THE TRIBUNE COMPANY

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THE TRIBUNE COMPANY Powered By Docstoc
					The Tribune Company
          By:
      Rikin Shah
     Bridgett Kelly
     Dane Bildsten
                  Why Listen?
   There are things discussed in this presentation that
    are relevant to all areas of business
    – Retrenchment strategies
    – Conglomerate and concentric diversification
    – Application of Porter’s model of industry analysis
    – Porter’s generic competitive strategies
    – Financials and stock price analysis to determine the
      direction of the market
             Introduction
 Background Information
 Tribune Company History
 Corporate Governance
 Company Assets
 Industry Analysis
 Overview of the Newspaper Industry
 Strategic Challenges
             Introduction
 Financials
 Primary Competitors
 Alternatives
 Recommendations
 Video
                       Background
 Sam Zell
          On April 2, 2007, Sam Zell announced
           plans to buyout the company for $34 a
           share, totaling $8.2 billion
           – The company will go private if this buyout
              occurs
          As top management we will present
           strategic issues and concerns in relation to
           this possible buyout.

finanznachrichten.de
              Background Information
      The nation’s second largest media provider
      Headquarters in Chicago, IL
      NYSE: TRB
      Fortune 500: #388




tribune.com
                        History
 Tribune Company was founded in 1847.
 Chicago Tribune published its first issue on June
  10th.
 In 1861 the Tribune Company becomes a Illinois
  corporation
 The WGN radio station first went on the air in
  1924
    – First to broadcast the World Series, Indianapolis 500,
      The Kentucky Derby.
    – Broke new ground with microphones in the courtroom
      during the Scopes “monkey trial” of 1925.
              History Continued
   Established WGN-TV in Chicago, followed by WPIX-TV
    in New York as two of the first television stations in 1948.
   1981 the company purchased the Chicago Cubs
   1985 purchase of KTLA-TV in Los Angeles for $510
    million, made Tribune the only non-network company to
    own VHF stations in the country’s top three markets.
   The merger with The Times Mirror Company, completed
    in June 2000, effectively doubled the size of Tribune and
    secured its position among the top tier of major media
    companies.
                 Dennis J. FitzSimons
                             CEO
         Chairman from January 2004-Present
         CEO from 2003-Present
         President and COO from July 2001-Present
         Joined the Tribune Company in 1982 as a Sales
          Director for WGN-TV
         Prior to the Tribune Company FitzSimons was a
          sales director at Viacomm and a sales manager for
          Telerep Inc.

tribune.com
                Company Assets
       23 Television stations, including affiliates
        of Fox and ABC, and superstation WGN
       11 TV shows including South Park, and
        Soul Train
       WGN radio station
       15 Newspapers, including the Chicago
        Tribune, and Los Angeles Times
       Chicago Cubs and Wrigley Field

tribune.com
              Company Assets (2)
       Tribune Media Services
       Forsalebyowner.com
       Chicago Magazine
       Other various assets




tribune.com
Porter’s Competitive Forces
           Model
                             Potential
                             Entrants




                                    Threat
                             Industry
  Suppliers                                               Buyers
              Bargaining   Competitors       Bargaining
                Power                          Power

                             Rivalry
                                 Threat




                           Substitutes
    Porter’s Competitive Forces
               Model

   How high is the threat of new entrants in the
    newspaper industry?
       Porter’s Competitive Forces
                  Model
   Threat of new entrants is relatively low
    – Due to the declining market and relatively few
      competitors remaining which are using economies of
      scale to minimize costs
    – Product differentiation exists among firms
          The Daily Herald is aimed at a different market than the
           Chicago Tribune
    – Relatively high capital requirements to begin printing
      newspapers at a level where you can gain economies
      of scale
          Also will be difficult to steal away remaining customers
           from a larger firm
    Porter’s Competitive Forces
               Model

