Transcript of Sam and Randy Interview

Operator: Good afternoon, ladies and gentlemen, and welcome to the Tribune Conference Call. My name is Katie and I'll be your coordinator for today. At this time, all participants will be in a listen-only mode.

We will be facilitating a question and session towards the end of this conference call.

(OPERATOR INSTRUCTIONS)

I would like now to turn the call over to your host for today, Mr. Gary Weitman, Senior Vice President of Corporate Relations. Please proceed.

Gary Weitman: Okay, thank you Katie, and thanks everybody for being on
the call today. As you know, we're going to make Sam and Randy available for questions. It was important to us to be talking to our own
media outlets first. We've gotten a number of media requests and Sam
and Randy both wanted to make sure we were taking care of our own folks
first.

So with that, we're going to open it up for questions, and we'll take he first question from Tim Darragh at The Morning Call. Tim?

Tim Darragh: Yes, thank you for taking my call. I'd first like to ask about the decision to cut the newsroom here at The Morning Call by 25%, which is a severer cut at any newspaper in Tribune and larger than most of the other newspapers. Even though the newsroom here has been doing its job, as you know our readership day-to-day increased by over 7% in the past year. So given that, I'd like to know why The Morning Call was asked to cut its newsroom by almost 25%?

Sam Zell: This is Sam Zell. First of all, although circulation numbers are interesting and obviously very relevant, revenue numbers are what pays our bills. And the steps that we've taken, and are taking across the country, are a downsizing of our organization to more closely reflect the revenue trends that are relevant.

It is very clear, and we certainly accept the fact, that the role of the newspaper is changing. And we need to size our organizations and our
newspapers to reflect the realities of the marketplace and that's what we're doing. I don't think anybody picked The Morning Call specifically, but we went through every one of our organizations with the goal of bringing our efficiency levels up and our headcount down, so that we can survive to live another day.

These are very, very difficult and challenging times and we are doing our best to make, what we believe are the appropriate decisions for the future.

Gary Weitman: Tim, did you have a follow up?

Tim Darragh: Well, yes. I mentioned readership not circulation, because
we've been told that readership is more of the key number than circulation, and the readership is up 7%. In addition -- and at the newsroom function. In addition --

Sam Zell: I'm not challenging that, I'm just telling you that when it's all said and done, we've got to have enough money coming in the door to turn on the lights and print the newspaper on a daily basis. And those are the kind of decisions we made. It's not a criticism of The Morning Call. It's an adjustment of The Morning Call size to the reality of the market place going forward.

Randy Michaels: Tim, I would second the motion that The Morning Call's a great paper and the newsroom's doing a great job. And it is not something that we enjoy. It's not something that we intended to do. However, the revenue is down much more, not just for us but for everybody, than anyone anticipated.

And look, this is not without precedent. I just read that in 1929 after The Crash, the Colonel cut the Chicago's Tribune size, closed a lot of the foreign bureaus and cut the number of reporters in Chicago down to 83 in order to stay alive through the Depression. So this is hardly unprecedented, it's not the first time. But we're seeing revenue declines that start to approach those levels. And I think we're going to come nowhere near those kind of draconian cuts that had been made before to keep these papers alive.

It's really unfortunate. And it's no reflection of the -- on the quality of the work the newsroom is doing.

Gary Weitman: And with that, we're going to move to the next questioner, Chris Flores at the Daily Press. Chris are you on, and do you have a
question?

Chris Flores: Thank you. Yes, I was wondering if you could talk a little bit about the idea of more Tribune newspapers going to an all-local front and increasingly sharing centrally designed pages for nation and world news as CCI evolves?

Randy Michaels: Well, I think all local it certainly would -- if you're talking about all news of local interest, I think that's the direction most of our papers are going. That doesn't mean that the news necessarily has to happen in our immediate geography.

In other words, for the Daily Press, the troop movement in Iraq, if it involves a lot of people who are from, say Newport News, who may be very quote "local." But I think that we do have opportunity to centralize some of our world and national news gathering reporting and writing. I don't see the reason to write every story eight and nine times.

But each of our papers will thrive to the extent that it's a reflection of its local community and its local community's interests. I don't mean for that to be all local news. In other words, news of interest to the local community wherever it occurs, I think is a cornerstone of how we're going to keep our papers relevant.

