of "the chicago tribune" and editor-in-chief of "the los angeles times" takes an inside look at the acquisition of the times company by the tribune company and the leader acquisition of the tribune company by the investor sam zell. this is about one hour and ten minutes. [inaudible conversations] >> it is my great pleasure to introduce these wonderful gentleman, james o'shea and james warren. [inaudible]

what i'm more excited about tonight is [inaudible] something you may not know about him is james o'shea is a master electrician [inaudible] we have a lot of work that needs to be done around here. [laughter] [inaudible] obviously you all know james warren. [inaudible] he writes a column for the news which appears twice a week in "the new york times" and also on

the web site. james warren is a fixture in journalism, you are all aware of that and he is known all over the country and all over the world for his frequent appearances on shows like cnn to the he was the washington bureau chief of "the chicago tribune." he writes for everyone including the atlantic monthly and the huffingtonpost.com. [inaudible] he is basically done pretty much everything to get these guys i am sure most of you know have worked together and we have heard a lot of different stories of them working together. one of my favorite is the story that both might tell how james o'shea was so mad at jim warren that he screamed at him and hung up the phone [inaudible] do you remember that? [laughter]

jim warren isn't here to retaliate tonight. [laughter] jim warren would be giving you a lot of james o'shea's background [inaudible] [laughter] but i just want to say quickly i have a huge respect and i know many of you do for james o'shea. [inaudible] he was a journalist and managing editor and [inaudible] it's nice to see how much people love and care and respect him and i think it took a lot of courage to write this book. jim is used to for writing about other people and i think it is not always so easy, and so it's really especially great to have him here talking about his book.

i also want to mention this is being taped for c-span. i think you know that coming and c-span has asked me to ask you if you are asking questions during the question and answer time please, wait until the microphone comes to you and start asking your question. with all of that i would like to introduce james and jim. [applause] >> thank you. [inaudible] [inaudible] i want to thank lisa hindman and it's a very appropriate space for the topic of the book. [laughter] since the book revolves around very much to deals, one an

option. [inaudible] mutually agreeable score setting but the fact is they wiretapped our conversations in the same way they wiretapped the former illinois governor who would find the great attention between us for periods of time and so the former editor of the paper put [inaudible] [laughter] i will be very short this book about james o'shea personally as

a native and graduate of a military run by christian brothers [inaudible] the only thing i learned is how to take a punch. [laughter] he was third lowest in his class and his older sisters suspected he was destined for a career in newspapers when at age nine he stole her diary and sold it to her boyfriend for $5. [laughter] the point tonight is to start taking him seriously, just remember that. [laughter] so, let's start off there are a whole bunch of seats of here, nine or ten seats in the front if you want to come on down and sit for a while. all these years later we have

this book called "the deal from hell." what is it about basically, and why should we care, especially [inaudible] >> really this book talks about the differences between journalism today and when i started. when i got into journalism in the newspaper business it was really largely controlled by families. not all of them were agents by any means, but they have a kind of public service markets and basically no one put it better than mike who was a member of the family of the first and he always says the only thing a newspaper has to worry about is

if the public respect it because of the public respects it, he will have readers and if you have readers you have advertisers and that is the main source of income and revenue for the newspapers is you really have to be respected by the public to be in a successful business and in the 1960's or 70's that sort of got turned on its head when the families wanted to get out in the business and they started selling and a lot of times they sold them to people come to the corporations owned by stockholders [inaudible] and the journalism also had a fiduciary duties and the first or fine because they had a lot of money coming in and it was pretty easy to balance the two things. and then sometime after september 11th that changed and we began struggling with that to

try to maintain the profit-margin. we began cutting and i suspect all of us were subordinating the public interest with of the fiduciary duties to produce the kind of currency will street and others expected. and i think that kind of lead us down this path where we are today. and in the case of the company and a great institutions it is today [inaudible] and i think it has -- it is an institution in all newspapers like it's i don't think people understand the fundamental rule the newspapers play in the information and there are other threats [inaudible]

people should care about the story not just because it's about me or "the chicago tribune" or the l.a. times, it's about journalism and that is something i feel should be vital to the society. >> the book is called "the deal from hell." it's about two things. first in the year 2000 [inaudible] the economic backdrop at the time [inaudible]

serial killer and that's like cereal like cheerios. and he was critical to the attack of the strategy executed. >> i think the deal is [inaudible] [laughter] time warner had just merged and things look pretty good, the future looks pretty bright, we paid a lot of money for it and the way it was structured is the

serial killer was the ceo and by the way he used to be the co-chairmen of general mills and the staff at the l.a. times was phenomenal. [inaudible] [laughter] so they didn't mark of the serial killer because he started cutting things and went to the new york newsday and therefore he got that name, but when the tribune bobbit mark willis didn't know they were buying the company. they bought it when he wasn't even looking. it was kind of a backstabbing drama and because they were trying to do the deal in secret a lot of things we should have known about that we didn't know

about it came back to haunt us later. the things we didn't know about like the circulation problems, all of these sort of things came back to haunt us and really became, put us in a troubling position which made us [inaudible] >> the tax case for the general is one that [inaudible] circulation problems jim who refers to at newsday which are gathered on a double-edged sword trying to do the secret on behalf of the ceo. >> i think that's true, and you

can fault a lot of people with the due diligence didn't last very long and even though there was evidence one of the things i found as i found some letters that were written to the people involved in the circulation scandal and six months after others went to the guy that was involved and inventing fake computer programs and september of 2000, six months after being completed in this deal, and what was even more surprising is the law german los angeles which represented [inaudible] i think those are the sort of things that though there were some signs we didn't take a long because we were trying to get the deal done.

