Not Just Ink Stained WretchesRichard A. Melcher
Stolid, imposing, insular. Since Colonel Robert R. McCormick put up his gothic pile on Chicago's Michigan Avenue nearly 75 years ago, the Tribune Tower has been a faithful reflection of this legendary newspaperman and the company that he built. Even today, to visit Tribune Co. Chairman Charles T. Brumback, you take a private elevator to the 24th floor, where he has a hushed suite of offices under hand-carved ceilings.
Step into the newsroom of the Chicago Tribune several floors below Brumback's perch, though, and you'll see a different, thoroughly modern Tribune Co. There, editors are electronically converting newspaper articles to be distributed on Chicago Online, a data network owned by Tribune and affiliated with America Online Inc. And reporters are using a remote-controlled TV camera to tape sound bites for ChicagoLand Television News (CLTV), a local cable channel also owned by Tribune.
The newsroom and executive suite may seem worlds apart. But Tribune's multimedia minions are taking their orders from the man upstairs. And Brumback, who gained a take-no-prisoners reputation after rancorous clashes with newspaper unions at the Tribune and the New York Daily News, is calling for radical change.
While Tribune used to be a classic publishing and broadcasting company, it is becoming one of America's most aggressive multimedia players. Once reliant on papers and TV stations, it now wants to distribute its products--everything from news and country-and-western TV shows to children's books--via CD-ROM, on-line computer services, and interactive cable. "People are going to want more" than newspapers and TV shows, says Brumback. "Computers and two-way cable systems will make it easier to get more."
To reposition his company for this multimedia world, Brumback has gone on a deal spree. First, he unloaded the long-troubled Daily News on the late press lord Robert Maxwell in 1991. Then, last year, Brumback sold 41% of Tribune's volatile newsprint operation to the public. Flush with cash from that sale and $100 million in annual cash flow from Tribune's core businesses, Brumback bought stakes in America Online and the Television Food Network. He also started the CLTV channel and is launching a country-music production company, The Road (table). Finally, Brumback spent $197 million for three publishers: Contemporary Books, Wright Group, and Compton's Multimedia.
MANDATE TO CHANGE. With media, technology, and telephone companies striking all sorts of new alliances, Tribune is staking its claim as a premier software supplier. That's a logical extension of its history as a provider of news and information to local markets. But don't mistake Tribune's localism for parochialism: Harvey Plotnick, who runs Tribune's book division, says Brumback has exhorted him to pursue markets such as China and eventually Cuba.
Brumback, who is 65 and will retire next year, brings the same intensity to multimedia that he brought to labor talks. Currently, Tribune gets 65% of its revenues--which were $1.9 billion in 1993--from its six newspapers, with most of the rest coming from its eight TV and six radio stations. Within five years, though, Brumback wants new ventures to kick in at least 25% of Tribune's operating profits, which were $356 million in 1993. "He's made crystal clear we have to change," says Plotnick.
On the surface, Tribune wouldn't seem to be under much pressure to do so. Measured by return on equity, the company has outpaced most of its publishing and broadcasting peers: 19.5% in 1993, vs. an industry average of 13.1%. What's more, its newspapers have rebounded from the recession and now have better prospects than at any time since 1989, says John W. Madigan, head of the publishing unit. Still, Brumback believes Tribune's core businesses are past their prime: "Newspapers and TV will do O.K.," he says, "but they will not grow at as significant rates as in the 1970s and 1980s."
To replace those growth engines, Brumback is lining up as many new distribution channels as he can for Tribune's products. In addition to books and on-line services, he is looking at software companies, entertainment programmers, and direct-mail outfits. And he is pursuing a raft of joint ventures with companies such as Time Warner Inc. Tribune will provide interactive news programming for Time Warner's cable system in Orlando. And Tribune's powerful independent TV stations will form the linchpin of Time Warner's proposed fifth broadcast network.
Brumback's strategy carries plenty of risks. First, Tribune must balance the needs of its traditional businesses with those of its multimedia ventures. The newspaper industry "will require more care and feeding over the next 5 to 10 years to preempt a lot of folks who will take swipes at it," says Eric Philo, a media analyst at Goldman, Sachs & Co. Those could come from new information providers such as telephone companies. Or even newly aggressive papers: The archrival Chicago Sun-Times was recently acquired by wealthy Canadian media mogul Conrad Black.
