Tuesday, December 9, 2008

The Road to Zell


Before you say Sam Zell got what’s coming to him, stop. He didn’t.

His Tribune employees – those on the front lines that write, produce, print, and distribute the papers didn’t deserve this.

True, Zell tries to come off like one of the guys. He drinks, he swears, he tells jokes.

He’ll even put his arm around an employee or two.

He thinks of himself as Jane Goodall - observing the apes by living among them.

Sure, his employees technically own the joint with Zell under his employee stock ownership plan. But let's face the facts here. The only way they’d ever have a prayer of making out in that deal is if Zell found a greater fool to buy it.

Too bad there aren’t any left.
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Even the young Saudi Princes can’t be conned any longer. Just ask Michael Jackson.

Don’t feel bad for Zell. It’s only Chapter 11 – not Chapter 7, which is liquidation. This allows him to reorganize – and also purge any contracts or deals he’d rather not honor.

Or Zell and his Machiavellian posse could make a quick exit, taking the Cubs and the few other chattels not integrated in the Chapter 11 filing, and leave the Trib mess for others to clean up. Sound familiar?
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Let’s turn the calendar back to Saturday, September 26. 2008.

I hear it was quite the party.
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No, I wasn’t there. My invitation must’ve gotten lost in the mail.

Every couple of years or so, Sam Zell likes to throw himself a birthday party and invite an intimate gathering of around 800 of his closest friends and colleagues and cloak it as a magical mystery event.

This time around, guests were bused to the corner of Halsted and Archer and welcomed into a 15,000 square foot circus tent. In addition to the Fellini-esque costumed characters, performers and booths, guests were treated to a private concert by the Eagles, while dining on fine food and chugging down top-shelf liquor.
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The last time I checked, the Eagles were charging between $6 million and $8 million for a private party performance.
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Maybe Sam didn’t get the memo about trimming the party budget this year?

It’s not quite AIG spending $440,000 of its $8 billion taxpayer-funded bailout on a weekend retreat or the Big 3 auto CEOs taking their private jets from Detroit to Washington to claim poverty – but if you’re thisclose to bankruptcy, you’d think….

Now, let's party like it's 1992.

Terry Jacobs’ Cincinnati-based Jacor Communications was on the brink of bankruptcy.

Sam Zell picked up its scent, met Jacor’s broadcast head Randy Michaels and – maybe it was their penchant for dirty jokes and dirty tricks done dirt cheap – they hit it off.

Zell was known for buying undervalued assets, building them up, and then spinning them off for a tidy profit.

He affectionately called himself the Grave Dancer.

Michaels sold Zell on an opportunity. The FCC had just approved duopolies, allowing one broadcast company to own up to two FMs and two AMs per market.

Duopolies were the precursor to the imminent 1996 Telecommunications Act, whose poorly-written radio ownership revisions allowed nearly unrestricted ownership of radio stations by a single company.

Zell bought Jacor for $70 million – considered a pretty steep price at the time – and when the Telecom bill became law, Michaels took Zell and his credit on a shopping spree.

Their shopping cart filled quickly with radio properties from Noble Broadcasting, Citicasters, OmniAmerica, and Nationwide.

Michaels also added two radio syndication companies, Rush Limbaugh’s EIB Network and Premiere, and a television station, WKRC in Cincinnati, an ABC affiliate to Zell’s shopping cart.

Within a few months, Jacor had become the third largest radio group in the U.S. – and certainly the most influential in the brave new world of radio management and programming structure.

In 1999, Zell sold Jacor –230 radio stations in 55 markets - to Clear Channel, another company that was buying up properties at a rapid clip – for $4.4 billion. Zell was also successful in persuading the company to install Michaels as its radio division’s CEO, a position he held for three years.

That brings us to the here and now.

Both Zell and Michaels enjoyed many adventures since then and reunited in late 2007 when the former took over Tribune and installed the latter as its executive vice president. Zell put up roughly $300 million for an $8.2 billion empire.

And that’s who he is – the people he attracts and those that he keeps around him.
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Then there’s Local TV LLC, a founded in December 2007, made up of nine former New York Times-owned stations. Randy Michaels was its CEO until Zell did the Tribune deal. Then Michaels jumped to Tribune and formed a “broadcast management company” to oversee Local TV’s operations. The following day, Local TV picked up eight TV stations Fox put up for sale to help finance their Dow Jones deal. Local TV is owned by Oak Hill Capital Partners, a private equity firm, founded by Robert Bass.

