Nieman Foundation at Harvard
For much of the winter and spring, Michael Ferro was uncharacteristically quiet. Once he’d defeated Gannett’s hostile takeover attempt of his newly named Tronc, Ferro seemed to cease being the center of the news industry storm. Some applauded; others privately told me they missed his plotting.
Now, he’s back.
In rapid-fire order, since May, Ferro has tried (and failed) to buy the Chicago Sun-Times, purged the L.A. Times’ top editors, dispatched four corporate vice presidents, and then led the post-Labor Day news cycle by buying the New York Daily News Monday night.
Even on the heels of an American summer that seems to have been produced by Jerry Bruckheimer — North Korean nukes targeting the U.S., horrific Hurricane Harvey, Nazi bros parading in American streets — Ferro and his growing Tronc command attention.
Since the sale of the Daily News, much has been written about its robust, storied past. We can all enjoy that bit of nostalgia. But then we — and the paper’s 200 or so newsroom staffers — are compelled to look to the future. What does this buy tell us about the plans, and eventual fate, of America’s third-largest newspaper chain? Let’s explore that with some tabloid-friendly headlines.
That’s how a tab might put it. The Zuckerman family looked for buyers on and off for the past couple of years. Unloading a money-losing paper in a receding industry proved tough.
Consider the dynamics of this deal. The announced price: $1. That’s because it needed a monetary amount. In fact, as one financial source noted, the enterprise has “negative value.”
To offset that value, the sellers gave Tronc a 49.5 percent interest in the 25-acre property on which the Daily News printing plant sits. On paper, that’s worth $3.5 million or so, based on previous assessment, according to SEC documents. In baseball terms, that’s like dealing a once-prized player and having to send cash along with him to help pay off the contract. The Zuckerman family wanted out from under the Daily News’ continuing losses and was willing to pay to get out of its ownership.
Though the published details are sketchy, that stake may be worth more if the property is later developed. As Tronc exec Tim Knight put it, “That was certainly an added inducement to this transaction.”
What’s it worth to Tronc — and when? As one man-about-Manhattan put it: “They’re talking about a skyline view, but it’s Jersey City. It’s not Hoboken or Weehawken.”
As several observers have noted, that prized view from the printing plant won almost equal billing with its 2017 Pulitzer Prize (won in partnership with ProPublica) in the announcement. “As part of the transaction, [T]ronc will acquire a 49.9% interest in a joint venture with Zuckerman-related entities that will own the 25-acre parcel of land on which the printing facility is located and which overlooks the Manhattan skyline.” “The property offers spectacular views of lower Manhattan and the Statue of Liberty,” noted Tronc’s Chicago Tribune.
Much of that property has now been sold — with no benefit to the newspaper side of the business. Whatever’s left of the real estate would now move onto the Sinclair Broadcast Group, if and when it completes its purchase of Tribune Media’s TV stations. (Just yesterday: “Three office buildings and a 310-unit residential tower are slated for a Tribune Media-owned riverfront site along Chicago Ave., according to plans unveiled today by the joint venture redeveloping the land.”
No matter how Tronc paints it, this baffling buy just adds more short-term pressures on a company that’s got plenty of them. No one’s seen Daily News financials for a while, and none were released this week. Yet, those in the New York know talk about annual Daily News losses in the $10 million-plus range; some put it at $20 million-plus.
It’s unclear how much of that “loss” is operating money and how much is what the Daily News pays into pension funds for its employees. That’s $4 million in annual payments; in addition, it looks like Tronc faces a credit obligation of $18.7 million, which must be resolved within 60 days of its ownership.
That’s a problem for a company as tight on cash flow as Tronc, which along with its peers is seeing double-digit drops in print ads. Tronc was down 18 percent — leading the industry in this dismal category — in the second quarter.
As Ferro sought to buy the Orange County Register, Us Weekly, and the Sun-Times over the past year, the company has touted the “accretive” benefit of the would-be purchases — meaning they would add to Tronc’s earnings. It made no such claim with the Daily News, and given the paper’s financials, it’s easy to see why.
And yet, Tronc CEO Justin Dearborn told the Tribune that he expects the Daily News to be operating in the black by next year.
