Another quarter, another drop in revenue for the company's publishing unit, which includes the LAT and is in the process of being spun off into corporate purgatory. For the April-June quarter the overall decline was 4 percent compared with a year earlier, to $470 million. But check out the categories: Retail advertising (supermarkets, department stores and such) down 8 percent, national advertising (banks, cell phones) down 8 percent, pre-print ads down 2 percent, classified down 5 percent. Circulation revenue eked out a $3 million gain, helped along by online subscriptions. Meanwhile, operating expenses fell 14 percent, in part because staffing levels have been reduced. So in summary they have less money coming in and fewer resources to produce the product. Is it any surprise that valuations for newspaper properties are so low? Tribune says that its spinoff won't be complete until the middle of next year, so it's conceivable that somebody might come along between now and then with an offer that the company can't refuse. But the issue goes beyond price - any sale would involve all sorts of tax complications and would not include the most valuable parts of the publishing portfolio, such as real estate. Such a deal, eh? There's also some question as to the consequences of the split - specifically, whether a sale would be allowable for a certain period following the spinoff's completion. That could delay any ownership change for another few years. One other possibility that's not gotten much attention: Another bankruptcy filing, with the remaining assets from the spinoff to be auctioned off to goodness knows who. The Tribune situation was one of the topics during this week's Business Update on KPCC:
Steve Julian: Speaking of companies, does anyone want to buy the L.A. Times?
Mark Lacter: The answer is yes - most recently, the controlling owner of the Dodgers, Mark Walter, said he was interested in both the Times and the Chicago Tribune (though there's no way to know whether there are actual discussions taking place). You also have several local groups, including one that involves billionaire Eli Broad, that have been interested to one degree or another. But what was thought would be a straightforward auction process has turned very complicated. It's now to the point where the Tribune board has decided spin off the papers into a separate business, and that process could preclude any sale at least into next year and maybe longer.
Julian: So, it's Limbo-land for the Times for who knows how long.
Lacter: Steve, it's not that Tribune really wants to keep the newspapers. But, selling them off presents huge tax problems. Also, there are assets that the potential buyers thought would be part of the package - assets that include real estate - that Tribune wants to hold onto. So, what's left to sell are just the newspapers themselves, and frankly, they're among the least valuable properties.
Julian: Now, last week came word that the billionaire Koch brothers, who were believed to be interested in the Tribune properties, decided not to pursue a deal...
Lacter: ...that's right, they don't consider the Times or the other dailies to be economically viable. You might recall a bit of an outcry over the prospect of having the Kochs, who are staunch conservatives, becoming the owners of these papers. So, they're out of the picture. But for the L.A. Times, it's really the worst of all worlds: no new owner and no vision for recasting the paper, at least in the near term.