Chris Flores: I think -- I was thinking more in terms of the role of the copy desk plays in terms of putting together nation and world news and some of the experiments that have been going on between the Daily Press and some other papers. You know, looking to centralize that function of putting a lot of that together and sharing --

Randy Michaels: As you know, we have been experimenting and how far we go will depend on the results of those experiments. But I would tell
you that I would expect we'll be going live reasonably soon with some of
those techniques. And I'm optimistic that we can -- that it's one way we can put out a better paper at lower cost.

Chris Flores: And under this system, how would you deal with the different nation and world preferences that each region might have? And that's one thing we've seen between some of -- in our experiments that we have different preferences. We're very military, you know whereas somewhere in Florida they may have other preferences down there. How do you deal with that as you share more and more nation and world content?

Randy Michaels: Well, I think sharing doesn't equal homogenization and
it doesn't equal one size fits all. If, for instance, there is a military story, you should be able to pull it down in Newport News if you think it's relevant. And maybe you have to edit it, maybe because there is a local angle. But, I don't think we need to start from scratch in each of our markets with every story.

And in some cases, the story that runs in Allentown and Newport News
may very well be the same story with the same picture and require no
re-editing. As much as we can centralize those functions and make it
possible for you to pull down something that is appropriate, or close to appropriate for your market, the better. That doesn't mean the stories in
your paper should be the same as the stories in the Baltimore paper.

Gary Weitman: Chris, we're going to have to move on to the next person in line.

Chris Flores: Thank you.

Gary Weitman: Sure. Doreen Hemlock at the Sun-Sentinel, are you on the
line? Operator you can open that line.

Doreen Hemlock: Hi, my question is about cutting back certain kinds of offerings and what that does in terms of turning off readers. For example, recently we've eliminated the stock listings in the business page and we've had a lot of older readers here in South Florida, who have said they are no longer going to subscribe to the paper.

How do you cut back certain offerings, whether it's international or stock listings and so on, and still expect to keep the readership and circulation growing? How does it not become a self-fulfilling prophecy of declining readership?

Sam Zell: I think the answer, in a broad sense is that, one of the issues that we're dealing with on a daily basis is attempting to find out what kind of a newspaper and what does it look like in the future? We know that the services and the level of interface that the previous newspapers provided is unsustainable at revenue levels, and has been unsustainable for some years now. And so, our objective is to basically to keep trying to find solutions to what works, what generates appropriate revenue, that gives us the ability to continue and to, in effect, deliver our message.

The answer is we're the first ones to tell you we're going to try everything until we find what the best niche is. Some of those things will lose us readers. Hopefully a lot of them will gain us readers, and it's the ultimate balance that's what we're after.

Randy Michaels: Doreen, look, I'm aware that a lot of papers have taken out stock listings without much impact, because frankly most people aren't getting their stock quotes in the paper. I'm aware of the noise level and I know there's been a discussion. Maybe we'll put it back.

We're not going to -- we don't have all the answers. There's no book. And so, if it turns out the noise level is high enough -- I know that when we redesigned the Orlando Sentinel, we had fewer than 500 complaints. But more than 10% of it were about the elimination of a certain column. What was it called, Sound Off or --

Sam Zell: Ticked Off.

Randy Michaels: Ticked Off. And so we put it back. And if it turns out there's enough noise about the stocks, we'll put them back too.

Doreen Hemlock: Okay. And just one other thing. How do you monetize
the net? I mean, in our case, I know that we're down more than $50
million in ad revenues, and on the net we only have something like $20
million, it doesn't compensate at all, so how do you monetize that, if people are going -- what are the efforts in that regard?

Sam Zell: I guess it starts with producing a net product that is not just a regurgitation of a newspaper. And, when you think about the fact that only 30% or 40% of net revenue comes from advertising, and the remaining 60% comes from transactions, it's pretty obvious that we have to become much more net savvy and take advantage of what the net provides us. The future of our revenue base has to include significant net contribution and we would expect that to be the case going forward.

Doreen Hemlock: Are there any specifics on how to do that though?

Sam Zell: I'm sorry.

Doreen Hemlock: Are there any specifics on how to do that, whether it's
--?

