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How Wall Street helped to plunder the newspaper industry

Freshly printed copies of a newspaper.

Steve Chiotakis: Good morning.

James O'Shea: Good morning.

Chiotakis: What was the role of Wall Street in the plundering, as you say, of newspapers?

O'Shea: Wall Street demanded returns that newspapers delivered for many, many years. But it was unsustainable, and the continued demands put a lot of pressure on people that ran newspapers. Those pressures simply crushed them and made them make a lot of bad decisions.

Chiotakis: So what was it like being in management at the L.A. Times and the Chicago Tribune during this pretty turbulent time in the news business?

O'Shea: It got to the point where all you really did was try to figure out how to do more with less. That's why when Sam Zell came along -- a real estate investor with a reputation of having a Midas touch -- everybody actually kind of looked at him like a savior because they thought, well maybe he can figure this out; we sure haven't. Along came the investment bankers, and in this deal, they earned $287 million in fees. That would be enough for me to run the Los Angeles Times newsroom and employ more than 900 journalists for two years.

Chiotakis: You talk about Wall Street and big moguls who were plundering the great American newspaper. But is that an accurate statement given what the Internet did?

O'Shea: They had to deliver these kinds of returns, and to deliver those returns, they became over-reliant on advertising. And the Internet came along, and it was basically a far better advertising vehicle than the newspaper was. And so it put enormous pressures to cut, and it kind of ignited the cycle of decline we still see today.

Chiotakis: I know Tribune is trying to get out of bankruptcy. Can the company succeed given what it has in front of it?

O'Shea: Once they come out, Tribune Company will be owned by banks that don't want to be in the newspaper business. So they're going to want their money back, and when they want their money back, they have a tendency to cut budgets. So I think it's a pretty daunting future. The papers might be sold to somebody who actually wants to be in the newspaper business, and that'll be the best thing that could happen to them.

Chiotakis: James O'Shea, the author of The Deal from Hell: How Moguls and Wall Street Plundered Great American Newspapers. Thank you, sir.

O'Shea: Thank you.

About the author

Steve Chiotakis was the host of Marketplace Morning Report until January 2012.

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