The first thing he did was hire his closest link to the media business -- Randy Michaels (former Jacor and Clear Channel head). Michaels then raided his former employer for a bevy of talent who may also be rueing the day that they signed on.
Now we learn that Tribune Company is headed for bankruptcy.
That's eight major dailies including the Los Angeles Times, Chicago Tribune and Baltimore Sun and a group of local TV stations. (Things are not much better for television stations these days, either).
Late Sunday afternoon The New York Times and Wall Street Journal reported (with little glee, I imagine) that fellow publisher Zell had hired Lezard Ltd. to counsel Tribune on seeking protection from their creditors -- something news reports say could happen as early as the week ahead.
You could blame the current recession that is likely to get worse during most of 2009.
But the economic situation affects everyone -- including, but not limited to advertisers. It's a global recession and you can't blame Sam Zell and his team for that.
But you have to wonder what a very smart and shrewd man was thinking when he decided to get into newspapers and television when everyone else was headed for the exit.
Someone must have gotten to this real estate magnate's ear. After all, Zell made his billions from real estate. He also took a nifty bundle from his one major venture into the media business when he and kindred spirit Randy Michaels built Jacor into a major radio group that was later sold to Clear Channel.
But that was then and this is now.
Traditional media is dead.
I've been saying this for the past few years and I don't have to lose billions to know it (not that I have it to lose). The question is: why didn't they know it?
Today, you'll be reading a lot of "business" accounts about how Zell got into short pants with this deal. How he was swimming in debt. How he managed to stay ahead of Tribune's $12 billion in borrowings by selling assets. Now, time has run out.
If you think this is a pure business story that you file under victims of recession, you've got it wrong.
Newspapers started declining long before the recession -- long before the Internet came along. TV killed newspapers -- first by forcing afternoon papers out of business or into consolidation (sorry about that word). They've convinced themselves that there will always be a market for print and that it is just a matter of emulating USA Today or adding color, shorter stories -- more features about pets, diets and health.
That would be incorrect as well.
TV, the other asset Zell owns that is in the toilet, started dying when local stations began squeezing costs from their traditional moneymaker -- local news. Network TV has no future -- look at NBC, CBS and ABC. Do you really want to own their stock?
But that's not what made grown smart men make stupid "I should have known better" decisions that have gotten them into this fine pickle they're in.
Radio would have been a good example and certainly Zell and Michaels could relate.
So why didn't these two insiders employ caution based on their radio experience -- radio being a business that has just about committed suicide with a Samurai sword by gutting its critical intestines and cutting off the life blood to what makes local radio work -- local talent, management and on-air.
I'm thinking of all the people who are going to look at this latest example of media company gone bad as an indication of more trouble for related industries.
But that's still not what caused Hard Times At (Sell Tribune) High. Did they really think they could turn around these laggards? Did they ever think they could sell Tribune high and get a nice return for their money?
Zell has already sold off parts of the company -- Long Island Newsday -- to raise cash and I guess even an old hand like Zell couldn't have known that the credit markets would be paralyzed due to the current economic crisis so even if you sell low -- money is hard to come by for buyers.
No, the single biggest mistake Zell (and many other traditional media moguls) made and are still making is the failure to understand the very populous next generation that is slowly coming of age but quickly having their Internet, mobile and social networking tools and preferences adopted by older generations.
That's right.
Poo poo the kids but boomers and Gen Y are LinkedIn, turned on, online, connected, friended and Twittered to death on their very own Blackberries, PCs, Macs.
Sooner or later companies that want to survive are going to have to deal with the Millennials who as a group are single-handedly upsetting the status quo in the record business, radio, TV -- and now perhaps Zell has noticed that they never read newspapers in the first place.
You can insist on arguing the advertising angle -- tough times, budget cutbacks, automakers not buying ads to sell cars when they are begging Congress for a bailout and I'll give you that bad luck doesn't help.
But even if we traded a recession for prosperity, radio would barely grow (in fact, analysts had predicted flat as the new growth for radio prior to the downturn).
The record industry wouldn't sell more CDs.
Television wouldn't get more people away from their computer screens or, more importantly, their social interaction online.
And newspapers would have continued a trend it pioneered a long time ago -- declining circulation, increased subscription prices and erosion of advertising to -- new media.
This was all predictable. I predicted it -- and I'm not that smart (as many of you will agree).
Why did they not see it -- and heed the warnings of the real story here -- the digital revolution coming of age.
Zell and Michaels bet on the past and now they have no future.
For those of you who would prefer to get Jerry's daily posts by email for free, please click here. IMPORTANT: First you must check your mail or spam filter to verify your subscription immediately after signing up before daily service can begin.
Thanks for forwarding my pieces to your friends and linking to your websites and boards.