Sam Zell: Well, I think you've got to watch and see. I mean, we're just rolling out our first net product in St. Louis and it's in test. And once that gets carried out across the country, I think you'll see a much more aggressive net program from us than what has been the case in the past.

Randy Michaels: So you do it with search, with referrals, with taxonomy
and not just display ads and all those things are coming.

Doreen Hemlock: Thank you very much.

Gary Weitman: Doreen, we've got to keep moving. Michael Hiltzik is your line open? And we're up to you if you want to ask a question -- at the L.A. Times? Michael?

Michael Hiltzik: All right. Randy, you came out to LA a few months ago,and you spoke quite energetically about how you were going to incentivize the sales force to sell across all lines -- all media lines and do other things to raise the top line of the enterprise. And thus far, we've seen a lot of efforts that go to cutting costs and selling assets at Tribune, but the effort to grow the top line by getting more out of sales, it seems [to absolved].

Or at least we haven't seen as much in terms of that. Obviously, we talked about that there hasn't even been an [answer] back here at the Times for many months. Can you tell us what progress you've made, or what we're going to be seeing in the future in terms of revenue building efforts?

Randy Michaels: Yes, sure Michael. I'm sorry that we're not communicating well because actually in Los Angeles, there's quite a bit going on. Your comment about a chief revenue officer is right on. That is long overdue and on the way. We have not been doing nothing. There's a gentlemen now who works in your building named Don Meeks, and he is in charge of a program called Tribune 365 which is a sales organization set up to handle accounts across platform, across the paper, KTLA, Hoy, in our on-line products, and to generate money that is not currently allocated for the newspaper. And he is in the process of building a team to do that along with John O'Loughlin in the marketing department, because they're going after non-advertising dollars.

You probably know, 60% of the money spent in promotion is spent -- I mean, in marketing, is spent in promotion. And at the moment, newspapers
don't go after that money except with coupons and the inserts in the
Sunday paper. So we are building exactly what I promised you, which is
a team to out and crack incremental revenue opportunities. I know it's
frustrating because sales cycles take a year to 18 months, but Don is
already building a team to do that.

We expect to have a CRO announced in a matter of, I'll say a few weeks,
and it'll be before that. And we're very, very clear that we have no problems that a few hundred million in revenue wouldn't solve.

Gary Weitman: Mike, you've got a follow-up?

Michael Hiltzik: Yes, I would --. Can you tell us a little bit aboutwhere we stand with the appointment of a new publisher here at the Times? There's been speculation in public about people like Eddie Hartenstein and there's also been talk that Brian Greenspun may be playing a new role, at the Times and the Tribune generally. So [say] a little bit about whether there have been talks with Brian.

Sam Zell: I think the answer is, that we are working very hard on, again in finding the new publisher of the LA Times. We would expect to complete that sometime in the next three to four weeks. I don't think that Brian Greenspun's going to play any greater role in the LA Times going forward than the role he plays as a director of the Tribune, and somebody who's very interested in both helping us and making this adventure work. So, I think that given three or four weeks, I think all of your questions will be answered.

Gary Weitman: Thanks, Mike. We're going to move to Matthew Kauffman at
The Hartford Courant.

Matthew Kauffman: Hi, thanks for holding this call. As Tim mentioned at the top of the call, several of your papers, including here at the Courant, are in the process of eliminating as much as a quarter of their reporting staff. You guys know the financial picture better than I do, so can you give me your thinking of how much time this round of elimination buys for the employees who are staying? For example, how likely is it, in your mind, that additional sort of broad based staff reductions will be required before the end of say, the calendar year?

Sam Zell: This is Sam. I think the answer is that we're not interested in trial by torture. We're not interested in having -- dying by 1,000 cuts. We are doing everything we can to make this downsizing happen as quickly and as painlessly as possible. I think that there are different time frames for different parts of this organization, so I can't tell you specifically as it relates to your situation.

But I think that, particularly in the T6 papers, we've moved much closer to being finished than we are to starting. Having said that, we're all sitting here looking at a very perilous environment. And we're attempting to make our best judgment as to what we need to do, both to survive and to produce a product. So all I can tell you is that we think we've taken the steps in the newsroom that were required and are relevant. And we're hopeful that we can go forward from this point, and that's certainly our objective.

Gary Weitman: Matt, do you have a follow up?

