Tribune Co. names Eddy Hartenstein new CEO
May 07, 2011 (Chicago Tribune - McClatchy-Tribune Information Services via COMTEX) --
For the man who helped popularize home satellite dishes, the table is set at Tribune Co. and there's plenty on Eddy Hartenstein's plate.
Hartenstein, publisher of the Los Angeles Times, on Friday became chief executive of the company and will oversee a troubled media conglomerate that includes that paper as well as the Chicago Tribune, WGN-Ch. 9 and other media outlets.
Obviously, he has an appetite for challenges. Besides struggling to make the best of a changing media marketplace that has undercut traditional business models, there's also Tribune Co.'s bankruptcy case, which has gone on for 29 months and counting.
"What stands out is that when you look at industries that (rely on) advertising -- broadcast in both radio and TV, magazines, newspapers -- newspapers are the only one of those that has not recovered" from the recession, said media analyst Ken Doctor, author of the book "Newsonomics."
Tribune Co.'s board plucked Hartenstein from the four-member executive council that has overseen the company since the October resignation of CEO Randy Michaels.
The executive council -- which also included Chicago Tribune Publisher Tony Hunter, Chief Investment Officer Nils Larsen and Chief Restructuring Officer Don Liebentritt -- will be dissolved, with its members focusing on their primary duties.
"The board feels strongly that it is in Tribune's best interests to have one person providing strategic vision and day-to-day direction for the company and its employees," Tribune Co. Chairman Sam Zell, the real estate billionaire who engineered the debt-heavy deal that took the company private in 2007, said in a statement.
Because Tribune Co. remains in the throes of a Chapter 11 bankruptcy process, Hartenstein's appointment is by definition interim, but he does not see it that way.
"I don't do anything on an interim basis," he said. "I'm pretty much full-throttle. ... We are acting as if we're going to do this forever. ... I think if we execute on a plan and show a direction of where we're going, a new board, when that new board is formed on emergence, can evaluate that."
U.S. Bankruptcy Judge Kevin Carey in Delaware is weighing evidence in support of two different restructuring plans proposed by rival groups of Tribune Co. creditors. Because the situation is fluid, it is impossible to predict how long Carey's decision-making process will take.
But when Tribune Co. does emerge from bankruptcy it will be majority-owned by its largest senior creditors, which will choose a new board to run the company, which, in turn, will select its own management team.
Although the new board will consider current Tribune Co. management, a person close to the situation said recently that the senior creditors also have been searching for other candidates.
Educated in math, aerospace engineering and applied mechanics, Hartenstein was named publisher of the Times in August 2008 after many years with Hughes Electronics Corp., a satellite-maker and defense contractor that became part of General Motors Corp.
In the early 1990s, Hartenstein convinced GM to back his development of the satellite-to-home TV technologies that became DirecTV. He served as its president from the outset, eventually becoming chairman and CEO.
During bankruptcy court testimony in March, Hartenstein outlined the company's challenges. Although the television business has stabilized, he noted that advertising revenue in print continues to erode alarmingly while Tribune Co., like most of its peers, has been unable to make up the difference with digital offerings.
"There is a lot of hope for digital somehow being the holy grail and the Hail Mary here," Hartenstein told the court. "But no one yet, including us, has figured out a way to make digital revenues and online make up anywhere near the decreases we are seeing in print revenue."
Since the bankruptcy case began, the company has been able to preserve its cash flow amid falling revenue through cost management. But "we have pretty much cut out all the costs we are able to cut out," he said. "We are down to the bone."
As a result, he said, cash flow is once again declining. Tribune Co. management in December had been projecting that it could produce $550 million in operating cash flow this year, compared with $636 million in 2010 (and $1.1 billion in 2006). But as the soft advertising market extended into this year's first quarter, the company revised the projection downward to $497 million.
On Friday, Hartenstein said the company must seek efficiencies through combinations inside and outside the company.
The most likely opportunity might be in his own backyard: Tribune Co. has been reported to be a bidder in the auction for Freedom Communications Inc., which owns southern California's Orange County Register. Hartenstein wouldn't comment on the situation.
Hartenstein also plans to push hard on the digital front, including a tablet strategy he plans to test soon in Chicago and Los Angeles. He wouldn't provide details of the strategy, but other company sources said the plan is to give customers an iPad-like device for free as part of a subscription to an electronic version of the paper.
The arrangement would be similar to a cable or satellite TV subscription where the company seeds demand by supplying both the content and the delivery hardware -- a model with which Hartenstein obviously is familiar.
"Without reinventing the wheel, we are about pursuing those technologies where there is a marketplace," Hartenstein said.
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