Raspy from days on the phone with irate investors, Tribune Co. Chief Executive John W. Madigan is puzzled. From his perch atop the company's neo-Gothic Chicago headquarters, it seems just good sense to unite Tribune Co. and Times-Mirror Co. into a continent-spanning media titan. Yet investors, who sank Tribune stock 17% on the Mar. 13 merger news--and 38% so far this year--don't understand. "We expected shifting [of stock] here and there, and we got it--more than I expected," Madigan admits. "It's transforming. It needs explanation."
And how. Investors already cool to newspaper stocks don't see how forging a bigger Old Media stake by adding the Los Angeles Times, Newsday on Long Island, The Sun in Baltimore, and other newspapers will pay off. They fear betting on Madigan's "national footprint" in newspapers is as dumb as expecting Tribune's long-suffering Cubs to win the World Series.
OFFLINE QUESTIONS. In the short-term, they may be right. Adding two slow-growth ink-stained businesses together is unlikly to boost revenues any faster than the two might have grown separately. But Madigan's longer-range vision for the $8 billion deal--a newspaper powerhouse that feeds data to a sprawling TV, radio, and Web-site network--is entrancing. He'll control enormous content and be in everything from newsprint to magazines to broadcasting and the Net. "It's a much better platform going into the online world," says analyst Mark Zadell of Bank of America.
Offline, the prospects may be more limited. The Trib will leap from regional to national status in print, but advertising gurus fear the deal may not generate even one more national ad than what the big-city papers already pull in. "I don't see how it's going to increase sales," says Jay Chiat, the former chairman of Chiat/Day ad agency, who now chairs Web distributor ScreamingMedia.com Inc.
Even locally, advertisers may not hawk their messages through package deals with the outfit's papers, magazines, Web sites, and broadcast outlets. "I don't believe it's going to offer that many advantages," says PentaCom's David C. Martin, who buys ads for DaimlerChrysler in North America.
Madigan, however, may have the savvy to link the past and future. Just last year, investors were so impressed by his moves away from print that they bid the stock price up to nearly $61 a share. His strategy ranged from taking stakes in America Online Inc. and hot Web sites to crafting a television empire that touches 75% of tuned-in households.
Madigan argues that he'll be able to connect Old and New Media with novel and profitable synergies. He already has Chicago Tribune and WGN-TV news staffers swapping information, and both sides feeding material to such Web sites as chicagotribune.com. Similar links could tie Newsday reporters to New York's WPIX-TV or Los Angeles Times staffers to KTLA-TV.
Madigan's plans so far remain vague, but one option may be to use these resources to build strong Web sites in each city he serves. Today, 3.4 million people a month view Trib sites and Times-Mirror's combined. The challenge: Expand that number, and make it pay off. If Madigan can do that successfully, he could prove his Wall Street critics wrong.
Of course, bridging the Old and New will be an enormous job. For Madigan, the future may have to come quickly. While Cubs fans wait decades for their team to improve, investors aren't so patient.