   What are substitutes to newspapers and do
    you think they are a threat?
    Porter’s Competitive Forces
               Model
   Threat of substitutes is extremely high
    – Substitutes such as the Internet (in terms of
      classified advertisements and blogs) are both
      major causes of the decline in the newspaper
      industry
     Porter’s Competitive Forces
                Model

   Do newspaper buyers have a high level of
    bargaining power?
    Porter’s Competitive Forces
               Model
   Bargaining power of buyers is high
    – Buyers have the power to drive down costs by
      either simply switching to another competitor
      or moving to a substitute (the internet)
          Many of the options on the internet are easier to use
           and free for buyers (such as classified
           advertisements and blogs)
    Porter’s Competitive Forces
               Model

   What do you think the bargaining power of
    suppliers is?
    Porter’s Competitive Forces
               Model
   Bargaining power of suppliers is relatively
    low
    – The major supplies for a newspaper is paper
      and ink, which are commodity type products
      with many suppliers selling them
    Porter’s Competitive Forces
               Model
   Rivalry is intensifying amongst the Tribune
    Co., Gannett, New York Time, and the Dow
    Jones Co. as the industry continues to
    decline.
Porter’s Generic Competitive
          Strategy
   Between cost leadership and differentiation.
                                                             Competitive Advantage
                                                           Lowest Cost    Differentiation
                             Narrow Target Broad Target




                                                                                             Tribune Co.
         Competitive Scope




                                                          Cost Leadership Differentiation



                                                           Cost Focus      Differentiation
                                                                           Focus
      The Newspaper Industy


   Is the circulation of newspapers increasing
    or decreasing?
                 Decline in Circulation




Washingtonpost.com
             The Newspaper Industry
      Overall, average daily circulation dropped
       by 2.8 percent from 2005 to 2006.
      Circulation for Sunday papers fell by 3.4
       percent from 2005 to 2006




http://www.washingtonpost.com/wp-dyn/content/article/2005/05/02/AR2005050201457.html
http://www.nytimes.com/2006/10/31/business/media/31paper.html?ref=business
http://www.chicagobusiness.com/cgi-bin/news.pl?id=24785
            The Newspaper Industry
       Decline in the newspaper market due to the
        internet
         – A large amount of decline particularly in the
           younger, more technologically adept market
         – “the circulation of English-language papers in
           the United States has dropped by 11% since
           1990, and that's while the population has
           increased”

http://www.fool.com/investing/small-cap/2004/12/31/the-future-of-newspapers.aspx
forbes.com
              The Newspaper Industry
          Companies such as Google have realized that they
           are a media company not just a tech company
           – They have taken the advent of the search to classified
              advertisements, “ripping out the commercial heart of
              the newspaper industry .”
          Newspapers have been “dumbing-down its content
           – For example, USA Today reported what secretary of
              state Colin Powell ate for dinner.



forbes.com
http://www.fool.com/investing/small-cap/2004/12/31/the-future-of-newspapers.aspx
              The Newspaper Industry
          The large increase of internet blogs has had
           an effect on the newspaper industry
           – This may be a possible contributor to the
              “dumbing-down” of newspapers.




http://www.fool.com/investing/small-cap/2004/12/31/the-future-of-newspapers.aspx
Marginalrevolution.com
              The Newspaper Industry
          The large increase of internet blogs has had
           an effect on the newspaper industry
           – Many blogs are written by serious, thoughtful
              people with a lot of information and things to
              think about.
                   Tyler Crown (of marginalrevolution.com) predicts,
                    “mainstream newspapers will become less
                    intellectual in their coverage, while (and because)
                    niche options expand dramatically."

