Zell expects a social network platform to save the newspaper industry

Part of the plan for rediscovering profitability for the troubled Tribune Co. of Chicago involves fishing for revenue -- somehow -- from a thus-far-undeveloped social networking platform, according to a memo to employees from their new CEO.

The dismally performing US economy is but one of many factors threatening the future of this country's print media industry, which nearly everyone directly involved believes must transform its business model if it is to survive unscathed.

According to an employee memo uncovered yesterday by the New York Observer, Sam Zell -- a Chicago real estate magnate who acquired Tribune Co., the publisher of the Chicago Tribune and many other papers, in April 2007 -- told employees of his multiple newspapers and television stations nationwide that he expects them to come up with a way to transfer the "primary source of revenue" of their businesses from traditional advertising, to online advertising around a social network model.


"We must find the balance between producing excellent products and producing products we can afford. And, we will find it," Zell wrote. "We'd also like to mention interactive, which will be a primary source of revenue in our future. We are in the final stage of developing a platform for our Web sites that will enable us to take advantage of all the opportunities on the Web -- from e-commerce to social networking to selling key words and other activities."

But that platform will be a kind of template, he warned, and papers and stations will be expected to find a working formula for building that template into something profitable. As a test bed example, Zell cited the new Web site for KPLR channel 11, the CW affiliate in St. Louis.

BetaNews checked out Zell's model for the future this afternoon. On CW11's Web site, users can view live clips from CW shows such as the reality series Farmer Wants a Wife, and entire episodes from sitcoms such as Two and a Half Men. Users can become members -- often anonymously -- logging on and offering comments not only on the show clips, but also on stories featured in the Newsroom Blog. There's also a live Doppler radar image, and plenty of pictures of the station's news anchors.

This is the model which managers of the various Tribune properties are being told to work with, after Zell announced his plan to implement across-the-board cost cutting measures, including reducing the size of newspapers and implementing a baseline 50/50 ratio between news and advertising content. This after already implementing job cuts in February, including trimming some 500 staff positions from newspapers nationwide, the Los Angeles Times being among the hardest hit.

While Zell's holdings have included broadcast entities since the 1990s, Tribune Co. is believed to have been his first investment in print publishing. In order to make the deal affordable, Zell intended to sell Tribune's interest in the Chicago Cubs baseball team, though so far there have been no takers. But Zell's primary business has always been real estate, and there, the storms are only worse. Last February, Zell appeared on CNBC to predict a recovery in the nation's housing market by spring.

But as a US Dept. of Housing and Urban Development report last May indicated (PDF available here), the housing market during the first quarter of this year couldn't have been worse, declining by 26.7% annually as a component of the nation's GDP, and dragging overall economic growth to just a murmur above flat-line.

The solution to all this, Zell believes, lies somewhere in that Web site social networking template. "It will be a simple tool kit that is pre-populated," he told employees yesterday, "but you'll be able to customize and design it for your market, and your individual audiences. But the new sites will come with a budget, and with the expectation that they will be fully leveraged to generate revenue."

Tribune TV stations will be the first to get their toolkits and start playing with them, with complete and workable solutions expected from them by the end of August. Newspapers will come later, though their deadline was not stated.

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