Friday, January 19, 2007

The Last Round of Musical Chairs: Soft Tribune Bids Portend Duller Deals

The Wall Street Journal (subscription) and others provide details on the Tribune Company's efforts to sell off their media holdings - and they aren't pretty. The bidding power The Chandler family and Los Angeles businessmen Ron Burkle and Eli Broad have bids that are little more than current market value, well below expectations, while The Carlyle Group seems to be focusing on their television holdings. This is hardly a rousing endorsement for the value of Tribune properties, but more importantly seems to point towards the end of the line for the recent round of "musical chairs" of newspaper M&A. With a Democratic Congress expected to look at media outlet holding rules afresh, recent moves towards "synergies" in markets may face fresh scrutiny - and further demotivate investors looking for scale to overcome the limits of collapsing traditional media markets.

In the meantime the bloodletting at major media companies steams on as they try to come up with margins that seem reasonable to their investors. Ann Moore let go 289 from Time Inc. worldwide to focus more resources on online operations, even as other print-oriented news outlets pursue cutbacks. At some point the question has to be asked: how much of this is pushing talent away from major media companies altogether to create new competitors? Some layoff strategies seem to be focused on the older hands who, in addition to being pricier, were squeakier wheels regarding the quality of editorial output suffering in the transition to multiplatform content delivery.

Many of these sacked writers and production hands may have had skill sets less attuned to multiplatform content generation, but some who were truly interested in good editorial quality are likely to resurface in their own Weblogs or via new startups. It's a bit like the Tsar in World War I sending the serfs out to the front lines of the battle with rifles, only to discover that at the end of the war these discharged veterans turning on them in full armament to foment the Russian revolution. In the push to make the numbers work for deals and impatient investors, media organizations are forgetting that "surplus" talent can fuel the production of competitive content inventories far easier than in the past. It's no longer a closed-system game, a factor that will be one of 2007's major reality checks. Deal-making is not likely to come to a screeching halt this year, but expect a lot more scrutiny as to whether media companies pushed hard enough early enough to make a graceful transition to more profitable and well-placed online operations.
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