LA Times editor

Journalists, accountants and bankruptcy experts found accord Thursday on the No. 1 issue facing Tribune Company as it begins its Chapter 11 bankruptcy adventure: It isn’t owner Sam Zell. It isn’t the company’s huge indebtedness. The question, said Los Angeles Times editor Russ Stanton, is “whether this is a viable business.”

In one way, Stanton told a gathering at USC’s Annenberg School for Communication & Journalism, the answer is already clear. “I think big-city newspapers, the way we have known them, are not long for this world, as they’re now configured.”

Stanton said his troops at the Times are scrambling to “reinvent our business on the fly,” but need a break from the relentless cost-cutting of recent months. Saying he hopes the bankruptcy proceedings will buy a little time, Stanton said, “We have to call a timeout here … or we’re going to cut ourselves out of business.” Sounding a more positive note, Stanton said the Times’ Web site revenue now exceeds its editorial payroll costs.

Financial experts attending the gathering of about 125 people backed up Stanton on the nub of the Chapter 11 proceedings. “What needs to be looked at: Is the big-city newspaper that we grew up with a viable entity?” said Mark Weinstein, an associate professor in USC‘s business and law schools. While he didn’t answer the question directly, Weinstein said, “The Tribune was in trouble before Zell took it over.”

One of the session’s most intriguing moments came when Los Angeles bankruptcy attorney Robert Greenfield said the bankruptcy court may well be asked to decide whether some of the $8 billion-plus paid to the Tribune’s former owners might be recoverable. Because the transaction was a leveraged buyout, and because the period from sale to bankruptcy was so short, Zell’s creditors could argue that it constituted a “fradulent transfer.”

Asked later in a phone conversation whether that wouldn’t be a far-fetched pitch in this case, Greenfield said, “Not necessarily. You’re talking major litigation. It’s very complicated. But I’m pretty certain somebody is going to raise it.”

Greenfield said Tribune should be able to maintain control of the bankruptcy proceedings, which he said could go on for years, unless creditors argued successfully that management’s restructuring had no likelihood of success.

Stanton said the Chapter 11 filing has had no impact on newsroom operations, and predicted that would continue another few months.

Several in the audience raised concerns about what happens to American democracy if a significant number of mainstream media go out of business or drastically curtail their operations. One current Times staffer asked Stanton to comment on rumors that the newspaper’s national and foreign reporting staffs were about to take a hit. Replied Stanton: “You can assume … everything and anything is being looked at.”

Although many in the audience were current or former Los Angeles Times staffers, a few came from NPR West to hear that operation’s general manager, Cinny Kennard, talk about the hit they’ve just absorbed — cancellation of the programs “News and Notes” and “Day to Day.” Kennard said she used to look at her for-profit colleagues at similar gatherings and think, “I’m glad that’s not me… It turns out it IS me.” Kennard said she’s especially concerned about the diversity loss that came with the programs’ cancellations. And she added: “I have grave concerns about the geographical balance” now at NPR.

Not all was despair at the session, sponsored by the Annenberg’s Center on Communication Leadership (CCLP). Michael Parks, USC journalism professor and former Los Angeles Times editor, said he saw Tribune’s bankruptcy as an opportunity to “buy back the Times.” The best outcome for Chapter 11, he said, would be to return Tribune’s roster of newspapers back to community ownership.

The panel’s moderator, Geoffrey Cowan, director of CCLP, said the government could have a quite helpful role to play through its tax policies, regulatory authority and other powers.

Geneva Overholser, Annenberg’s Journalism director, drew a distinction between the news business’ current strife and journalism itself. “It’s not the death of journalism…More people are coming to journalism than ever before…We can be hopeful that people will be willing to pay for reliable content.” (Disclosure: Geneva’s my wife.)

But for the people with an ownership stake in Tribune, no such hope exists, said Randy Beatty, USC’s accounting dean. “Those of you who are equity owners, you’re gone.”

Postscript: Former LA Times staffer Henry Weinstein reported that the lawsuit he and others have filed against Zell is proceeding. A judge ruled Thursday, he said, that the bankruptcy proceedings need not hold up the lawsuit.