[inaudible] >> they were happy with the ceo of the company. what was to something different and i don't know that they were clear of what they wanted the days of the tribune had newspapers, television, we were into the internet, probably one of the more innovative companies at the time, and i think they also felt very strongly that the leadership of the tribune company particularly somebody in the audience was somebody that

could gain the company credibility because the journalistic principles, and because he was considered and was willing to send someone they trust it and so white think they really saw a lot of good things about the tribune, and wanted to diversify and wanted cash. [laughter] [inaudible] kind of a tax-free transfer. >> [inaudible] >> i think it was a seven or 8 million-dollar deal. they got stock and it was disputed because they wanted to take -- they were wanting it all in stock so they wouldn't pay taxes, tax-free transfer into some of the shareholders didn't like that because they were

going to get cash and they would have to invest. it finally got settled, but at that time it was the largest newspaper merger in history. >> by apologize if i [inaudible] may have voted for him six different times. [laughter] it also involves the transparent times. is it not true for some period of time the conventional wisdom was a smart move that things were going in the right direction? >> there were a lot of times the deal was actually working. in the early years it required -- the companies took a lot of cost of the times, and they did

something that frankly was almost that no one else had been able to duplicate and that was the careerbuilder dearth website and monster is going to wipe out everybody and careerbuilder, though starting of the internet operation was finally successful and eventually overtook monster. so for quite a while it was working very well. and in journalistic, the los angeles times when they took over was really from the scandal we turned that people around and it was a little surprising. [inaudible]

>> [inaudible] less folks in the newsroom and our counterparts in los angeles which increasingly coming you know, seems to us as sort of a we word western empire doing what the hell but wanted to do. but let's move past all the rich possibilities of score settling which i love to do now, but i want. i will take the high let's fast-forward to the core of the book, the second big deal, the deal from hell and tell us what was going on in the industry in that the company and the economy and the period a round of 2006, 2007 that prompted the defacto to bring to the spotlight the gentleman named sam zell. >> there were people struggling with revenues. those attentions really created a lot of, you know -- who is

going to get it? who's going to lose stuff? is it going to be the l.a. times, "the chicago tribune"? everybody fighting for their reputation. and personally, you know, i was asked to go off to the "los angeles times" in 2006, november of 2006, after the staff rebelled against the company numerous times. john carroll, one of the editors and a year later a good friend of mine left and i went out in november of 2006 to take over the l.a. times, and i will never forget the first day that i walked in, i walked in the door of the l.a. times and the security guard said who are you? i said i am james o'shea, the new editor. he went and got a pass for me to go in the building and was good for one day. [laughter] i thought that says a lot right there. i walked into the newsroom and all around the newsroom are

pictures of dena and chandler. i kind of looked around and thought okay, welcome. so i decided i was going to go there and i was going to get out in front of the newsroom. i told them right away i want to assemble the stuff and i went out and basically said okay i'm a journalist, i'm here and i think i can help you guys and i basically tried to be honest with them. it appeared to the journalist that, you know, they will give you a fair shake. they travel in the fairness and balance and if they think you are honest and they will give you a chance even if they can't stand to which a lot of them probably looked at me like that. and so i basically did that and we tried to do it. but all throughout the industry you have to understand people -- we had gone through three or four years of trying to figure out the right size of the news room, how to downsize the news

room. there were real economic winds blowing through the whole industry forcing all of us to do a lot of things we didn't like and that included laying off people, he eliminating jobs. it got to the point where you really didn't want to do anything because you were afraid you stuck your head out somebody would say you're going to switch somebody? you really need them? and so, you kind of got to the point where it was you were sick of cutting back and you were just looking for an opportunity to do something about it. not a lot of people knew what to do. and that is when this came along. >> what were the factors that prompted the tribune company to be essentially put itself up for sale? why, why didn't the need anybody to come in? what was going on whether it was the stock price or the revenues, why was it not on the same steady course? >> well, the revenues started eroding, the cash flow began to be challenged, we could say.

i think part of it, too, was the happy chandler's came into play. the chancellor's did not -- they were not happy with the direction of the company under dennis fitzsimmons, and so dennis went out to stop price of language and the revenues were down and to kind of get the stock price up he engaged and created a stock where he was going to buy a chunk of the borough billion dollars and buy back the stock and that jeopardized a couple of trust that they had and they were worried that would make it difficult for them to unwind the trusts in a way that wouldn't cause them to pay a lot of tax. so they wrote a letter to the board and made a public attack in the management of the company, the direction of the company coming and when you do that the company goes up for sale. so that's when the company was put up for sale.

