• by Erik Sass  @eriksass1, August 26, 2008

Monday saw an interesting twist on two struggling businesses, with the announcement by the Los Angeles Times Media Group that it has established a company, Zetabid, to auction distressed real estate from around Southern California, helping banks and homebuilders unload foreclosed and unsold residential and commercial properties.

The first auctions are scheduled for Sept. 27-28. Zetabid, the product of a partnership with GoIndustry-DoveBid, a British company, and California's CataList Homes, will be advertised by the newspaper, as well as Tribune's broadcast properties in Southern California.

The move delivers a triple dose of irony. The LA Times is widely viewed as a distressed property in the newspaper business, largely because of steep declines in real estate classified revenues. And the new owner of Tribune Co., Sam Zell, is trying to stabilize the company's finances by selling key real estate holdings, including the newspaper's own headquarters.

The new venture looks like a concept brainstormed in executive suites as a way to rebuild some of the revenues lost in real estate classifieds, which have been battered by the migration of listings to the Internet. Sunbelt areas like Southern California, Arizona, Texas and Florida have been especially hard-hit by the slump in the housing market. While this spells bad news for real estate classifieds, the wave of foreclosures is a bonanza for real estate investors looking to buy cheap during the downturn.

Ken Doctor, a newspaper analyst with Outsell Inc., expressed both praise and reservations about the move. On the upside, he observed that "Tribune, like all newspaper companies, has to find non-traditional sources of revenue, lines that are not associated with only advertising"--pointing to the Washington Post Company's success with Kaplan as an example.

But there are also potential pitfalls, Doctor warns: "The foreclosure disaster is one of the top stories of the year. The LA Times must recheck its firewall between editorial coverage of foreclosures in the housing turndown and its new business activities. As a newspaper, it owes its readers full, fair and impartial coverage, and the more its parent company branches into businesses that the paper covers, that becomes more difficult."