Matthew Kauffman: I do. Sam, you were here almost exactly six months ago and had told the staff, I'll quote, "I do not believe that anybody can grow a business by reducing the number of employees. It is not our game plan to in effect, try and figure out how few people we can have run this business." And I think we've moved maybe a little bit more in that direction.

As I understand it, cash flow projections continue to fall at, I'm guessing at all the newspaper properties. And I don't think those numbers are anywhere near the numbers that you had expected to see when you were valuing the Company a year or so ago. Have you figured out for yourself, what went wrong in your analysis and how you could have been so far off in projecting what 2008 would look like for the industry?

Sam Zell: The answer is, that when we underwrote this transaction, we
assumed a continued suppression of newspaper revenue, somewhere in the minus 5% to minus 7%. This was in line with everybody's expectations.
As a matter of fact, our expectations were somewhat more pessimistic than conventional wisdom at the time. We have now confronted almost 20%
depreciation in revenue. i don't believe it's fair to hold me to the sentence that I expressed when I was there six months ago, when in fact, we've had a very traumatic, and frankly this is dramatically worse than September 11th.

I mean, I don't know that anybody has a frame of reference on advertising
revenue destruction that in effect is as bad as this, going all the way
back to The Depression. So, I think the circumstances are dramatically
worse than anyone could have possibly predicted. And we're dealing
with it accordingly. There aren't a lot of other options if you want to stay in business.

Gary Weitman: Thanks, Matt. We're going to keep moving so that we can
try and wrap this up in 30 minutes or so. We're going to go to Lorraine Mirabella at The Baltimore Sun. Operator, if you could open Lorraine's line.

Lorraine Mirabella: Hi, I had a question about asset sales and the sales that are in process or nearly completed, will the proceeds allow the Company to meet its debt obligations for this year? And, are there other asset sales that are being considered specifically, is The Baltimore Sun one of those? And is the Company speaking with any, or in contact with any potential buyers of the Sun?

Sam Zell: We believe that we have, with the asset sales in place, we have adequate liquidity to meet all of our requirements for 2008. And nothing has changed since I made that statement about two months ago. Are there future asset sales on the horizon? I can't answer that question in specificity. Obviously, the Cubs are on the agenda and beyond that, I don't think we have anything definitive.

As to the Baltimore Sun, as I've said numerous times before, when the Tribune transaction was originally announced, we were contacted by various people in various markets across the country who expressed an
interest in buying various assets. We have had intermittent conversations
with various people since that time with no definitive resolution. So, at least at this point, I would tell you that the only newspaper disposition that we have on our agenda for 2008 is Newsday.

Gary Weitman: Lorraine, you have a follow up?

Lorraine Mirabella: Well, I -- can you say whether any of those conversations that you've had have been with any groups that are interested in the Sun, and whether that has been any --?

Sam Zell: I previously had stated that we had in fact gotten inquiries from people on Newsday, on The Sun, on the LA Times, on the Florida newspapers, and I don't think that situation has changed at all.

Lorraine Mirabella: Okay.

Gary Weitman: Lorraine, we've got to keep moving. We're going to go to
Scott Powers at The Orlando Sentinel. Operator, could you open Scott's line? Scott, your question?

Scott Powers: Yes, it's a follow up to Matthew, earlier I think. When you talk about the T6 papers are closer to being finished than started, what economic expectations do you have to set that in? I mean, what do you see going forward as the economic conditions that will make that work?

Randy Michaels: Well, the -- Scott, I think that what's -- I think that what Sam meant is that we did an exercise where we tried to project, based on the current trends, where we're going to be in 2010 and what the right size for the paper is. Sam said, death by 1,000 cuts is not -- I mean, I'm aware of how tough morale is and understandably so. We need to get past the Sword of Damocles and get focused on how to build better papers with leaner staffs. And I would rather take our pain at once and get to where we need to be, so that we can focus on the important work that's ahead of us in reinventing the American newspaper.

So we're trying to get to 2010 levels right now. And we believe at T6 that we're going to be pretty close. I think what we're trying to avoid saying is, we're not going to guarantee you, there will never be another cut or that no one will ever lose their job. But it is certainly our intention to get it all out of the way right now, and move on with some focus and clarity.

Scott Powers: Does that expect continued revenue declines [in] what you've seen, or going back to the 5% to 7% that you'd expected earlier?