>> why was it that so many people the truth here from various places, wall street, a lot of other media companies looked at the book and headed back to o'hare as quickly as they did? >> at that time the newspaper business, you had companies coming up for sale and forced into a situation where a venture hedge fund guide for still to be put up for sale. i did get was the minneapolis tribune which sold for $1.5 billion. like nine years before obamas got about $500 million for it and everybody was shocked that it wouldn't bring any more money than that. and people began doubting it. the internet was coming along, the newspaper industry didn't know how to deal with the internet. and so stock prices started the stumbling yet there was an uncertain future nobody wanted to walk into an uncertain future they don't want to take that risk. so they couldn't figure out how to make it work and walked away.

splenectomy the most fascinating stop in the book involved the purchase of time where this guy you have to tell more about name sam zell comes into the picture, and there is this feverish activity behind the scenes to put together this deal. tell us a little bit about his entry onto the scene and the feverish activity which you disclose particularly as it evolved some well-known firms in this country. jpmorgan chase, morgan stanley, merrill lynch all involved in does you characterize it it seemed to be doing the same out of less the most noble interest not necessarily carrying much about things like the social mission and a lot more about significant fees and expenses to be paid and tell us also how that relates to something called a solvency letter which you spend a lot of time on.

>> well, when sam zell is -- he kind of mick came to the to -- nickname himself and his big thing would be to come by distressed assets. so he wants to come when you're not doing well and pay on the dollar to get a hold of your company and then he can bring some expense of our budget and reform it and sell it off a few years later for a lot of money. he was successful in that in some cases, he was pretty successful at it and he looked at the tribune company and fought okay here is a company which if he valued he thought it was about 16 or $17 billion he could buy it for like 13. all he had to do was to borrow a lot of money to deutsch said that's what he did he put about $300 million down. it's worth billions and billions of dollars curious of 300 million is a lot to me and you and anybody in this room, but it wasn't relatively speaking that great a risk for him. so it puts that down and probably wrote off some of that

on that. borrowed the money and goes out and he buys the tribune thinking that he's going to hold onto it for a while and make a killing. >> it wasn't just the matter of putting on the 300 million. there was a very complicated deal which was a great fascination to lots of people in the financial business. i remember the first and probably last time i will have gone skiing in my life my wife took me to park city utah following the deal and we shared a house with folks including the cfo a big wall street firm who was far more obsessed with the deal, and i was because he just couldn't figure out what would work. he knew everything about it. he knew the involvement. you will have to explain that to get and said that in his little world if this deal worked, it was going to be something of historic consequence, but he just didn't get what would work.

so tell us about some of the intricacies of the deal itself. >> to answer the question, or the rank and file workers drafted? [laughter] >> welcome naturally i will do that first because, you know, the people who were working at the tribune company when the deal closed the $34 a share for the stock that the road, so if you were sitting there and you had stock and you had purchased it and as part of your compensation program over the years you get 34 a share there wasn't anybody else the was going to be $34 a share of that time some of these people didn't come off so badly and they were saying thank god sam can along. but the way that he structured it it was unique. he created an esop which is an employees' stock ownership program and through financial maneuvers he used that to kind of by the company, and he and the employees were kind of partners and they were going to

buy the company, and because it was a esop they didn't have to pay taxes to the tribune company of that time span two or $300 million a year of income taxes. he could eliminate the 401k because now you are an owner and your return is going to be in the stock. so there goes another 60 or $70 million. and he is looking at all of these expense savings and was unique and a lot of people in wall street didn't understand this. and when he went and sold it, he convinced them this work. ..

that he could close the deal so the stock that was out there, is still out there tanks, and everybody is trying to figure out if he is going to be a will to pull this off. he keeps saying i can do it, can do it and he has all the money borrowed. the banks then begin saying the first phase in the deal, the investment banks earn $161 million in cds. that was more than enough for me to run the "l.a. times" newsroom for a year and employ 970 journalists. so that was a huge amount of money. and then within the second phase is coming on and they are going to get another $122 million in fees altogether in his $280 million in fees that they have writing on this deal but the deal has to close. so there's this enormous

momentum to close this deal, despite people saying i don't know if this thing is going to work. this could bankrupt the entire company. if you are a banker, it is against a the law to lend somebody money when you know that the loan will put them in bankruptcy so the big deal became, they had to go get a solvency and this is an outside, kind of the good housekeeping seal of approval some financial guy will say this is going to be okay and they're going to make it. so they went to several funds that did not want to touch it and then they went to one in milwaukee, and evaluation research corporation and it paid them a million dollars which is a huge feat, to do a very quick solvency opinion on the second phase of the deal. they issued a solvency decision even though most of the people that work for the evaluation research corporation was suggesting not to do it. they got that deal and that is how the deal got close. that is how the banks cut their fee and that his is how slam zell got the company and that is

how the employees got screwed. they end up being a company that they could not be carried that dead and that is when they began laying them off. i was at the "chicago tribune" and we had 700 -- a little over 700 journalists working. we have a little over 920 journalists working in the newsroom. probably too many, but right now i would say i know the "l.a. times" is bound, probably around 550 to 575 journalists, so all of those people lost their jobs. i don't know their levels but i would suspect their staff is a third to a half by now. all of these look great and frankly when sam zell came along we thought maybe he has got the answer. we have been trying and we can figure it out. sam zell the big successful guy. he comes along and he is saying to us, can cut can't cut your way out of this.

