NEW YORK — At a time when newspapers' fortunes are tanking, Rupert Murdoch's News Corp. is stocking up on them. The media giant, which last year bought Dow Jones & Co., parent of the Wall Street Journal, is negotiating with Tribune Co. about adding Long Island-based Newsday to its fold, according to a person familiar with the situation.
The talks reflect Murdoch's long-standing strategic interest in Newsday as well as Tribune's apparent willingness to sell major assets to pare down debt incurred in the $8.2-billion buyout that took the company private in December. Chicago-based Tribune also owns the Los Angeles Times, KTLA-TV Channel 5, the Chicago Tribune and other newspapers, TV stations and media assets.
Spokespeople for both companies declined to comment on the talks, first reported by Crain's New York Business.
Murdoch has long coveted Newsday as a means of bolstering his growing but money-losing New York Post, which has been in a three-decade-long war with its tabloid archrival, the Daily News. By combining Newsday and the Post's business operations, News Corp. could save money on printing and circulation and offer advertisers both the Post's youngish city audience and Newsday's suburban reach.
News Corp., meanwhile, is trying to reposition the Wall Street Journal by ramping up its political, cultural and sports coverage so that it can directly take on the New York Times.
The Tribune buyout, led by Chicago billionaire Sam Zell in conjunction with an employee stock ownership plan, left the company with more than $13 billion in debt at a time when the U.S. economy appeared to be sliding into recession.
The slowdown, paired with competition from Internet rivals for advertising dollars and readers' attention, have sharply depressed Tribune's revenue and cash flow, especially among its newspapers.
Tribune's bonds have had their ratings cut and have declined precipitously in value, reflecting investors' view that there is a rising risk of default. At the current rate of deterioration, Tribune probably would violate bank covenants regarding debt-to-cash-flow ratios by early 2009, Standard & Poor's bond analyst Emile Courtney said.
Tribune, in a regulatory filing Thursday, announced a $78.8-million fourth-quarter loss because of falling advertising revenue, higher interest expenses and a number of one-time charges arising from the buyout. The loss contrasts with profit of $233 million from continuing operations in the year-earlier fourth quarter. For all of 2007, Tribune reported net income from continuing operations of $55 million, compared with $661 million in 2006.
