L.A. Times publisher Hartenstein angles for top corporate post at Tribune
By: LYNNE MAREK
Chicago Business
April 7, 2011

While the fate of Chicago-based Tribune Co. remains mired in its long-running bankruptcy drama, Eddy Hartenstein, publisher of the company's Los Angeles Times, is angling for more power within the parent company, intensifying tension between the home office and its biggest print subsidiary.  Mr. Hartenstein is positioning himself with creditors for a lead executive role as the company prepares to emerge from bankruptcy later this year under new ownership after more than two years of warring over Tribune's assets in Delaware Bankruptcy Court.

A four-person council that includes Mr. Hartenstein and three Chicago executives - Chicago Tribune Publisher Tony Hunter, Chief Restructuring Officer Donald Liebentritt and Chief Investment Officer Nils Larsen - was appointed last year to steer Tribune after the ouster of CEO Randy Michaels. Chairman Sam Zell, who headed a 2007 leveraged buyout that led to Tribune's bankruptcy, is keeping a low profile except to press his own claims in court.

Signs of Mr. Hartenstein's increasing influence are beginning to show. Tribune, parent of the Chicago Tribune, Baltimore Sun and 23 local TV stations, is among a handful of suitors looking to buy the L.A. Times' neighbor, the Orange County Register, according to sources familiar with the auction, which would make the Times an even bigger part of the company. In recent weeks, an L.A. Times editor was put atop the papers' combined Washington, D.C., bureau. And sources say that a previous mandate from corporate that enforced sharing of stories between the papers - long a sore point between Chicago and Los Angeles-is no longer closely monitored.

Meanwhile, Tribune awaits a new board, CEO and strategic vision that will come only when it emerges from bankruptcy under new owners. The time adrift holds risks that the company will fall behind in the race to revamp a newspaper business dogged by Internet competition, declining circulations and flagging ad revenue.

“There's a leadership vacuum, there's an ownership vacuum and there's a capital-starvation problem,” says Marshall Sonenshine, a New York-based investment banker who worked on the reorganization of the Philadelphia Inquirer. “They have to get out of this to make the ultimate progress.”  Mr. Hartenstein said as much in Bankruptcy Court last month on behalf of the council in support of the company's reorganization plan. Tribune projections for this year show operating cash flow dropping to $497 million from $636 million last year, assuming the company remains in bankruptcy, he said. Mr. Hartenstein also testified that Tribune's revenue was $3.2 billion in 2010.

“We are trying to compete with our feet cast in cement, with our hands tied-handcuffed behind us,” Mr. Hartenstein told the court. “I feel that we have seen much of the competition move by us, and we need to do everything we can to catch up.” Mr. Hartenstein is pulling at the seams of the national Tribune network after a decade of futile attempts to increase revenue across the media outlets cobbled together by the company.

“Advertisers never bought that idea,” says Jim O'Shea, a former managing editor of the Tribune who later was editor-in-chief of the Times. “And from a news perspective, my experience was that every paper wanted a different story.”

FANNING FLAMES

Mr. Hartenstein's power grab could fan the flames of discord that have beset the two biggest papers in the network since Tribune's purchase of Los Angeles-based Times Mirror in 2000. A Tribune spokesman declines to comment. The papers have taken different approaches to surviving in the digital era. While the Times has continued to run longer national and international stories, the Tribune more routinely whittles such news down to briefs and has embarked on a number of digital experiments.

Online readership at both papers has risen, but web revenue isn't nearly enough to make up for the landslide of lost print advertising.  And Tribune's bankruptcy may “scare away” other opportunities with potential partners at a time when the industry is consolidating, Mr. Hartenstein told the court.

Unlike the national network, a tie-up between the Los Angeles Times and the Orange County Register could have a positive impact on revenue because the readership areas are part of a single region, analysts say. It could boost Mr. Hartenstein's reach, too.  “There's a natural fit between the Orange County Register and the Los Angeles Times,” says Scott Flanders, a former CEO at Register owner Freedom Communications Inc. who is now CEO of Playboy Enterprises Inc. “I was trying to bring those two storied companies together before I left.”