Tribune Co. is Bankrupt; Times to Mortgage its Tower

Okay, now the perpetual bad news for print media companies is starting to get a whole lot worse. With the economy reeling, advertisers slashing their media budgets, and consumers cutting purchasing of just about everything but necessities, the path to any sort of viable future seems to be closing for newspapers in particular.

Confirming speculation that has been building over recent weeks, the Tribune Co. -- publisher of the Chicago Tribune, the Los Angeles Times, the Baltimore Sun, and various other media properties -- announced today it is filing for Chapter 11 bankruptcy protection.
The Chicago-based company 's move is intended to restructure its staggering debt load -- $13 billion -- and it claims that the newspapers will continue to operate for now. "Factors beyond our control have created a perfect storm - a precipitous decline in revenue and a tough economy coupled with a credit crisis that makes it extremely difficult to support our debt," said Sam Zell, chief executive of Tribune, in a statement. "We believe that this restructuring will bring the level of our debt in line with current economic realities, and will take pressure off our operations."

In its bankruptcy filing, the company said it owes $1 billion in interest payments on its debt this month and another $500 million by June. The Tribune also owns the Chicago Cubs baseball team, although that franchise is not included in the bankruptcy petition. (The team is, however, actively seeking a buyer.)

Also today, The New York Times announced it is planning to mortgage or even negotiate a sales-lease on the $225 million on the 58 percent of the Times Tower it owns (the remaining 42 percent is owned by a developer.) The Times has been under pressure for months to generate a credible plan to manage its upcoming debt payments. Next May, one of the company's two $400 million revolving credit agreements is due, with the other will come due in 2011.

Obviously, these are radical steps being taken by two of the nation's most prominent newspaper companies, but neither addresses the underlying weakness in their line of business. No analyst, literally, projects any improvement in print advertising revenue for the foreseeable future. The best available option is to rapidly transform themselves into digital media companies, utilizing some combination of various online business models, including distributed content via Web 2.0 technologies with stronger partners, such as Google.

In this regard, the Times is ahead of the Tribune, due to a stronger web presence and a demonstrated commitment to experiment online.

Barring bold moves to restructure themselves, this will not be the last of the bad news we'll be reporting about these two particular companies.