http://www.fool.com/investing/small-cap/2004/12/31/the-future-of-newspapers.aspx
Marginalrevolution.com
                  Tribune Co. Strategic
                       Challenges
         Is a public company with no controlling
          shareholder
          – The problem here is that the current organization of
            the company no longer works.
          – There is the public market (wall street) that only
            cares about ROI
          – Then there is the “public good” that newspapers
            serve by professionally gathering information and
            reporting it to their communities
                 Meeting both publics demands are no longer viable due
                  to the decline in the market due to substitutes of
                  newspapers (internet).
nytimes.com
                  Tribune Co. Strategic
                       Challenges
         Lower profit margins in comparison to
          companies such as Gannett.
           – This affects ROI and means change is strategy
              is needed sooner (Gannett is still seeing sizable
              profits, but growth has came to a bumpy
              decline).
         Advertising revenues falling (classified ads)
          at a alarming rate– 7.2% in August 2007
          compared to August 2006.
editorandpublisher.com
nytimes.com
         Tribune Co. Strategic
              Challenges
   Falling revenues, profits and increasing
    costs date back to the early 2000s
    – There was some growth exhibited around 2003,
      which closely parallels the growth in the
      economy after the recession.
   Declining circulation of newspapers due to
    the internet
                   Financials
       Company Type Public (NYSE: TRB)
       Fiscal Year-End December2006
       Sales (mil.) $5,517.7
       1-Year Sales Growth (1.4%)
       2006 Net Income (mil.) $594.0
       1-Year Net Income Growth11.1%
       2006 Employees 21,000
       1-Year Employee Growth (6.3%)
hoovers.com
             Tribune Co. Income
                  Statement

Income Statement

PERIOD ENDING      31-Dec-06    25-Dec-05    26-Dec-04
Total Revenue      5,517,708    5,595,617    5,726,247
Cost of Revenue             1
                     2,736,41    2,736,998     2,708,394


Gross Profit       2,781,297    2,858,619    3,017,853


Net Income          593,995      534,689      555,536
    Tribune Co. Balance Sheet
P ERIOD ENDING               31-Dec-06     25-Dec-05    26-Dec-04

Assets

Total Assets                13,400,772   14,546,242    14,168,196


Total Current Liabilities    2,546,714    1,446,658     1,370,460

Total Liabilities            9,081,156    7,820,691     7,331,352


Net Tangible Assets         ($4,658,835) ($2,670,690) ($2,148,463)
        Top Competitors
 Dow Jones
 Gannett
 New York Times
Stock Prices For Last 5 Years
                          Financials
                        TRB        DJ       GCI       NYT      Industry
Market Cap:             3.53B     5.12B    10.14B    2.78B      1.61B
Employees:              21,000    7,200    48,675    11,585      7.2K
Qtrly Rev Growth
    (yoy):              -6.8%     16.2%    -3.4%     -3.7%       .8%
Revenue (ttm):          5.37B     1.93B    7.96B     3.25B      1.56B
Gross Margin (ttm):    49.91%    62.24%    44.55%    54.12%    49.25%
EBITDA (ttm):           1.24B    263.38M   2.22B    493.02M    277.79M
Oper Margins (ttm):    18.69%     8.44%    24.30%    10.25%    17.80%
Net Income (ttm):      443.62M   112.77M   1.12B    -610.38M   122.44M
EPS (ttm):              1.771     4.033    5.067     -3.424      1.77
P/E (ttm):              16.79     14.78     8l59      N/A       14.19
PEG (5 yr expected):     3.03     3.15      2.29      4.71       2.98
P/S (ttm):               .66      2.65      1.30      .87        1.28
                    Competitor Strategies
         New York Times
           – Revenues have been declining and offers for
              acquisition by other firms have been made,
              including Echostar Communications Corp.
                   CEO has stated multiple times it has no intentions of
                    selling to a private buyer.
           – Is attempted to attract younger readers
               Teamed up with Facebook's ad system, which

                allows users to learn about content from the
                company's newspapers through word of mouth.
editorandpublisher.com
reuters.com
marketwatch.com
                    Competitor Strategies
         New York Times
           – Partnered with Monster.com
           – Stated that the online business will become their
              main business in the near future
                   Currently nytimes.com is the most visited newspaper
                    website with 13 million users
           – Reduced their newspaper size by 1.5 inches to
             reduce paper costs by $10 million per year
           – Subsidiary Boston Globe outsourced many jobs to
             India
inhome.rediff.com
editorandpublisher.com
iwantmedia.com
                 Competitor Strategies
         Dow Jones
           – Acquired by Rupert Murdoch for $5.6 billion
               Murdoch is making plans to cut $100 million costs