So how will the Daily News change its colors so quickly? As Dearborn told the Tribune, “Tronc sees cost efficiencies and opportunities for revenue growth, including Tronc’s scale, to operate the Daily News less expensively and attract more printing clients to the New Jersey plant acquired as part of the deal.”
Certainly Tronc will find management jobs it can whack, and it can claim efficiencies through newsprint and ink buying at its greater scale. The Daily News already prints numerous regional titles, and perhaps Tronc will find more.
But it seems inconceivable that Tronc can erase the big Daily News deficit without major job cutting, including into that newsroom of about 200.
Expect cuts across the newspaper trade, anyhow. Just yesterday, Gannett CEO Bob Dickey announced a “less than 1%” job cut for the largest U.S. news publisher. That’s 150 or so jobs, and some of them are likely to be in Gannett newsrooms. Inside Gannett, the speculation is that the cuts will fall greatest on the smaller papers.
Add it up, and it’s going to be an anxious fall at the Daily News.
Tronc remains a fairly thinly traded stock, with a daily transaction volume about a tenth of Gannett or The New York Times. Speculation — will Tronc end up being sold sooner than later? — probably drives much of its relative volatility. Further, investors like change — whether it’s big management moves at a big paper like the L.A. Times or an apparently strategic buy in New York — even if they often understand few of the dynamics under it.
With the transaction, Daily News CEO William Holiber leaves the paper. Long-time Daily Newsman and current editor-in-chief Arthur Browne becomes publisher through the end of the year.
That means big changes at the top as Tronc figures out its strategy. Add that to its search for a top editor at the L.A. Times, given its recent purge, and Tronc faces still another test of its seriousness. In L.A., word is that interim Times editor Jim Kirk (late of the just-sold Chicago Sun-Times) has told reporters and editors that while he will help with the search for a permanent editor, he is indeed interested in the job.
Ferro has told associates that he wants the company to be considered in the top ranks of newspaper publishers — “Why can’t we be like the New York Times?” he’s asked — but his L.A. firings sent a chill in the trade. How much of a yes man (or woman) will he hire in L.A. — and now New York?
Ferro clearly craves recognition of his deal-making skills — but if he wants industry esteem, he’s got to focus on the kind of traditional editorial excellence (shown anew by both The New York Times and The Washington Post in this precedent-busting news year) that commands respect, audience, and revenue, pretty much in that order.
Ask around the industry why Tronc would buy a money-losing tab that’s faces brutal legacy costs and digital competition, and you hear the same answer: ego. You need more than your fingers and toes to count all of his once or current associates who point to Ferro’s Trump-like character — egotistical, occasionally bullying, self-reliant on his own counsel.
That portrait hasn’t changed much over his year-and-a-half presence in the industry. Acrimony serves as his constant companion. His war of words with Gannett as it made him an offer it was certain he couldn’t refuse made new industry legend. His Hollywood-speed split with major Tronc investor Patrick Soon-Shiong, whose investment he used to blunt Gannett, surprised in its vehemence. He’s one tough character. But will he attempt to be a New York player? That may be even more fun to watch than him cozying up to La La Land’s celebrity culture.
The trifecta: New York, Chicago, Los Angeles. Tronc is now the only regional newspaper company with properties in the three largest metro markets. That seems like an impressive feat — by 20th-century standards.
In fact, at the end of that century, Tribune CEO John Madigan pulled it off. That trifecta strategy served as the centerpiece for Tribune’s $8 billion acquisition of Times Mirror. Times Mirror added L.A. (the Times) and N.Y. (Newsday) to Tribune’s Chicago Tribune. And yet, the national advertising play — then mainly print — hardly paid in significant revenue, those involved at the time have told me.
Today, those national print ads have largely gone digital. And the national digital buys have gone Facebook, Google, and programmatic, enabling better targeting than mere geography can provide.
Tronc says its Daily News buy would give it an audience of about 80 million. Even if it reaches that number (duplication of audience may reduce it), Tronc must prove out the proposition that that’s enough scale in 2017 to earn the digital ad dollars it needs.
Tronc has also said it would gain from this deal with better “content-sharing.” Tronc’s early attempts to “share” have been disdained by the larger newsrooms in the company, as sharing has meant the imposition of videos and informational widgets on their sites. While Gannett has evolved a major content-sharing efficiency — through its use of USA Today as a national news section in dozens of its papers — that process took years, and other content sharing, while promising, is still in its infancy.