hey man, and want to hear more about that. you can't cut your way out of this. you have to grow revenue and we are struggling to do this but in the end the dead was so narrow that if we missed our projections by like 2%, the aesop would not get any kind of funding or any kind of benefits for five years. it was that close so the thing finally went into bankruptcy at the end of the year and now they are still struggling. right now, right now these papers are fare better off in bankruptcy then they will be when they get out of bankruptcy court because when they get out of bankruptcy court the banks don't want to be in the newspaper business. they want their money bank and there is one way they are going to get it back. it is a pretty grim situation for the employees. >> is there any jack daniels around here? [laughter] i was going to meet my wife later but if anybody has a

flask, just send it right up after that jury assessment. zell can obviously be a pretty convenient foil particularly given the sort of larger personality, barry propane guy but to what extent should there be a fair amount of responsibility shared by the previous tribune company board of directors. what about their role, including some bastions of the chicago community who undoubtedly thought that in some way they were upholding this very meritorious legacy? >> i didn't drink enough wind to answer that one but anyway. there is culpability and responsibility for the board. i think everybody, everybody who is probably guilty of wanting the deal to go through and everybody was guilty of hoping against hope that we could get out of this, and so i think people kind of closed a blind

eye to some pretty disturbing realities. the journalist, we all were wondering, we wanted to be successful. we wanted this thing to work so i would imagine if we weren't reporting this deal we would have gone hey are you crazy? this is an a going to make it that we didn't. we turned a blind eye to a too so i think there was a lot of responsibility all the way around, but in the end, what i try to do in the book was not assign blame, not point fingers but say this is what happened and let the reader figure that out. >> oh, come on. let's not be so charitable here. take us a little bit inside the zell camp and as i read the book you suggest that there were two conflicting visions of what to do with this company and its assets within the zell camp and as you tell us about that, please do tell us about a fellow

named randy michaels. >> no, no. [laughter] >> well in the zell camp there was one camp that said we should work with these existing editors. these are solid, good editors and solid good papers. we should really try to work with them and see what we can do to improve it. that was kind of a memo that was drafted for sam zell by bill payton is chief investment officer. talking about the first 100 days. what did we do will make when we got the company? the second was by randy michaels who was his chosen coo and it was totally different. it was 12 or 13 pages of bullet points. never mentioned the word turtle is a basically said let's cut this about giving the people what they need to know. this is an attention deficit society. attention deficit disorder society. we need to give them what they are going to read and we need to

get them what is going to sell ads and that is the philosophy that prevailed. randy wanted to say, let's have fun. his idea of fun was not much fun for a lot of other people particularly women. he was a pretty abusive kind of guy in that regard and it is well chronicled some of the incidents that have occurred. and so, they went with randy and it was a disaster. day i think dumb down the paper and i don't think with the citizens of chicago benefited. i think the citizens of chicago spoke very clearly because i think a lot of them have quit the paper and walked away from it. >> there is a chapter in this book that is titled count kern. explained that title and wyeth you decided to write about that topic.

>> well, because count kerns, jerry turn,, he was the, he had a position of the tribune publishing and it was, you know, he decided that he he and i were kind of competitors for a managing editor job and i became the managing editor in jerry went upstairs. i don't think he ever really got over it not been named managing editor. that point aside, he began really examining our operations and there were some good reasons to do this because you could eliminate some duplication but i think he really focused on it and he began counting how many -- of hurricane katrina how many people were resending to cover this? how many people did the "chicago tribune" sent? what did they write? he began examining it in a grand jury way and i began thinking of

him as the sky the calms everything because every time i turn around i have jerry out there counting how many people i am doing and basically trying to second-guess why we did this. i think in the end that gave people some ammunition that they need someone randy michaels came along to basically really cut back the staff pretty severely and it closed all of the foreign bureaus and the national bureaus in the "chicago tribune" and basically it was determined that no one in the city of chicago was interested in anything other than local news and they didn't really need their own foreign reports and they didn't need their own national stories. i totally disagree with that, and so i felt like it was an important part of the story that sheds some light on why these guys would come along and just decimate the place like that, because that is what they were looking at. >> meanwhile out in los angeles you are the editor-in-chief of "the los angeles times." your boss, the publisher, man named david heller now the head

