Is Sam Zell Smart Like a Fox?

Lot’s of commentary about Sam Zell buying the Tribune company. I won’t bother linking to them all (because I’m too lazy tonight to go through the work of doing it).

Here are some of my comments, in no particular order.

Sam Zell is a legend in real estate and beyond for his ability to be counter-cyclical and his ability to rejuvinate depressed property. Come to think of it, that’s a much needed skill in the newspaper business right now. I wouldn’t bet against him just because he makes a couple of comments that Jason Calacanis doesn’t like.

It’s pretty remarkable that Zell is staking only $315 million of his own cash to anchor the $8.3 billion deal.

Perhaps the most staggering aspect of this deal is how little the 11 newspapers (including top 3 media markets) are worth. Tribune is a interesting diversified media and entertainment company, here’s some facts about what Zell just bought:   

  • The Chicago Cubs
  • 23 broadcast stations, including major network affiliates
  • Superstation WGN
  • Radio stations
  • Spanish language newspapers
  • careerbuilder.com, cars.com, apartments.com, and a few other (47) websites
  • Television product production and distribution, including exclusives on Saving Private Ryan, Gladiator, and Shrek.
  • Tribune Studios is a movie set, equipment, and production company

When you strip out the non-newspaper assets and look at the comparable valuations, it’s pretty clear that the newspapers are dragging down the rest of the company. The newspapers employ a disproportionate number of people and are the only segments of the business that are actually declining in reach. It’s really a lot more complicated than suggesting the Internet alone is responsible for the decline of the newspaper business, but it really can’t be avoided any longer, the newspaper business is dying.

Lastly, there was an interesting comment from Dave Wner that caught my attention and underscored how the online world isn’t that different from the physical property world, in some respects.

It could be that Zell is brilliant, and is saying something that simplifies the truth to make a bigger point, and he doesn’t mind if you think he’s inept if some people get the bigger picture — which is he thinks of the Internet and Google as being the same thing, and you know what — I bet a lot of other people do too, and they have a point.

In real estate success comes from the old adage "location, location, location" but also from an ability to get someone else to take the financial risk (look at Trump to see this played to perfection, he gets the credit and someone else shoulders the risk), never paying too much for something, and selling when everyone else is buying and vice-versa.

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