               Many of these costs may be through job cuts

           – Murdoch stated that he plans to increase
             revenues through growth of its products and
             services including growth on the internet


bloomberg.com
guardian.co.uk
                  Competitor Strategies
         Gannett
           – Sustaining profits due to higher margins, but incapable
             of much growth due to declining market
           – CEO Craig Dubow stated the company is not for sale
             on August 2007.
           – Formed a joint venture with the Tribune Co. to publish
             and syndicate the weekly edition of USA Today abroad.
           – Cut newspaper size to 48” (from 52”) and is
             considering cutting the size to 44” and reducing the
             width from 12” to 11”

editorandpublisher.com
                 Alternatives & Trends
       Conglomerate diversification into other markets
         – The Washington Post is experiencing large growth from
            its Kaplan subsidiary (a provider of educational and
            career services)
       Retrenchment
         – Going private (sell-out strategy)
         – Many large newspaper dominated media companies are
            looking for investors to going private
                This includes companies such as the tribune company and
                 Dow Jones & Co.

nytimes.com
http://www.fool.com/investing/general/2004/04/15/more-than-a-newspaper.aspx
         Alternatives & Trends
   Sell the company to a single owner and go
    private?
    – Currently, Sam Zell is offering to purchase the
      company
   How far to expand to the internet?
    – Careerbuilder
    – Autotrader
 Cut the size of the paper to cut costs.
 Outsource jobs to cut costs.
 Divestment
               Alternatives & Trends
    Expansion to international markets, where
     the newspaper industry is still experiencing
     growth
    Create searchable advertisement pages
        – For example, Gannett (the nations largest media
             company jointly owns careerbuilder.com)
              *note: Many major newspaper companies have already tried
                joint-venture options and have failed.


forbes.com
                      Issues to Consider
         Expansion to the Internet is limited
           – Companies want to better serve the needs of their
             customers, to create stronger richer relationships
           – People want professional, intellectual material but
             expect the information on the internet to be free
           – A conundrum exists because it is unclear how to
             make decent money from this
         If the size of newspapers is decreased the
          readers may react negatively to this

http://media.guardian.co.uk/newmedia/story/0,,1763996,00.html
          Issues to Consider
 Conglomerate diversification is always an option
  but how far away from their expertise can a
  newspaper company go?
 If jobs are outsourced to another country will this
  bring negative publicity to the company?
 Is is possible to attract newer readers through
  applications such as Facebook or is this the
  entirely wrong market?
Recommendations?
          SWOT Analysis
 What are the Tribune Company’s internal
  strengths?
 What are the Tribune Company’s internal
  weaknesses?
 What are the Tribune Company’s external
  opportunities?
 What are the Tribune Company’s external
  threats?
              SWOT Analysis
   Strengths
    – Economies of scale
    – Good cost control
        Second highest net income in 2006
             SWOT Analysis
   Weaknesses
    – Lower profit margins than many competitors
    – No controlling shareholder
             SWOT Analysis
   Opportunities
    – Internet market is growing in many areas where
      newspapers derive there profits
    – Many of the jobs done here are done for
      cheaper in other countries
              SWOT Analysis
   Threats
    – Advertising revenues falling (classified ads) at
      a alarming rate– 6.1% in August 2007
      compared to August 2006.
    – People wanting good information for free and
      believe that they are finding this on the internet
       Strategy Formulation

   What type of business strategies is the
    Tribune Co. using?
            Strategy Formulation
   Business Strategy
    – Joint Venture with Gannett for international expansion
      of the USA Today magazine
    – Between cost leadership and differentiation
                                                             Competitive Advantage
                                                           Lower Cost     Differentiation
                             Narrow Target Broad Target