of the mccormick foundation here her injured auto. explain your relationship to him and why ultimately you departed the "l.a. times" greg. >> well i think david, he is a nice guy and he was really trying to do the right thing out there. but we got into a big difference of opinion, not about cats that if you are going to cut the budget what do you do with the savings? and he was under pressure from sam zell to put the savings as the bottom line. i kept saying we need to reinvest that in the paper and i had started to convert the paper i'm a news organization that rogue stories on line and explained and analyzed them in the paper. and for that we need some selective investment. no one was going to give me that investment. i said look david i've been cutting investments for five years now. this is not working. we keep cutting the budget and things keep getting worse. i had done a couple of things

with a couple of sections that generated some new revenue and i wanted to go through the papal and say each section to try to generate more revenue and try to deal with this problem with the balance of budget cuts and revenue enhancements and he did not want to go that way, so he decided that he was going to make a transition and so david always said, you know, he still says i did not fire you. i said i don't know because i had never been fired before that when somebody comes and takes you to lunch and they say to you i am going to put somebody else in your job i kind of think that qualifies. [laughter] so, we probably still disagree with that, but we just could not cia to eye on the future. i said, i'm not going to -- i told you when i came out here i was not going to cut this place indiscriminately and if that is what you want to do and if this place needs to get smaller and

smaller and smaller you probably need yourselves to get an editor because i won't do it. so that is when he said okay i'm going to get myself an editor that will do it, and he did. >> part of the book is personal and poignant, so let me ask you, what was it like, whether it was fired or quit, what was it like to be wherever you were, condo, near the beach and presumably for the first time in your adult life unemployed? >> that is interesting, because in a way it was a little bit liberating. i will never forget the first day because i went and sat and i was looking at the ocean and the waves are coming in and i'm drinking a cup of coffee. i thought, holy -- i don't even have anywhere to go today. it was the first time since i was a kid that i hadn't had a job or somewhere that i had to go out and do something that day. i thought, what am i going to do?

i will go ride my bike and that will be the first thing to clear my head out and then i began thinking well there are a lot of things i wanted to that i have always wanted to do. i wanted to write a play so i sat down and try to write a play. i actually wrote a play and it wasn't very good. then i decided i -- i started to revive my interest in photography. there are a lot of things you want to do in your life in here is an opportunity to do it. you don't have to sit down anymore and worry about going into the office every day and thinking how my going to save these people? what am i going to do to keep these people working? what am i going to do to avoid letting them off? i looked at it in some senses an opportunity. it was unsettling fell because you just get hired -- fired and everybody is writing. there goes another job. and you know, my daughter was still in school and my son was

in graduate school so i was trying -- it was a pretty scary thing. it really is, to sit down and look at it. then you just look and say well, i always look that bad situations and said where is the opportunity? i saw an opportunity to try to do some different things and go going a different direction and i got basically bailed out by a guy named alex at the shorenstein center and called me and said would you like to come here and be a fellow? i thought, i had never been a fellow. now i never understood what i fellow did. that is better than being a nobody. i never dreamed of a million years that i could get through the door at harvard. like i said i graduated the lowest in my class. here i went to harvard and i'm sitting in the kennedy school and i got a researcher and i could tell her -- she was helping me research the book. i had a book contract by this

time and along came this opportunity. a funny thing happened to me. all these kids started coming up to me and i took them to lunch. he was the editor of "the harvard crimson" and he said to me, you know we have this luncheon talks about all the things i had done and he said at the end of the lunch, i want to be you. i said, what? he said, i want to do exactly what you did. i said, are you crazy? everybody i know is being laid off, fired are unemployed and you want to be like me? he said that you rent out and try to do some good things in the world and that is what i want to do. i began thinking about that and became friends with the people in the nieman program. i began -- they were all there, talented people, some of the best in the business and they were all worried that when they went back to their papers they would not have a job. then i started thinking, the newspaper business was good to me. i was a kid from nowhere and i

got to be the head of two great newspapers. maybe i should give something back some opportunity came with my publish peter osnos who called me and said they were trying to form a new knowers organization in chicago and what i help? so i did. i told them about -- i will be a catalyst. i will help you get this off the ground. i will work for you for a year with no salary. it is really needed in any business, any county anywhere. how we going to do that? we are trying to figure that out right now. nobody has figured that out. no legacy news organization, no one but i really feel strongly that it is important and important to this community and important to the country and

important to the world to have strong edited information, not gossip, not junk that has put up somewhere so somebody can justify an ad. you really have to get out in figure and that is what we are trying to do. that led me to another point where i thought you know i'm glad i got fired because i would have never done this if i hadn't been fired and i'm out there and it is spun. it is interesting. it is scary to say sometimes it is the same thing. you walk into place and you figure how you going to get money to keep these people employed? i have learned what many people in this audience probably have experience. fundraising, boy did that. [laughter] i don't like it. i'm a journalist. i never asked for anything and there i am going out and trying to raise money and that is what i do now. i am a fund-raiser and probably not very good at it but i am trying at it. but the whole thing is to try to figure out how are we going to provide the money that does this