Will Tronc somehow invest in the next revitalization of the Daily News? That seems unlikely, but one could wish for a miracle at 4 New York Plaza. Remarkably, two of the last remaining tabloids — those Front Page successors with a sensibility so unlike the dominant broadsheets — have changed hands in the last two months.
To be sure, plenty on the web itself — from early HuffPost to present-day BuzzFeed — has pixeled up a tabloid-like directness. But there’s something still unique to the newsprint tab as urban voices.
Will they soon be consigned to the Newseum? (And will the Newseum even be there to house them? Where is Al Neuharth when we need him?)
Michael Ferro effectively took over Tribune Publishing late in February, 2016. His platform, loud and clear: digital transformation. So much so that he renamed a company that had meant a lot to a lot of people Tronc, for Tribune Online Content. (Nevermind that “online” itself smells of the 1990s, replaced by “digital” as the standard one-word description of our era. Trdc, he probably recognized, was a non-starter.)
Words are the least of it. Performance counts. By that metric, Tronc hasn’t moved the needle ahead of its maligned predecessors.
Take overall digital audience, by two metrics. In March 2016, according to comScore, Tribune Publishing could count 56.9 million unique visitors to its sites. In July of this year, Tronc — with the significant addition of the San Diego Union-Tribune, which the company purchased in May, 2016 — accounted for 54.3 million unique visitors. That’s a 4.5 percent drop, even as many other newspaper companies have seen single-digit increases.
In acquiring the Daily News, it’s bought another enterprise that is treading water with audience growth. In 2015, it counted 25 million unique visitors, a couple years after its launch of a quickly unsuccessful Daily Mail-like Daily News America product. When it was sold this week, it claimed an audience of…25 million. Across town, its arch-rival Post had doubled the number of its digital visitors in the same period, to 49 million.
Consider another metric: time spent. That’s measured in aggregate minutes of readers’ time. It is in that category that we’ve seen the outsized growth — and impact — of The New York Times and The Washington Post.
In that same 17-month time period, through July, Tronc was up 15 percent in total minutes — again with San Diego having been added during that time — while the newspaper category as a whole was up 22 percent according to comScore.
Eyeballs are one thing; money’s more important. Recall that when Tronc trumpeted its new name, it produced that video that won universal ridicule for its clueless buzzwordiness. Now, the Tronc digital guru — Malcolm CasSelle, a friend of Ferro’s — has left the company. While Anne Vasquez, his video compatriot, has been notably quiet within the company for most of 2017, say numerous Tronckites, she has added to her chief digital officer title. Her Twitter bio now reads “Chief Digital Officer, LA Times/tronc, Inc. ” In her new expanded Times-specific role, she replaces Megan Garvey, the deputy managing editor for digital who lost her job in the purge.
But it’s a newer player who now drives Tronc’s digital business. One-time Tribune, one-time Sun-Times publisher Tim Knight formally heads Tronc X, Tronc’s digital division, having arrived in February. (Tronc M stands for its print business.) A more sober executive, Knight must pick through the assorted forays of the past year and evolve a real digital plan. In that role, Tronc will also look to new L.A. Times CEO and publisher Ross Levinsohn, late of Yahoo and Fox Digital, for new strategies.
As they ascend, four top Tronc corporate execs are out. Within the last month, Tim Ryan, president of publishing at Tronc; chief marketing officer Joseph Schiltz; and senior vice president of sales Ken DePaola lost their positions. Just last week, Jim Spanfeller, SVP/ general manager of The Daily Meal Ventures Group, was out as well. Spanfeller had sold his niche websites to Tronc last year; word is that they’ve failed to generate the network traffic promised.
Knight, Levinsohn, Dearborn, and Ferro himself face a big challenge. Despite showing real progress in Tronc digital subscription growth, up year-over-year by 89 percent to 220,000, Tronc X underperformed its peers — down 5 percent in digital revenue.
This is a company-wide digital transformation still waiting to get off the ground.
Maybe, just maybe — the next generation of tabloid wars could be beginning in New York. Imagine a public pissing match between New York Post owner Rupert Murdoch and the arriviste Ferro? How much fun could that be?
If it’s just a war of words, it could be highly entertaining. If it’s a spending war, Ferro may have found an opponent he can’t best or bully.
