Internet drives Tribune, Times Mirror deal

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News last week that Chicago-based Tribune Co. was to become parent to Times Mirror Corp. brought a spate of comparisons to the pending America Online-Time Warner deal. But as multimedia mergers go, the two couldn't be more different -- except where the Internet is concerned.

The AOL-Time Warner deal brings together two companies specializing in broad-based mass media properties. The proposed $5.9 billion Tribune Co.-Times Mirror merger will create a company that owns many disparate but powerful local brands, including 22 TV stations in markets such as Chicago, Los Angeles, and New York, as well as flagship newspapers the Chicago Tribune and Los Angeles Times.

But one thread common to the two deals is the Internet as driving force.

"It wouldn't be surprising if they went public with their Internet division. As it is, media consolidation is not particularly surprising anymore. But after Time Warner-AOL, everything seems like small potatoes," said Marissa Gluck, online advertising analyst with Jupiter Communications, adding, "this latest is much more of a local play than the other."

DOMINATE A MARKET

However, just because the deals are different doesn't diminish the potential value of the Tribune-Times Mirror combo. Tribune Co., largely through its Chicago holdings, has found that dominance in one market can be quite lucrative. If the deal is completed, Tribune Co. will begin to implement a similar strategy in Los Angeles, with its KTLA-TV station paired with the Times, and WPIX-TV, New York, paired with suburban New York's Newsday. Tribune Co. executives made it very clear that local Web-based information also would play a vital role in growing the merged company.

"Right now 14% of online advertising is local. But that is expected to rise to 24% in just a few years, which means one out of every four dollars spent on online advertising will be locally targeted, which isn't small potatoes," Ms. Gluck said.

In fact the national media portion of the combined companies, Times Mirror Magazines, may be one piece of the proposed acquisition that Tribune Co. finds expendable. Although still too early for such a decision, magazine publishing watchers immediately began chattering about who would be interested in taking the division off Tribune Co. Chairman and President-CEO John Madigan's hands.

"A lot of people have said that they would be willing to do that," said Mark Edmiston, partner with AdMedia Partners, New York. "It seems pretty clear that the Tribune Co. didn't buy a bunch of magazines and get some newspapers with them. So far, everything they've said indicates the magazines are not part of their strategic plan."

Times Mirror Magazines President Jason Klein did not dismiss the possibility of a sale of his division: "We're in the process of setting up meetings with Tribune executives now," he said. "They have not made their minds up on magazines yet. It's going to be a mutual discussion that takes place. I'm optimistic it will work out for Times Mirror Magazines."

MAGAZINES UNIT SUITORS

Speculation about likely buyers for Times Mirror Magazines, expected to fetch upwards of $200 million if it were to be sold, include Primedia, Emap USA, American Media and possibly, although not likely, Reader's Digest Association.

Mr. Klein, however, does not advocate a sale, and believes the magazine division can offer much to the combined company, especially with its syndicated TV shows based on Golf Magazine and Today's Homeowner, as well as its vertical Internet sites for golf, skiing, and extreme sports skateboarding and snowboarding. Tribune Co. produces syndicated programming through its Tribune Entertainment Co., and Mr. Klein pointed to two other properties, Popular Science and Field & Stream, for which he'd like to develop syndicated TV properties.

"The exciting part is the potential fit for TV and further expansion of our new media. Those two goals line up very well with our properties," Mr. Klein said.

WILLES' LEGACY

While the fate of the magazine division is still up in the air, the fate of Times Mirror's hard charging CEO Mark Willes has been set. Mr. Willes has said he intends to leave when the deal, which he only learned of shortly before it was made public, is completed. Mr. Willes has been a controversial figure in newspaper circles and within Times Mirror. His insistence on tearing down the editorial/advertising wall along with a recent scandal involving the Los Angeles-based Staples Center sports arena led many to believe that he never really understood a crucial aspect of publishing: editorial integrity. The Chandler family, which has run the Los Angeles Times for 119 years, decided to sell to Tribune Co. without Mr. Willes' input.

The deal also raises interesting implications for the Federal Communications Commission rule that bars companies from owning both daily newspapers and TV stations in the same market. Tribune Co. has lobbied hard to eliminate the cross-ownership rule, as has the Newspaper Association of America. By adding Times Mirror, Tribune Co. now would own newspapers and TV stations in Hartford, Conn., Los Angeles and New York. Tribune Co. needs to get the rule changed before 2006, when the TV stations are next scheduled to renew their licenses.

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