vital service because nobody is going to buy an ad and say hey do want to buy an ad to sponsor a story to put someone in jail? no thanks. you have to figure out, how are we going to do this? it is the kind of journalism that is really going, the coverage of government and institutions and the statehouse and all of these things where a lot of our problems remain. that is right now what we are trying to do. the long-winded answer to your question, what it was like? it was scary at first but in the end it was a pretty enlightening and thrilling thing and i got an opportunity to try something and maybe help people and teach kids journalism and the kind of journalism i believe in. >> i have a whole bunch more questions but i'm going to ditch all of them so you guys can ask a few questions and when we do there is a mic from c-span so if you can hold off a second before it comes. since we just mentioned in

passing a thing called the internet and i see a friend, howard tallman, a great chicago entrepreneur who had something called the flashpoint academy, which is multimedia vocational school. i saw him give a speech a couple of weeks ago that sort of laid out how people were consuming media these days. it is both frightening and challenging and you see them who get their news every day from youtube or example. and a dramatic accelerating changes. say you took over some big media company today. how do you deal with monetizing you know what you are doing, particularly on line, in a way that can pay for that great journalism of which you are a part of? >> well i think part of the things we were talking about doing is trying to create communities of interest. organized around the subject. i mean i don't think you can look any more anymore at a mass

audience. so you look for, let's find the people in chicago that are intensely interested in education and let's create a new centrist network kind of on line that really gets into good education coverage. can you find 10, 20,000 people, less than -1/2 of 1% of the population and cook county? county? can you find people like that would pay two bucks a week or good education coverage and then you have used that money to hire education reporters to go out and cover the subject and then they create the real good solid, good education coverage on line and then you create another -- out of that you cherry-pick through that and create a broader site for people that don't want to pay for it. can you go out and find people that are in just as in politics? can you find people in education and health and all in all the subjects and create these narrow audiences that will pay for this

because they paid -- care about it and are committed to it. can you use that money to hire about 40 or 50 reporters to go out and cover the city? and get that kind of coverage that is sorely needed, and can you use that to create a broader -- the way we did one little experiment with a thing called early and often, political web site and we got people to pay for it. it granular political information and we took some of that information and created something called the palm card which is something everybody gets for free. so we are getting money from certain people that are ingested in politics and using that money to do two things, higher political reporters and supporter web site that goes to the general public. that is our idea but i think in a legacy news organization you have got to start, you have to do two things. the first thing you have to start doing is gradually get out of the printing business. it is too expensive and people

are not going to pay you $5 for a newspaper every day or 10 or three or four and that is what it takes. that is the big cost. it is not the reporter. it is the printing press and they ain't and the driver of the paper. that is what cost to the money, 70 to 80% of your budget. you have to get out of that business because it is on economic. the prices people are used to getting for newspapers or you have to go on line. maybe you don't have a daily newspaper. maybe you have a newspaper three days a week. maybe you have that one day a week. every other day you have on line business and then your costs go way down because you are no longer delivering these things to everybody everyday and every day and sometimes they aren't even looking at it. so i think you have to -- i think you also have to go on the business side of it and quit selling zip codes in ad positions and start selling people people -- men who do you want to read? we have the data. how are you going to get them

there? how do you get people in facebook? what do you do with twitter? howdy how do you reach her audience? we have to become newspapers newspaper newspapers had to become modern information companies that deal in traffic in information and help people that are business, wherever get their message across to the people in the audience. we do know the audience and we have to figure that out. i don't know that his answer but it is a hell of a lot better than sitting here and watching everything go to hell in a handbasket. >> my last question is about methodology and writing the book. partly i was inspired a couple weeks ago when you are first box of books showed up in the gave me a comp and -- a copy in two feet outside your door and simply look at the index, and as vain as i am, breathed a sigh of relief that i was only mentioned once. you know combatant washington

bureau chief or something like that, which was fine by me. there were a lot of people that were mentioned many many more times. there were a lot of people we spend a lot of time with particularly corporate executives and some of those aren't treated quite as benignly as i am. tell me a little bit about that, about -- i don't know if you call it an ethical matter but how you use information that originally came to you and distinctly private business meetings with some of those folks and then just talk to me a little bit about, i don't know what you call it, the more emotional side of it. i cringe at occasional sentences here and there about some of the folks we know. since we are only talking to a few people here and a few million on tv maybe, the former ceo of the company and we spent a lot of time with you particularly, named john madigan.

