So much for niceties. The Tribune CEO, who arrived on the journalistic scene less than a year ago (seems a lot longer), laid out his mostly unflattering view of journalists and newspapers during the Quadrangle Group's recent media conference in NY. 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. Zell quickly identified the arrogance that has prevailed in many large newsrooms around the country and that no doubt contributed to the industry's implosion. He was questioned by Condé Nast Portfolio editor in chief Joanne Lipman. Some edited excerpts:

JOANNE LIPMAN: Everybody here wants to know the same thing, which is: If you knew then what you know now, would you have made this deal?

SAM ZELL: Well, obviously, the newspaper business and advertising, generally, has gone off a cliff. And it didn't go off a cliff in October or September. It went off the cliff in January. When we looked at the historical numbers, we saw an average erosion of about 3 percent. At the time we underwrote the transaction, we used a 6 percent erosion. And the last time I checked, 19 percent erosion is bigger than 6.
And so it's just a whole new ballgame. Just like if you asked the guy would you have stepped on the tracks if you'd known the train was coming, the answer is no. But once the train is here, you've got to deal with it.

JOANNE: Is there a place for the newspaper?

SAM: I think the answer is certainly, but the answer to whether the conventional approach to the newspaper business that has been the model since the beginning of time, I could tell you unequivocally that model is a failure, or that model has passed its time of relevance. The newspaper business basically grew up as a monopoly, and like every other monopoly, it built processes and approaches that reflected its monopoly status. One example was the rate card you give to an advertiser in order for that person to determine how he would like to participate. You needed a Ph.D. in order to understand the rate card. In the days where the customer had no options, you could give him the rate card and say, "Take it or leave it." But today, that doesn't work.

[CUTI

There's a role for newspapers, providing the newspapers understand what that role is and are able to adjust to it. So, for example, most of my newspapers do not have a comparative advantage on international news. I'm not going to compete with Bloomberg or Reuters to, in effect, secure the latest international news. On the other hand, I've got staff and people and knowledge locally that nobody else has. So…and when you do focus groups with people and you ask them, "What do you want from your newspaper?" they tell you, "local, local, local." And they say it over and over again, "I want to know what's going on locally because that's the only thing I can't find from 10 other sources."

JOANNE: So you raise a couple of questions there. I mean, one is simply the staffing issue. And it's interesting, when you came in a year ago, the L.A. Times, you went to the L.A. Times and said, "I have no intention of being the captain of the Titanic," and you also said that you didn't believe in kind of cutting your way to success. You, more than the other of your competitive set, have really made very, very deep cuts and particularly among the journalists. So how does that gel with providing the reader more and building on the papers to create a model of success?

SAM: Like everything else, we're dealing with process, we're dealing with changing methodologies of the way things were done before. If this gentleman over here is a reporter and he calls in and says, "I've got a story and you want to put it up on the Web," he talks to one copywriter, they put it all together, it's on the Web in 10 minutes. But if that same story with the same facts is going in the newspaper, then it goes to the copywriter, the section editor, the page editor, I mean, it goes to everybody. Okay? And you wonder why the newspapers can't financially compete.

JOANNE: Journalists believe that there is a reader service and a public service, that there's a public good…

SAM: And 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.

JOANNE: It takes a lot of resources to pour into investigative reporting…and this is not just "How much did Sarah Palin spend on her wardrobe?" but serious investigative reporting that takes…could take months at a time that could take you down some dark alleyways that are not going to pay off. Is there a place for that? Is there a way to fund that, or are newspapers not the place for funding that any longer?

SAM: Well, you know, you were just talking to me a minute ago about the precipitous decline in advertising revenue. So the answer is that every piece of a newspaper has to be economically evaluated, because, in the end, we're not an eleemosynary institution, even though most of the newspapers have been run as one. I mean, how would I not challenge every cost, every decision, and basically look at the cost benefit, just like our government is supposed to do when it raises our taxes? I got to look at the cost benefit and say, "What's the benefit? What's the cost? Does this make sense?"

JOANNE: So at the L.A. Times, for example, which under a previous editor before you owned it won quite a few Pulitzer Prizes and really put a lot of effort into pieces that may or may not pay off, does that no longer make sense in the business model that we're talking about?

SAM: I haven't figured out how to cash in a Pulitzer Prize. There was a day when a newspaper put "Winner of Pulitzer Prize" on the front page, and people flocked to read the Pulitzer Prize story. Unfortunately, I'm not sure that that's the case today But I also think that there are scale issues. In other words, I think that if the goal is a Pulitzer, it's in the wrong place. In other words, we're not in the business of, in effect, underwriting writers for the future. We're a business that, in effect, has a bottom line. So as far as we're concerned, I think Pulitzers are terrific, but Pulitzers should be the cream on the top of the coffee. They shouldn't be the grounds. And I think there are a lot of scenarios in the newspaper industry where the entire focus is on Pulitzers. The entire focus is on becoming an international correspondent. I mean, I know that because our newspaper sent somebody to Kabul to cover the "Afghan Idol Show." Now, I know Idol is the No. 1 TV program in the world, but do my readers really want a firsthand report on what this broad looked like who won the "Afghan Idol" Show"? Is that news?