Summary
You cut and cut and before you know it there's no product to sell. Unlike a factory or other asset, there's no correlation between reducing cost and overhead and making a profit.
Analysis
I guess in hindsight we should not be surprised with current situation at Tribune Company. While those of us in the media and communications industry can clearly see these changes it's been a little less apparent for readers and consumers of news so far. We tend to get a little hung up on Zell's 50/50 magic formula (edit to advertising ration), but it will trickle down to readers soon enough. It makes good sense to leverage assets; in this case newspaper, TV and internet but it has to be done so the end product is stronger than the sum of its links. At the rate they're going each element will lose more and more of it's relevancy to consumers and advertisers as well. Converting to a completely digitized newspaper product doesn't happen overnight. Yes, you can incentivize some subscribers to receive their newspaper in an electronic format through reduced subscription pricing but the big loss is on the business end, what advertisers are willing to pay.
So, in the end, it's not looking too good for Tribune Company, imagine how bad it will be when they shed the Chicago Cubs as well.