he is not going to necessarily be a happy camper. tell us about the challenge of writing about people who use of new and it pretty intimate way. >> i could say, respond to john. john and i don't think it is going to -- he didn't like the idea of me writing about this but i kind of went back to almost everybody and interviews and went over a lot of what happened. there are some instances that may be a private meeting that i was directly involved in that i used, but i didn't do it unless i thought it really lends to this story. it contributed to the narrative that characterize something. there were things that i struggled with frankly. there were a couple of incidents that were pretty embarrassing. i went back and forth and at one

point in the end i said no i'm going to take it out and then i would go back. i had to sit down and say, does this specific thing, does it contribute and lend understanding to what happen? if it did, used it. it is hard because i don't want to embarrass people. i really don't, but i think you have to look at it. i am a journalist and in the end, any journalist is the same way. when you sit down to write your only friend in the world as the reader that sits in front of you. you look at it and it is a screen but scream but it is a reader. you have to be loyal and faithful to the story. so, that was my guiding criteria. if it lands understanding insider contacts the story, that is one i would consider using it. if not, and there were a lot of other things that frankly i did not use that i found in my

reporting. it was much more embarrassing so i didn't. >> one of those that offers a great deal of insight and context does involve, so when you go to amazon tonight, there is a little bit of titillation and there, which is in its own way very revealing, and with that, like people magazine magazine like segue, let's open up to a few questions. what was he talking about? jim, you and i know each other so you know i'm not looking for a job. i'm gainfully employed. for how much longer i am not sure, but here is my question. people like me have taken a great deal of comfort in the integrity of this newsgathering

aspect of what you have done for a living and brought to which integrity to the publications you have been involved with. that model is vanishing. i love telling everyone that you and i talked about tonight that i have daughters, 21 and 24 and i don't think they have ever read a newspaper. of course you folks in journalism have all seen that and are trying to make the transition into the digital media. you are doing back at the same time that there is so much pressure, economic pressure on the gathering model -- [inaudible] [inaudible]

[inaudible] >> for people who are able to pay $2 a day. [inaudible] for the rest of their people there won't be that kind of thing. [inaudible] that was an amazing thing, and that is not going to be true in the future, because the model is

broken. so i mean i think, that is why i kind of got involved. we have to figure it out because if we don't figure it out it will go away. i think the best thing -- i do see lots of hope. i see lots of organizations bringing up and i'm just hoping that the traditional newspaper organizations can learn from us and we can learn from them about how we can maintain that. >> another question? up in the front here. >> hi. hugh had commented that while you were still at the "l.a. times," you had started to think about the on line aspects of things as being a source of breaking news and that you were going to use the newspaper as an extended analysis of the story. do i need to repeat that? >> no, just go ahead.

>> i will, i will. >> can you expand on that and tell me what your thought process was and what you hope to accomplish from that? >> the question was what was just theoretical strategy when he was running the "l.a. times" about how to divide the role of the internet on line version of the "l.a. times" with the print version? and see them as two separate entities. well i think at that time, you know, there was a divide in the newsroom. there was an on line newsroom and the print room news and it was very difficult because there was a culture clash like all of the culture clashes and he really had to make people realize that you really have to -- this is one news organization and each medium has its own strength. journalist like to tell stories so you can kind of convince people that they the avoidant thing here was you know, tell your story for the medium that it is, so i think my thought of

it was, kind of explain to people, he laid out for them here is what is happening in classified autumn that will advertising and this is what was paying her salary. and we lost to say $200,000 in print advertising last year and they only gained $50,000 on line. if we don't get the on line going, next year it is going to you worse and i will have to lay people off, so let's get with the program. that was a successful message out there and people began taking it too hard to heart and looking at it. dad actually started and it is still going on. i think the "l.a. times" has been pretty successful with its on line operation because they kind of adopted that. it is a very difficult proposition for a lot of journalists at that time and a lot of brand journalists were resistant to having their stories appear on line before they appeared in the paper. it was a real hard to break that down. there a lot of people in this room that wrestled with that and

they can tell you is tough but they had -- we had to do it. >> can you talk about classified ventures in terms of, think you said it was early to the on line internet world. is that what you are referring to? >> i was referring to a company entity called classified ventures which was pretty early to this on line world. well, the one that i was referring to us a different one called career builder. career builder was really an outgrowth of a job section in the newspaper, and we basically took career builder, made it in the on line jobs information and classified advertising vehicle and when we did it, monster had overtaken all the newspapers and was way up there and everybody thought that's it. it's all over, and actually jack

fuller was one of the driving forces behind it. career builder eventually overtook monster and is one of the few examples of the legacy news organization creating an internet vehicle that became a very powerful force in the industry. so that is what i was referring to and bad save some of the classified advertising that craigslist was coming along which killed us. >> jim, in your book, you talk about the greatness of the editorial voices of the chivian and the "l.a. times" when they were at their peak. what is the future of an editorial voice in a model like the chicago news cooperative?

