Sam Zell is getting credit from his critics for telling it like it is in this interview with ¬†Cond√© Nast Portfolio at Quadrangle Group’s Foursquare media conference. The famously combative Tribune Co. CEO reinforces remarks he’s been making all year about treating newspapers like businesses. That means questioning everything from sales incentives to the importance of journalism prizes if they don’t contribute to the bottom line. Some nuggets:

I could tell you unequivocally that [the current newspaper] model is a failure, or that model has passed its time of relevance.

In the Tribune he took over, “every single newspaper had a cadre of salaried salesman. Now, you know, I’m just a businessman, but I’ve never seen any kind of a sales force that was effective if, in fact, they had no incentives.”

On home delivery economics: “If you go across the street and you buy a newspaper from a vendor, you will pay 50 cents. But if you get it home-delivered, which costs the company 10 times as much, you pay 30 cents…You try and make those numbers work, and it don’t make any sense.

Journalists are more than willing to tell you what they think you need to know. And to some extent, that’s a valid position, but I certainly don’t think it is the answer. And to the extent that you have journalists who are unwilling to listen and only want to talk, they really should give up journalism and become college professors.

If the goal is a Pulitzer, it’s in the wrong place. In other words, we’re not in the business of…underwriting writers for the future. We’re a business that…has a bottom line…I think Pulitzers are terrific, but Pulitzers should be the cream on the top of the coffee. They shouldn’t be the grounds…newsrooms have basically never recovered from Watergate, and everybody wants to be Woodward and Bernstein, and that’s the definition of success.

86 percent of the cost of the newspaper business is print, paper, distribution, and promotion. That’s untenable long-term and…short-term.

Mark Potts has been no Zell zealot, but he sees a lot of sensibility in the mogul’s remarks. “More so than a lot of people in the newspaper business, he’s dealing in a reality-based environment, not living in the past,” the recovering journalist writes. Newsosaur Alan Mutter, who’s also no Zell fan, largely agrees. And Mark Lacter of LA Observed, which has been a vehement Zell critic for his cost-cutting at the Los Angeles Times, applauds the CEO’s rationale. “Much of what Zell says is painful to read, but it would be a mistake to dismiss many of his views about the news business,” Lacter writes.

We were struck by Zell’s comments about the sales infrastructure he inherited. According to the CEO, Tribune Co.’s sales reps were effectively order-takers, competing with no one and holding a lifetime lock on their territories. In a harsh advertising environment, you wonder how any sales force can be competitive without incentives, particularly when their task is increasingly to sell low-margin online ads in high volume. Internet companies know that online ads require a fundamentally different compensation structure, a hungrier sales staff and a incentives that encourage reps to develop new business. It’s hard to believe that even a year ago, major newspapers were operating without those simple principles in place.

Speaking of Zell, we can’t help notice that it’s been more than two full months since the wonderfully snarky Tell Zell blog has posted an update. We’ve heard that management at the LA Times has recently been coming down on internal critics like a ton of bricks and we hope that the blog’s anonymous author, InkStainedRetch, is simply in hiding, waiting for another chance to ply his or her viciously eloquent talents at a future date.

Happy Thanksgiving to all our readers in the US!

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This entry was posted on Wednesday, November 26th, 2008 at 10:26 am and is filed under Advertising, BusinessModel, Journalism, NewMedia, Newspapers, OnlineMedia, Solutions. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

1 Comment

  1. November 26, 2008 @ 1:18 pm



    I have to take issue with Zell’s 86% figure, unless he’s counting newsroom, ad department and general management as all being part of the printing and distribution expense. In my experience, historically the total cost of newsprint, pressroom, mailroom, distribution and the circulation department was more or less equivalent to circulation revenue, which was about 25% of total revenue. In recent years, circ revenue fell while printing and distribution expenses rose, so today those costs are more like 30% of revenue (at smallish dailies). In a metro market paper, it might be 40% of revenue. If the place is profitable, that’s around 50% of expenses, not 86%.

    Posted by Martin Langeveld