In total, the Trib oversees 23 TV stations.

Zell did what anyone in his position would do when borrowing money. You spend it all and you spend it fast.

His deals are always intricate and well planned. He layers transactions on top of transactions in a pyramid that is so inscrutable his finances are nearly impossible to trace.

Here’s my suggestion to Zell.

Call your party planner – the one that handled your birthday party in September.

Did you check the Trib’s Chapter 11 filing list of creditors? The thing runs 2,387 pages.
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You had a 15,000 square foot circus tent for your 800 guests, right?

I figure you’ll need at least a half dozen tents to handle your creditors – even if only a few show for the hearing.

Now, that’s a party.

One question. Will it be a Fellini theme or a Lynch?

23 comments:

Anonymous said...

Sam Zell above the law, below the belt. What a scumbag. He and Randy deserve each other.

Anonymous said...

Sam Zell above the law, below the belt. What a scumbag. He and Randy deserve each other.

Anonymous said...

I wonder if Zell pick pocketed the Tribune retirement fund? The way he writes deals he probably owns the first borns of sons and daughters of the current Tribune employees. There are scumbags and there are SCUMBAGS. We know which one Sam Zell is. Hope he enjoyed his 8 million dollar Eagles concert. How much was that per song?

Anonymous said...

Thank you for your background about Sam Zell and Clear Channel's purchase of Jacor. You explained it well. Given Zell's adoring Machiavellian style did he have Randy Michales put in charge of Clear Channel to destroy it. I did not realize he was there for that short of time. He did a lot of irrepairable damage in his short tenure there. After reading about Zell I would almost believe Michaeles was put there to ruin the Mays family business. We are seeing history repeat itself. I was hoping that Zell's days would be numbered when Bush leaves the White House. Now my concern is that Zell being a major Obama backer will still have his 'get out of jail' ticket intact and will continue his raping of American media.

Anonymous said...

No use crying over spilled milk, but many people foretold the outcome of this. My only sympathy is for the people relying on the Tribune for pensions. Oh wait, when the pension fund goes belly up, the taxpayers will pick it up through the pension guarantee board. I forgot about that. So I guess my only sympathy is for us, the idiots who get stuck with the tab on this -- as usual.

Anonymous said...

By the way, don't leave out hiring Lee Abrams when you consider Zell's many stupid decisions.

http://www.guardian.co.uk/commentisfree/cifamerica/2008/dec/09/tribune-company-bankruptcy-newspapers

Anonymous said...

Are there no laws to protect employees from scrooges like Zell? How can he get away with this time and time again? It is the exact scenario you would expect from Zell, Michaels and his band of merry thieves. They ruined radio, they put the final nail in the coffin for newspapers and they will find suckers to buy their baseball team and other holdings for far more than they are worth.
Laws need to be changed to protect the consumer, the investor and most of all the employee.

Anonymous said...

Put that gnome faced bastard and his Tweedle Dee Ben Homel Randy Michaels sock puppet in jail. These two have caused many hard working people nothing but grief. First Clear Channel. Now this.

There have to be laws against such low lifes.

radio, a friends ipod with commercials said...

John it’s a great time to be a writer. Sam Zell, HD, Clear Channel, & Citadel it’s almost like Christmas 24/7.

I’m dreaming of a few bankrupt radio companies for Christmas and the icing on the cake would be John Hogan and Farid Suleman on their knees begging congress, live on CNN for taxpayer bailouts.

Here’s my advice, sell the corporate jets now boys..

Keep writing John. Thank god we live in such interesting times with corruption,
greed and fake leaders at the top of dead and dying industries.

Anonymous said...

You mean John Hogan had all those years to put Clear Channel back on track after Randy Michaels left and it is still in that shape?

Did Sam Zell recommend Hogan too?

Anonymous said...

Here is a typical Randy Michaels story. Randy Michaels came to town with Mark Chase and some other CC execs and visited our stations. They had an evening dinner planned so I dressed appropriately and somewhat conservatively since I did not know much about the new owners.

When I arrived at the restaurant I was told that our dinner is in a private room in the back.