>> i am sorry, i don't really understand. can you be a little more specific? >> the influence of otis chandler, the influence of colonel mccormick to set the tone on the publisher's perspective? >> okay, and how would we do that at the chicago news? if you embrace the values of a journalist, and i think part of it, one of the reasons that the people you mention otis chandler and mccormick in the people who really gave the tribune, chivian, made the tribune a great newspaper is they really had strong journalistic values and they really believed in the journalism. the kind of god out of -- the journalist should be in charge of the business side of the operation and be involved in it. we had a wall to protect the so it would remain peer and i think that has got to change and i think journalists have to assume some of the business responsibility that we didn't do for a long long time.

the kind of figure this out because i think what mike cole said when i talked about before, every news organization has to be based on the public's respect for you and your values and the institution to run so you have to really be strong and you really have to resist. i think it will be easier and an organization like the chicago news cooperative that is trying to figure it cannot balance a a bunch of revenue screens. so i think a lot of it is in the value of the journalism and the value of what you are really driving for and what you are driving ford is respect for the public. if you have the respect of the public and readers you can figure out some way to monetize that. >> we have one more. why do we take those and call it a night? >> do you foresee a model or a future where people are going to pay for on line content of any

quality? >> the question is does either of us see a future in which folks were pay for high-quality information on line? i think you are saying that. you see that in bloomberg. they pay a lot of money for high-quality information. i think as the newspapers shrank and as they -- as it becomes much more difficult for them to keep providing the information for free -- you are seeing it now. in the smaller papers are of the country they are charging for on line content and they are doing pretty well added. it is the dailies that aren't doing that yet and i think they have to because you cannot -- this is unsustainable. you cannot give away information. gather information and give it away for free and expected to make it up in an ad market. it is not going to happen. >> maybe one last one.

and esteemed former "chicago tribune" correspondent, dorothy collins. >> jim, i'm going to ask you something critics will ask you, and that is, they will claim you are trying to settle scores. what is your answer to that? >> the question from dorothy is, you are going to be hammered for settling scores. >> well i think it kind of accept that is going to happen to you when you write a book like this. i gave the book to several people ahead of time and said, do i look like i'm settling scores? tell me the truth. if you do tell me, and i changed a lot of things where people say the word being a little mean there and the turn of the phrase looks a little bit like a dagger. i kind of eliminated a lot of that and tried not to. i really did try to say if i were reporting the story is a reporter even though i am involved in it, could i just do

an honest job of saying what happen? that is really what i wanted to do. this is what happened. and i say up front, this is from the bias of the journalists. so i tried to be pretty upfront about it, but you are going to get all of that. so you know i have taken a lot of lumps in my day and i can take a few more. >> well i want to wrap up by first of all thanking everybody for showing up here tonight, thinking leslie for offering this space. i thank the folks at c-span, and i am one of the ones dorsey, who was a little bit nervous in picking this up and thinking he was going to be just a whole lot of score settling. as much of it as i kind of would have liked to have seen on one level -- [laughter] when i put the last page down, a he sends jim an e-mail saying you know, you have more self-restraint than i would have had and i think at the core of

it is a book less about personalities than about some very very significant societal and cultural shifts all seen through the prism of a very important american institution that just happens to have been based here in chicago for a long long time, and was central to the workings in many ways of democracy in a major american city. i think that link ultimately between what jim is talking about and our citizens in a democracy is very significant. you can read it and either find things to be hopeful about or as i alluded to earlier a flask of jack daniels around. but i think it is a good serious important work and jim you are to be congratulated. thanks for spending time with us. [applause]

[inaudible conversations] for more on this book and author james o'shea visit the deal from hell.com. >> charles thompson's new book. mr. thompson, what is your book about? >> i would like to say my book is in one word, moonshine, but that one word often requires thousands more explanations because i am trying to take what people think about the subject, moonshine, and turn it into the history of a broader time period in american history, and this

was the 1930s during prohibition. and the air of the depression. >> whetted moonshine mean to american in the 1920s and 1930s? >> of course america, even back in its formation, had always had spirits, liquor is part of its social gatherings and so forth. three of our first five presidents had liquor distilleries on their plantations. for example. and thus when 1919 came around and the nation forbade anyone from making or distributing alcohol, suddenly here we have both a time period of deep poverty and unemployment, 25% and a time period when the government is saying it is illegal to have liquor. suddenly, there is a great market for a illegal whiskey. so you makes unemployment and

poverty with a high demand for a product, and of course you are going to have a situation where they are is conflict. >> now, in your subtitle it is mountaineers, liquor bosses in the moonshine capital of the world. what is the moonshine capital of the world and why did you choose to focus on this one area? >> four of my great grandparents, two of my grandparents were born in this community called in the cot, virginia in the mountains of virginia, franklin county, known as the moonshine capital. people claim that it is a part of the heritage, and i am from there -- that culture. so that is where it starts with with the prologue of the book. i talk about my own grandfather. when i found out as an adult, that he had essentially bought his farm using the proceeds from hauling moonshine, i realized

that there was something deeper to the story than i ever saw, especially because he never drank himself. so we had this meeting, the spirits of just men, meaning just in the sort of normal sense and honest and also spirit about my ancestors as well as spirits about liquor. so, it means very much to me, so i began and ended the book with this relationship. >> finally mr. thompson what is the photo on the cover? >> the photo was in the 1920s of actually an illegal distillery located near shooting creek in franklin county, where there were 77 different legal distilleries leading up to the time of prohibition. we had lots and lots of small farmers who had applied for and received federal license