Sam Zell: I think the answer is that our internal projections assume that the majority of the decrease in advertising revenue is structural, primarily the movement of classifieds to the net. So I think we believe -- originally believed that migration would be much, much slower. I don't know why, frankly even at this point, it happened so fast. But the net effect has been that we have to look to the future, and I don't think that our 5% to 6% reduction in revenue that we projected a little over a year ago, or a year and a half ago, is probably a realistic in this changed environment.

Gary Weitman: Thanks, Scott. We're going to move now to Ellen Yan at
Newsday.

Ellen Yan: Hi, everybody. Thanks. When do you guys expect the Tribune
deal to be done?

Sam Zell: You mean the Newsday transaction?

Ellen Yan: Yes, I'm sorry, the Tribune Cablevision deal.

Sam Zell: We expect it to be done before the end of the summer, maybe
sooner.

Ellen Yan: I'm hearing like maybe next week.

Sam Zell: Yes, that's a possibility. I didn't want to commit to you because, obviously we ain't done, and like I think Casey Stengel must have said, you ain't done until you're done.

Ellen Yan: All right. I know that once that's done, Tribune is going to have a member on the Board. Is that the entire Tribune's 3% stake, or can you talk a little bit more about the 3% stake including any specific reason for choosing 3% versus 4% or 5% or some other small number?

And does that also mean that Tribune will still keep getting 3% of the profit and also maybe share in -- or pay for 3% of any capital expenses?

Sam Zell: I'm not totally familiar with all of the details of the Newsday Cablevision/Tribune transaction. We do envision this transaction will close shortly. We envision that we will be a partner going forward with a minor voice commensurate with our ownership position.

I think that the final negotiations about what percentage of the company we would retain was a panalopy of all kinds of different issues that led to here we ended up and not some specific formula. But I would expect that Cablevision will make all of the decisions with reference to the operation of the business going forward, and that our board member would have a presence and a view, but obviously commensurate with our ownership.

Gary Weitman: Okay. Ellen, we're going to move forward. Mike Oneal
from the Chicago Tribune.

Mike Oneal: Okay. You know, I think obviously we all understand the need to move more quickly and decisively in this environment, but how do you balance the needed change with the general state of chaos it creates, or disruption?

It seems as though, in some cases we're losing good people, in some cases we're -- there's just a lot of, as Randy said a minute ago,morale problems. I mean, in changing the newspapers themselves, there's obviously a lot of risk in doing the wrong thing. And I guess what I'm wondering is, is there a danger of destroying any long-term value in these
brands in the interest of short-term survival?

Sam Zell: Michael, this is Sam. Let's just assume that we don't survive short term. What do you think our long-term benefits are? I think, Mike, some great philosopher, I think it was Confucius who said, necessity is the mother of invention. As Randy just explained to you a minute ago what we're doing right now is what we planned to do in 2010.

We thought we could very slowly prepare, change, execute it in an
organized fashion and everybody would live happily ever after. Then the
advertising market crashed. And we're looking at, as I said a minute ago, some of the worst advertising numbers in the history of the world.

I have a responsibility. And my responsibility is that I'd rather be able to keep this business alive when its cash flow has eroded at a prodigious level. What choice would you like me to have? I could just say, okay, let's just stop paying salaries and then we'd have enough cash flow and we wouldn't fire anybody. We just wouldn't pay them.

Or, we could downsize the business to reflect the realities both currently and going forward, and frankly, live to play another day. Believe me no one, no one enjoys the level of friction and the moral issues, and frankly, nobody enjoys laying people off. We're all human beings and we all have serious concerns about our fellow man. I certainly do and I think everybody sitting around this table does and yet the reality is, what's my choice?

Do I try and create a business that can be viable and preserve two-thirds of the jobs? Or, do I let all 100% of them go by the wayside because I'm not willing to confront the realities of the environment? So I guess I'd only ask you the same question, Michael in reverse. Either I make hard, short-term decisions, or I'm not going to have to make any decisions. What do you think I should do?

Randy Michaels: Michael, I'd also ask you to -- there's no question, it's a real question and it's a real situation and none of us signed up to do -- I didn't sign up to make the paper smaller. This was not our plan. But I'm sure it wasn't General Motors plan to close plants and lay so many people off. I'm sure it wasn't United Airlines plan to let 22% of the work force go and close 18 gates which, by the way, resulted in spending less in advertising.

