INTERACTIVE: TRIBUNE'S VISION GOES WELL BEYOND ONLINE NEWSPAPERS: FROM SHOPPING TO SEARCHING, GIANT GETS STRONGER

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More than any other newspaper publisher, Tribune Co.'s tentacles on the Internet stretch far beyond its core business.

In just four years, the company best known for owning the Chicago Tribune, WGN-TV and the Chicago Cubs has spent $125 million to launch or invest in more than 20 online properties. Its roster of investments ranges from local online service Digital City to America Online to e-mail service Mercury Mail to online grocery shopper Peapod.

LEADING EDGE

What does all of this have to do with newspapers and TV? Not much, on the surface. But Tribune wants to be on the leading edge of emerging media, no matter how technology, commerce and usage patterns shake out.

"Our motto is to be nimble and quick," said Tim Landon, VP-strategy and development for Tribune Publishing, explaining the company's light-speed approach to the Internet.

Tribune maintains two separate new-media initiatives. Tribune Ventures, a unit formed to manage strategic investments in emerging media, has invested $100 million in AOL, Digital City, Mercury Mail, Peapod, Open Market, CheckFree Corp. and others.

Tribune Publishing, meanwhile, has poured an additional $25 million since 1995 into partnerships and wholly owned properties, the latter of which include BlackVoices on AOL and the Web, online versions of its four newspapers and exclusive rights to Digital City in its four newspaper markets

Digital City, which is 20% owned by Tribune and 80% owned by AOL, offers local news, information and entertainment, with plans to serve more than 100 towns and cities.

CAREER CHOICE

Tribune Publishing also is an owner of CareerPath, an employment information service formed in October 1995 with The Boston Globe, Los Angeles Times, The New York Times, San Jose Mercury News and The Washington Post.

It has partnered with Knight-Ridder on Destination Florida, an AOL- and Web-based tourism information service, and with Cox Communications, Knight-Ridder and Advance Publications on a real estate listings service called Interealty, a proprietary service for real estate agents.

"Tribune Co. has been a pioneer. It has a very aggressive new-media strategy to diversify its business and extend its brand across a variety of distribution channels," said Randy Bennett, VP-new media for the Newspaper Association of America.

"We think the Internet is a whole new medium, and we want to be there first. That's the way you are able to learn the most and learn it at the least cost," said Donn Davis, president of Tribune Ventures. "It's easier to fail early. We don't see our interactive businesses merely as an extension of what we are doing [in other media]. It's partly an extension, but some of them are entirely new businesses."

Gaining knowledge about new media is key. Said Mr. Landon, "Our primary reasoning is that we want to invest in companies that can help us learn and grow in the new-media world, because they have the knowledge, people, technology or distribution that we think has some breakthrough quality. We want to get as much sharing and learning between that business and our operations."

For example, the company's investment in Peapod, of which it now owns 13%, has given Tribune executives insight into how retailing is poised to change and how advertisers are responding to online shopping.

DISTRIBUTION LESSON

Its 7% stake in Excite, an Internet search company, has given executives firsthand experience with how content distribution is handled on the Internet and has offered the company a means to develop relationships with others in Silicon Valley.

With CheckFree, an electronic payment company, and Open Market, a transaction software company, Mr. Davis and his colleagues are learning about electronic commerce.

"There will be a merger of online content and commerce, so being involved in things like Open Market and CheckFree is very positive," said Bill Bass, director of media strategies at Forrester Research. "The same goes for Peapod. A fairly significant chunk of newspaper advertising comes from grocery stores. So if online becomes an important channel for them to reach consumers, the Tribune as a newspaper will be very well suited to say `we know all about that, we have a solution.' "

SEEKING RETURNS

There's another reason for Tribune's aggressive strategy.

"There are only three things that matter to public companies," said Mr. Davis. "Returns, returns, returns. That's why we are so aggressive in interactive services. We think it will provide better shareholder returns than other strategies."

Mr. Davis said Tribune Ventures' $100 million investment in Internet properties is worth $300 million to $350 million today.

Media analysts and newspaper industry insiders applaud Tribune for its proactive stance regarding the Internet. But they are quick to point out the risks.

"There is nothing [in Tribune's new-media lineup] that makes no sense, except that something might crater," said Mr. Bass. "All of these intellectually might make sense, but whether they will pay off financially in the long run is a question."

To Tribune's credit, Mr. Bass points to its 2% stake in AOL as a good omen.

"Tribune made a great investment in AOL; it could just as easily have chosen Prodigy or CompuServe," he said. "It is in the right areas, but only time will tell if it has picked the right companies within those areas."

Others consider the variety of Tribune's Web portfolio to be somewhat curious.

"Tribune has been a leader in interactive investments since its investment in AOL in the early `90s," said Peter Krasilovsky, VP of new-media consultancy Arlen Communications. "It has invested in a wide range of products, plus it has its own home-grown products. But you wonder if some of the companies are synergistic with the others."

Tribune executives are not unaware of the risks, especially the Internet's threat of cannibalizing traditional media. But that is a key reason the company has been aggressive.

"We recognize at some point there will be a percentage of advertisers who just want to put their ad online," said Tribune Publishing's Mr. Landon. "We are determined if they place [a classified employment ad, for example,] only online, they will place it on CareerPath because they feel it is the best marketplace."

Taking risks in new media is not new for the Tribune. As if they had just emerged from the same media-training seminar, Tribune's new-media executives all are quick to point out that the company historically has never been one to shy from emerging technologies, such as radio, TV and cable TV.

SECOND BIGGEST IN STATIONS

Tribune is the second-largest TV station owner in the U.S. Its recent $1.1 billion purchase of Renaissance Communications brings its total of owned & operated TV stations to 16, for a 33% share of the nationwide audience.

It also owns WGN radio, WGN-TV, cable station CLTV and the Chicago Cubs baseball team.

"In the same way we embraced radio in the `20s, TV in the `40s and `50s and cable more recently, we believe the Internet is not going to be the CB radio of the `90s. It is a significant and profound media," Mr. Landon said.

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