Tribune Bankruptcy and the Deal They Didn’t Make

Had to bristle when I heard during  Tribune Company’s bankruptcy filing  that Chairman Sam Zell blamed his company’s hardships on a “perfect storm” of forces roiling the media industry. 

Not so fast. Storms are forecast. And at least in one case, Tribune’s predecessors had enough fair warning to have smoother sailing.

Flashback:  Spring 1997. Mark Del Vecchio, a former UPI reporter who covered the  Tiananmen Square debacle, is running the electronic media site for the Hartford Courant.  Mark’s an avid collector of movie trinkets, and notices on a internet board that there’s a rare movie poster for sale at a place called AuctionWeb. 

Then it dawns on him: Online auctions are akin to classifieds, which often can make up to 50% of a newspaper’s revenue.  This business model could be substantial – and a threat.

He meets AuctionWeb’s founders in Campbell California, and finds the 10-person company is a mess, complete with bags of unopened mail that are checks from members wanting to join. The founders are ready to take investment and  scale. Del Vecchio’s timing is just right.

He gets executives from Times-Mirror — the assets of which which were purchased by Tribune in 2000, including the Los Angeles Times –  in a meeting with AuctionWeb’s founders to discuss a deal.

Their bottom line: AuctionWeb could be bought for $40M or less. Or Times-Mirror could invest $5M and own a percentage. But the newspaper execs, befuddled at the lack of a warehouse, inventory, trucks on the road, simply can’t understand what hard assets there are to buy. They pass.

So AuctionWeb became Ebay, with a market cap of $18 billion  in January 2009 and Tribune,  looking at $13 billion in debt, is bankrupt.

Of course the media deal-making landscape is riddled with hindsight. And I’m not saying that if Times-Mirror/Tribune bought AuctionWeb, that an $18 billion market cap would have been the result. In fact, having worked in newspapers for more than a decade, I’m pretty sure they would have stifled some growth with bureaucracy.

But don’t tell me newspaper folks didn’t see this “perfect storm” coming and were powerlees to act in their best interests.

Postscript: Del Vecchio, with whom I worked at AltaVista, founded a movie collectibles company and has been a power seller on Ebay for several years. For more on Ebay’s early years, check out Adam Cohen’s The Perfect Store.