I mean we're not alone, it' a tough economy and as it gets worse it feeds on itself. And we're hardly the only business doing this. I think we're sometimes, as an industry, a little bit too absorbed on what's happening to the print business because it isn't just us. And, by the way, we're not the worst off. Take a look at GM and you can see, if that makes you feel any better, that we're getting off lightly.

Gary Weitman: Mike, do you have a follow up?

Mike Oneal: I do. I think we've all spent a lot of time over the last couple of years thinking about how do we grow on the Internet. And one of the things that I think we're confronting now is that the Internet sites, or at least in the case of Chicago Tribune the Internet has the scale to the kind of production that its already -- that it already has. And so, trying to do more on the Internet in this environment becomes difficult in the sense that are there people there who have the expertise to know how to translate some of what we're trying to do online.

Randy Michaels: Well, Mike, can I talk about that for a minute? I hear you, and we're in a -- we're doing a lot of things on the Internet to effectively recreate the newspaper. I think that's the wrong business model. Page views don't equal circulation and display ads, while that's what we have to sell in the paper, hardly optimize the potential of an interactive medium. And so, let me tell you what I envision specifically for the Chicago Tribune and for many of our other papers.

If you think about the history of journalism, newspapers gather most of the news in the market. Everybody gets their news from us, news radio and the TV stations and everybody else, they get their news from us because we're the people with by far the largest news staffs in each of our markets. But newspapers no longer break most of the news. We lost that in 1939 when Congress, as a result of interest in the war in Europe, forced AP and INS and UPI to start offering news to broadcast, and all of a sudden radio broke the news. That was taken from radio by television. That was taken from television by cable, because CNN is going to break more than CBS.

I think it's about to be our turn again. Because more and more people are getting breaking news on their PDA, on their cell phone, on their Kindle, on their digital assistant, and it's coming directly from the newsroom -- from the newspaper. And so, what I think we need to do -- you think about Chicago, we have the Chicago Tribune, we have WGN TV, we have CLTV, WGN Radio, all making the police calls, all going after the same stories because they go after them in very, very different ways.

We need to build, especially in markets where we have multiple media outlets, a breaking news center. And we need to recreate our website so
that instead of looking like a newspaper online it looks like a breaking news site with the most recent news first, perhaps filtered based on your interest, perhaps not.

I'd like to see most people, or many people, leaving the Chicago Tribune website up all day on their computer because they're going to be constantly updated at work on the latest news. They may have to get the
paper tomorrow to read the rest of the story and to get the perspective
and the comment, but we need to become the breaking news authority.

That breaking news center needs to be a broadcast studio so that when
it reaches a certain level it goes to bulletin status on television, on the radio. And in markets where we don't own the television, where we don't own the radio we need to partner with somebody. We need to sell our services. We need to become recognized as the source of breaking
local news. And we're just a very little bit of technology away.

That may not sound like a big shift, but that is a significant shift. It's a big opportunity for the newspaper to regain its rightful place as the people who break the news and who gather most of the news in each of our communities. And that is coming to Chicago, to Los Angeles, to South Florida and in other markets as quickly as we can roll our partnerships.

Gary Weitman: Okay. And with that, we will close the call for now.

Randy Michaels: Let me say one other thing. I know that everybody hates the cutbacks. At the end of the day, we still have by far the largest news gathering organizations in our markets. In fact, the Chicago Tribune, once we complete these breaking news centers, which combine the resources of all of our media outlets, we'll have the largest, the two largest local news gathering organizations in America in Chicago and Los Angeles, smaller than they are now, yes, but still larger than any other --

The New York Times is a national publication, the Washington Post has just gone through cuts. We will have more journalists, more people in our news centers than any other organization in America. I don't -- I'm not trying to say that makes it right, but they'll be nobody bigger and nobody to say we're too small because we'll be bigger than they are.

Gary Weitman: And with that, we will bring the call to a close. We will have an archive audio available on Triblink later today. We'll have a transcript up on Triblink late tomorrow afternoon. Thank you everybody for participating, appreciate it. Goodbye.

Operator: Ladies and gentlemen, thank you for your participation in today's call. You may now disconnect. Have a wonderful day.