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Q&A with Tribune's Dennis FitzSimons

Tribune Co. is already the nation's second-largest newspaper and TV conglomerate, but chief executive officer Dennis J. FitzSimons wants to make it even bigger. And he'll be able to make sure it can grow with the likely liberalization of the Federal Communications Commission rules against cross-ownership of TV and newspapers in the same markets. The rule changes would let Tribune keep its existing properties in both media in such key markets at Los Angeles, New York, and Hartford. And the group could add to its potent roster of broadcast stations and newspapers -- which FitzSimons says he's keen to do.

Tribune (TRB), with $5.3 billion in annual sales and a countrywide span, is already a media powerhouse. Its 12 daily newspapers include The Chicago Tribune, and The Los Angeles Times. Eight of its 26 TV stations rank in the nation's top 10 markets, and its stable of broadcasters cover some 40.1% of the nation's homes. It owns a 22.5% stake in The WB Network, 31% of TV Food Network, as well as the Chicago Cubs baseball team.

FitzSimons, 52, became Tribune's president in July, 2001, and he assumed the title of CEO in January, 2003. He had joined Tribune's WGN-TV in Chicago in 1982 after a stint with Viacom, then rose quickly to become the station's general manager on his way to the top job at Tribune Broadcasting. Recently, he spoke with BusinessWeek Chicago Bureau Manager Joseph Weber about his view of the proposed changes and Tribune's potential plans. Edited excerpts of their conversation follow:

Q: Why are the rule changes significant?

A: The changes make sense because you can't have one sector of the media landscape regulated and unable to take advantage of efficiencies, while another isn't regulated. Look at cable and a market like Philadelphia. Comcast (CMSA) has 90% of the cable homes. They own a sports channel, a news channel, a golf channel, and QVC. They provide broadband. There's no regulation on that, and there's also the advantage of a dual stream of revenue -- subscription fees and advertising revenues -- and that's a better economic model.

Multiple-system operators like Comcast -- which has 21 million homes in its national footprint and owns programming services -- are competing in the same pond as broadcasters. The broadcasters, to some degree, and newspapers are limited in what they can do, so the ability to own multiple channels in a market is going to level the playing field. This is the public-interest argument that a lot of people miss.

Q: How will they reshape the media business?

A: Programming follows the money, and programming is migrating from free, over-the-air television to cable, and audience share is migrating over there as well. If you own multiple channels and have significant infrastructure, it's a more efficient model, and it enables you to spend less on infrastructure and more on programming, which enables you to compete better.

The only entities that are unable to own television stations in a particular market are foreigners, felons, and newspapers. So why shouldn't a newspaper be able to own television stations and bring the benefit of a large staff of journalists to add depth to television-news programming? With all the cable TV channels, the national news channels, all the local news channels, all the Internet sources of information, consumers have many more sources of information than they've ever had. That has fragmented audiences. So what companies are trying to do and ownership deregulation will allow is to reaggregate audience share.

Some people cling to this romantic idea of diversity of voices, but if those voices are much weaker and have many fewer people viewing or listening, they won't be very effective voices.

Q: What do you say to those who contend consolidation has become excessive?

A: That argument doesn't stand up to scrutiny. If you go back 25 years to 1978, there were three networks that controlled 90% of the viewing in prime time. CBS had a 30% share of viewing. Viacom (VIA) now owns CBS and UPN and has a 27% share of prime-time viewing. But it takes them 15 channels to put that together now.

You don't have three over-the-air networks now. You have six, and you have another 100 cable channels. If you ask people to supply data as to why the ownership rules should not be relaxed, there is a lot of silence.

Q: Can you clarify if Tribune got a waiver from the FCC on newspaper-TV cross-ownership situations it took on as a result of the Times-Mirror acquisition?

A: We're not in violation. We had licenses in Los Angeles, New York, and Hartford that are good -- to 2006 in Los Angeles and 2007 in New York and Hartford.

Q: Where do you want to buy TV stations?

A: What we've said to Wall Street is we want to add television stations in the top 30 markets. We would like to expand our national footprint, and we would like to double up in markets where we can, so we can compete better with Viacom, Fox (FOX), GE-NBC(GE), and Disney-ABC (GE).

Q: Is Tribune interested in seeking TV stations in other markets where it already has newspapers, such as Orlando, Baltimore, and West Palm Beach?

A: We think cross-ownership adds value, but it all depends on the individual properties in those markets. There are additional benefits in aggregating audience share -- in this case, across media -- that you can bring to the table. But we're competing with a consolidated cable industry and a consolidated radio industry. What companies are trying to do is to reaggregate audience share.

Q: In markets where Tribune already has a TV station, would it be interested in buying another TV station to form a duopoly? Any "triopoly" possibilities?

A: We would be interested in doubling up. As for triopolies, we haven't seen the FCC documents, so we don't know. We're only reading the same kinds of things you are regarding triopolies.

Q: In Hartford, Tribune owns The Hartford Courant and TV stations WTIC-Fox and WTXX-WB. Would you hang onto all those?

A: Hartford is an interesting market -- right between New York and Boston. It's the Hartford-New Haven market really. There's a lot of competition in Hartford, and we would want to hold onto all three properties -- the two TV stations and the newspaper.

Newspapers are not competing with [just] other newspapers. They're competing with all media. Anything we can do to cross-promote and cross-sell advertising or share content should enable us to compete better, and the consumer will be served better.

Q: Will the rule changes tilt you toward more TV or more newspapers?

A: It just gives us more flexibility in what we're able to do, within the strategy we've already laid out. There will probably be more television opportunities that come our way, but we're still interested in major-market newspapers where we can make sense of the purchase prices.

Q: Would you expect to see a rush of deals?

A: I don't think so. This will play out over time. Cable consolidated because there were lots and lots of small operators. Radio consolidated for the same reason. It wasn't a good business until it could be consolidated.

Q: How about your ability to buy?

A: We've got excellent debt capacity and a strong bond rating. We've got a multiple of debt-to-cash-flow-ratio that's very strong.

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