values of the newsroom but would also include people from our online efforts and from the circulation, marketing, advertising, and production departments at the paper. I decided to put the squabbling tribes in a room and make them agree on a path forward that would transform a great newspaper into an awesome, powerful storytelling machine in print and online. My challenge to them: Build me the kind of newspaper you would design if you were starting from scratch.

Frankly, my speech was long overdue. Editors rally journalists by confronting them with facts and challenging them to overcome obstacles, regardless of their height. I gave the newsroom some cold hard facts about revenues that helped pay for them and their journalism: In 2004, the
Los Angeles Times
had collected $102 million in print advertising from auto dealers. By 2007, that total would fall to around $55 million. “That's $47 million dollars gone,” I said. “We've made some of that up online. In 2004, online auto classified ads totaled only $7 million. By 2007, digital auto ads would come in at $31 million, or an increase of $24 million. But,” I told them, “notice what is happening here—we lost $47 million in print and only recovered $24 million online. For every $2 we lost in print, we are recouping only $1 online. The story is similar in other areas: Some categories such as real estate are doing well, but it is only a matter of time before it too goes south unless we build online readership faster while keeping our print readers.”

I allowed that there were many reasons for the declines, some having to do with the way we practiced journalism, and some not. I continued, “But we can't hide from the fact that smart competitors like Google and craigslist are stealing readers and advertisers from us through innovative strategies that are undermining the business model we've relied on for decades.” I told the staff we had to change and change now.

My speech, to my surprise, got a lot of national attention and a good reception in the editorial department, where I had started to pick up some support. It's always hard for anyone to judge how well they are doing in volatile situations like the one into which I had walked. Colleagues around the country with friends on the staff would occasionally call to tell me if they had heard good or bad things about me from their friends. Most of the time they were positive. One exchange made me feel particularly good; a metro reporter I encountered in the newsroom told me that he and his colleagues were once again talking about stories at news meetings, rather than their problems. I had started wrestling with the biggest challenge I faced—how to cover this large, sprawling, disjointed metropolis I now called home—when the first signs of trouble hit.

Newspapers and the Tribune Company had done precious little research and development despite the challenges they faced. I looked at what data we had, but I knew of its limits and that the real answers rested in insights developed by interactions with readers. So, I spent a lot of time trying to learn about the community during the sixteen months I was editor of the
Times
. I had time to attend functions at night since my wife had remained in Chicago and I was alone. Trying to commute back to Chicago proved tough, too, so I often remained in Los Angeles over the weekends. Sometimes I would bike or drive to a certain community to get a feel for Los Angeles and just walk around and talk to people, ask them questions about what they wanted and needed from a newspaper like the
Los Angeles Times
. But every chance I could, I also tried to meet with community groups such as Zocalo, a cultural forum that attracted many
Los Angeles Times
readers interested in cultural issues, to hone my instincts for the right mix of news for metro coverage.

Not too long after FitzSimons had dropped his bomb about front-page ads, I met Hiller at a meeting of community leaders in the Inland Empire, a vast, rapidly growing swath of suburban communities and towns east of Los Angeles. I had been told by numerous readers that
Times
editors seemed like nose-in-the-air types who didn't have a feel for the wide range of communities on which the paper had to report. I thought it wouldn't hurt to spend a little time with readers and leaders outside of the office. Like a lot of folks I met, the Inland Empire group told me that the
Times
lacked a strong presence in the community. They wanted coverage of state politics, the price of water, the economy, and trade issues related to the businesses that had located in the Inland Empire to be near rail and truck routes that linked the region to the Los Angeles port, a huge 7,500-acre international transportation hub twenty miles south of downtown Los Angeles. It handled more than 40 percent of the waterborne container traffic flowing into the United States.