                                                                                             Tribune Co.
         Competitive Scope




                                                          Cost Leadership Differentiation



                                                           Cost Focus      Differentiation
                                                                           Focus
      Strategy Formulation


   What type of corporate strategy is the
    Tribune Co. using?
          Strategy Formulation
   Corporate Strategy
    – Retrenchment strategy
        Looking for to sell out to a private investor and

         possibly divest from some of its subsidiaries
     Strategy Implementation


   What type of corporate structure does the
    Tribune Co. currently have?
      Strategy Implementation
   Corporate Structure
    – The Tribune Co. operates in a conglomerate
      structure with many unrelated subsidiaries
      operating under one corporate umbrella.
                Videos
 http://video.google.com/videoplay?docid=-
  6875316948019238393
 http://video.google.com/videoplay?docid=3
  597840118691677472
             Conclusion
 Background information
 History
 Corporate Governance
 Company Assets
 Industry Analysis
 Overview of the Newspaper Industry
 Tribune Company Strategic Challenges
             Conclusion
 Financials
 Primary Competitors
 Alternatives
 Recommendations
 Video
     Why This Was Relevant..
   If nothing else you should now:
    – Know a little about newspaper industry and the
      direction it is heading
    – You should also be able to apply the following
      to industries you will work in:
          Retrenchment strategies
          Conglomerate and concentric diversification
          Application of Porter’s model of industry analysis
          Porter’s generic competitive strategies
          Financials and stock price analysis to determine the
           direction of the market
                Resources
1.   http://www.tribune.com/
2.   http://www.tribune.com/investors/governance/in
     dex.html
3.   http://www.tribune.com/about/history.html
4.   http://en.wikipedia.org/wiki/Tribune_Company
5.   http://query.nytimes.com/gst/fullpage.html?res=
     9E03E3DA103BF937A25750C0A9669C8B63&
     sec=&spon=&pagewanted=print
6.   http://www.hoovers.com/tribune/--
     ID__11508,ticker__TRB--/free-co-fin-
     factsheet.xhtml
                Resources
7.  http://finance.google.com/finance?q=NYSE:TR
    B
8. http://finance.yahoo.com/q?s=trb
9. http://www.hoovers.com/mcclatchy-company/--
    ID__10971--/free-co-factsheet.xhtml
10. http://www.newspaper-industry.org/search.cfm
11. http://online.wsj.com/public/article/SB11859520
    6198884573.html
12. http://www.nytimes.com/2006/10/01/business/y
    ourmoney/01frenzy.html?pagewanted=2&_r=3
    &ref=media
                Resources
13. http://www.forbes.com/columnists/
    2006/05/23/eppy-awards-
    newspapers_cx_pm_0523notes.html
14. http://www.fool.com/investing/small-
    cap/2004/12/31/the-future-of-newspapers.aspx
15. http://www.fool.com/investing/general/2004/10/
    13/hard-times.aspx
16. http://www.fool.com/investing/general/2003/11/
    05/newspapers-on-a-roll.aspx
17. http://www.fool.com/investing/general/2004/04/
    15/more-than-a-newspaper.aspx
                Resources
18. http://www.fool.com/investing/general/
    2004/07/13/a-pageturner-at-the-times.aspx
19. http://media.guardian.co.uk/newmedia/story/0,,1
    763996,00.html
20. http://www.editorandpublisher.com/eandp/news/
    article_display.jsp?vnu_content_id=1003644086
21. http://www.finanznachrichten.de/nachrichten-
    2007-08/artikel-8862667.asp
               Resources
22. http://www.marketwatch.com/news/story/more-
    newspaper-takeovers-unlikely-
    follow/story.aspx?guid=%7B0E1F3D83%2D68
    C7%2D4A95%2D8291%2D9041A1AA1E09%
    7D&dist=buscom
23. http://www.reuters.com/article/mergersNews/
    idUSN1022651920070810
24. http://www.bloomberg.com/apps/
    news?pid=20601087&sid=aGDSqNYy2nGg

				
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