I walk in and to my surprise the Clear Channel people are dressed casually and acting like a bunch of morons. I cannot put it any other way.

Randy Michaels walks up to me and says I am sorry but I you are fired. I am immediately in shock but before I can say a word he says "you have a nice pair of tits" I can't believe I am hearing this. Then he says "Okay, your'e rehired". A couple of his CC people around him break out laughing and wolf whistling. It was humiliating.

I told my GM about it and he advised me to do nothing and forget it happened.

Later Michaels screamed food fight and everyone started throwing carrots, broccoli and cauliflower at each other.

I could not take it anymore and left. The next day which was Friday I was called into the general managers office and told that my position was being eliminated.

The GM then told me off the record that the decision was made by Clear Channel and had nothing to do with my ability. But off the record he said had I played along with Michaels when he was commenting on my breasts I would still have a job.

Lucky for me a job opened up at another station in the market and I have been working there ever since. So thank you very much Randy.

I wonder how many women at the Tribune Corp. have had the same run in with Randy Michaels?

Anonymous said...

Sam Zell creates the home for wayward idiots. How come no one is mentioning Lee Abrams. You want a real idiot, savant, Chauncy Gardner - that is Lee Abrams. He is one of those people that always finds someone to latch on to. His memos at the Tribune are only matched by his old blog. Whats on your iPod, Lee? Yes? Thought so.
If you didnt have your rich little buddies to latch on to you would be homeless on some street corner in Chicago.

Anonymous said...

I can imagine how those former Fox TV people will feel when Michaels and his hillbilly army come marching through the doors.

Anonymous said...

The Sam Zell story just floored me. I knew of his Jacor background and would see his name in the business pages from time to time. When he bought the Tribune and started bringing those ex-Clear Channel people on board I figured something of a shell game was taking place. Sure enough, it turned out to be true. Zell has no heart, no soul, no compassion. The party he threw for himself and spending millions to get the Eagles peform show what a lonely miserable man he is.

Call it the Trib said...

For those of you who feel the world is not wise to what a sham Lee Abrams of Zell's Tribune is should read this from the Columbia School of Journalism: http://www.cjr.org/feature/the_lee_abrams_experience.php?page=all

He is probably a good dirty joke teller along the lines of Sam Zell and Randy Michaels. They deserve one another.

Anonymous said...

I wonder if the people Zell fired from the Chicago Tribune were those that Blagojevich requested?

If so, what did Zell get out of the deal because he always gets something.

Anonymous said...

I want to pass on something to your readers they may not know about your blog that I find fascinating.

I like the way you have numerous links to use as resources throughout your blog and many of your readers may not be aware of the hidden gems there. When I read your blogs I block out the time to check out those other links. Even the Wikipedia bios and information is entertaining.

Your Sam Zell blog was a real eye opener. I knew he was that kind of guy but not to that extent.

Anonymous said...

The Blagojevich scandal could hurt Zell if he did follow through and fire the journalists he suggested.

They have extensive wire taps. We can only hope. Zell skirts the law better than anyone.

Zell personifies being held up without a gun.

Anonymous said...

Zell is a dick. Benji Homel is a small dick. Newspaper is an obsolete business model. It's end (along with other Jurasic media) is inevitable. As far as the loss of jobs, nobody gives a crap about old whores.

Anonymous said...

John You are so right.
The Tribune staff that was let go or did a voluntary buyout now have their severence or buyout pay SUSPENDED because of Zell filing Chapter 11. In other words they will NEVER see the money owed to them. Zell is the ultimate scumbag. The total amount he owed was probably less the six to eight million dollars he paid the Eagles to play at his birthday party just six weeks ago. You are also right about Randy Michaels. You judge a person by the company they keep.

Anonymous said...

The spin Zell's public relations people are putting on the Tribune Chapter 11 is that they made a gallant attempt to turn the newspaper industry around but being novices were overcome by contingencies. Bullcrap. Zell and his buddies will walk away from this unscathed and even making a profit on the original investment.

Anonymous said...

Sam Zell - the payback is a bitch and it will be coming for you and your partners in crime.

Newcomb said...

Put that gnome faced bastard and his Tweedle Dee Ben Homel Randy Michaels sock puppet in jail. These two have caused many hard working people nothing but grief. First Clear Channel. Now this. There have to be laws against such low lifes.