Moreover, Brumback faces a tough sell in spreading his newfangled vision within old-line Tribune. Much of his strategy is predicated on staffers' collaborating across divisional lines to develop new products. Plotnick, for example, says the Wright Group, a leader in the "whole language" technique of children's teaching, will harness Compton's technical expertise to put out CD-ROM versions of its publications. These kinds of products, he says, could propel the book unit from $82 million in sales to several hundred million.
But such collaboration is largely unknown at Tribune. Some journalists balk even at the company's low-key efforts to pool reporting resources among its newspapers. More generally, the journalists worry that Tribune's growing focus on electronic information and entertainment will devalue their traditional roles. "I don't think journalism is a big item on the agenda," says James Squires, former editor of the Tribune who wrote Read All About It, a harsh 1993 analysis of how big media companies erode journalistic values.
RADIO STALWARTS. Brumback's multi-media bets better pay off, since insiders say his foray is cutting Tribune's operating income by 10%. Operating income did jump 33% in 1993, from $268 million to $356 million, but that's mostly because Tribune reported lower losses from its newsprint unit after selling off part of it. What's more, rivals say Brumback's $200 million investment in books was excessive. "The proof of the pudding is two to four years away," says Philo.
For their part, Tribune executives insist they aren't dazzled by multimedia hype. "We've got to keep the company in balance," says James C. Dowdle, president of Tribune's broadcasting arm. "We can't get totally enamored with the future of the superhighway." To that end, he recently acquired two plain-vanilla radio stations in Denver and TV stations in Boston and Philadelphia. And Tribune is prowling for still more stations and newspapers. Dowdle, along with Madigan, is a prime candidate to succeed Brumback.
For now, though, Brumback is still very much in charge. And he is downright evangelical about Tribune's multimedia future. To spread his message, Brumback has hosted more than 500 Tribune executives at a series of management retreats, dubbed Camp Tribune. He has circulated laminated cards bearing a message about Tribune's multimedia goals. And he is even tying executive compensation to the number of new products developed.
Brumback's campaign has met with some success. Before CLTV went on the air a year ago, for example, its general manager, Robert Gremillion, met with Jack Fuller, then the editor of the Tribune, to discuss how the newspaper could possibly contribute to the cable channel. Now, the two executives say, Tribune reporters appear regularly on CLTV and share office space.
Some of Brumback's urgency comes from his looming retirement. But he also chafes at opportunities he says Tribune missed because it was distracted by the battles at the Tribune and Daily News. As an entertainment programmer and TV-station group owner, Brumback figures that he could have launched a fourth television network. But Rupert Murdoch trumped him with his Fox Broadcasting Co. "We were too busy screwing around in New York to do it," Brumback snaps.
Now, Tribune must pin its hopes on Time Warner's WB Network. The company has an option to buy 20% of the network. But both companies face tough competition from a rival network backed by Viacom Inc.'s Paramount Communications. And Tribune will carry WB on its flagship Chicago station, WGN, only three nights a week, so that it can continue to air games of the Chicago Cubs, which it has owned since 1981.
For all the changes Brumback is making, some veteran Tribune observers argue he is only taking McCormick's legacy to its logical conclusion. "Colonel McCormick was ultraconservative politically," says Newton N. Minow, a Tribune director and former chairman of the Federal Communications Commission, "but he was willing to get us into radio and TV, which was highly progressive." If Brumback has his way, McCormick's gothic Tower will be the last old-fashioned vestige at a defiantly modern multimedia giant.
...AND THEY PUBLISH NEWSPAPERS, TOO
Key multimedia investments of Tribune Co.
EDUCATION Spent $197 million for three publishers: Compton's Multimedia, Contemporary Books, and Wright Group. Total 1993 revenues: $82 million
TELEVISION FOOD NETWORK 20% owner of cable food network. Investment: $10 million*
CHICAGOLAND TELEVISION NEWS Owns 24-hour news channel. Investment: $10 million*
AMERICA ONLINE 11% stake in information service. Investment: $8.5 million. Also owns Chicago Online
THE ROAD Will produce country music shows for TV and home video this fall
WB NETWORK Linking its eight TV stations to Time Warner's fifth network
* Estimates DATA: COMPANY REPORTS, BUSINESS WEEK
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