Will Tribune Publishing use Ferro's cash to bring digital to new level?
When news broke Thursday that the main investor in the Chicago Sun-Times now is the lead investor in Tribune Publishing Co., questions arose about the end of a two-newspaper city.
The problem, experts said, is Chicago is not a two-newspaper town. The entire market includes the Daily Herald, the Northwest Herald, Kane County Chronicle and other daily newspapers with online news sources throughout the suburbs. Having an investor locked into the major competitors in the region isn't likely to change the print landscape, they said.
But it likely will change the digital world, said Owen Youngman, professor and Knight chair of digital media strategy at the Medill School of Journalism at Northwestern University in Evanston.
"This isn't as black and white as readers might think," Youngman said. "It's really about the long-term future of journalism and it's only, very partially, about the success of the print edition today. It's mostly about the digital edition and its future on how we deliver that content across all platforms."
Michael W. Ferro Jr., a major investor and leader of the Chicago Sun-Times, on Thursday shook up the media profession in Chicago and nationwide. He controls Merrick Media, an investment firm that provided a $44.4 million cash infusion to Tribune Publishing. The news also shook up Wall Street, sending Tribune Publishing stocks plunging more than 20 percent on the news of the cash boost and the Tribune's decision to drop its dividend. The shares closed down about 11 percent on the New York Stock Exchange.
Ferro suddenly relinquished his active role as chairman, yet kept his investment, at the Chicago Sun-Times. Then, he became the nonexecutive chairman of Tribune Publishing, the parent of the Chicago Tribune, Los Angeles Times and several other newspapers and web products. Merrick Media became the largest investor in Tribune Publishing with 5.22 million shares, or 17 percent.
By moving into that new role, Ferro also replaced Eddy Hartenstein, who will remain on the Tribune's board as a director.
"Michael is optimistic about the opportunity to drive value at Tribune Publishing in a way that it would benefit journalists and shareholders alike," said Ferro spokesman Dennis Culloton. Culloton also declined to comment about the amount of Ferro's own investment at the Sun-Times and at Tribune Publishing, or about Ferro's plans for the Tribune.
"He doesn't have a timetable," said Culloton. "He just wants to get his arms around things right now."
Ferro, according to the Chicago Tribune, outlined his vision while addressing Tribune Publishing employees during a webcast Thursday,
"It's not about digital subscribers or print," Ferro said. "Some of the biggest companies in the world are using our data and making billions of dollars on it, and we need to find a way how we tap into that so that our journalism remains stronger than ever."
"I have no intention of ever selling my stake," the newspaper quoted Ferro as telling employees.
Ferro aims to strengthen the Chicago newspaper group as it faces financial troubles, despite cuts to its workforce and operating expenses companywide.
Ferro's relationship grew with Tribune Publishing after he worked with the company in October 2014 to sell the Sun-Times' suburban newspaper group to the Tribune for about $23.5 million. Those papers and websites included The Beacon-News in Aurora, The Elgin Courier-News, the Lake County News-Sun, The Naperville Sun, the Post-Tribune in Northwest Indiana, The Daily Southtown (then named SouthtownStar) and the Pioneer Press weekly newspapers.
Ferro is expected to spend the upcoming months developing his strategic plan with the management of the Tribune. There are no immediate changes expected at the Tribune company, Culloton said.
On the other hand, the Sun-Times newsroom and sales team will continue to be led by publisher and editor-in-chief Jim Kirk, who will join Bruce Sagan, who will lead the Sun-Times. Sagan, owner of the Hyde Park Herald and former owner of the Daily Southtown, already is aiming to improve the Sun-Times website.
"I look forward to the opportunity to share my experience leading the Chicago Sun-Times into the future. It has been a pleasure to serve on the board of Wrapports and to be a part of the turnaround of the iconic Chicago Sun-Times brand," Sagan said in a statement.
Joining Sagan and Kirk on the board will be Paul Pham, general manager of the Chicago Sun-Times, and Erik Hammer and Richard Krieberg, executives with Wrapports, the investment group that bought the Sun-Times in December 2011.
Chicago business and civic leader John A. Canning Jr., chairman and co-founder of Madison-Dearborn Partners LLC, will become chairman of the board of Wrapports. Jack Griffin, CEO of Tribune Publishing, told the workforce via an email and held a webcast to answer employee questions on Thursday.
"Michael is an excellent addition to our board," Griffin said in the memo. "An innovative technology and media entrepreneur, Michael has a successful track record developing companies in the midst of transformation."
Griffin said Ferro is a strong believer in journalism and "in the importance of independent news and editorial voices and the value that is derived from the content our talented journalists create."
Actually, Ferro is a businessman who is hedging his bet on the future of journalism online, said Owen Youngman.
While some might wonder if Ferro's dual investments are a conflict of interest, Youngman believes that won't raise concerns. Many media companies already are linked through content-sharing agreements, printing contracts and other arrangements, he pointed out.
While it's difficult to speculate what such a financial arrangement will do to the Sun-Times and Tribune in the short term, we should be watching something more, Youngman said.
"What we should be watching is what this additional money will do for the Tribune and whether it will invest more rapidly in its digital strategy," Youngman said. "They're going to see how they can get more revenue from consumers online. And the future is, who will pay for it all?"
This is the memo by Jack Griffin, CEO of Tribune Publishing, that was sent to employees. It was published by media writer Robert Feder.
Colleagues:
Tribune Publishing today (Feb. 4) announced the company has completed a $44.4 million private placement transaction with Merrick Media LLC. This investment supports our ongoing strategic plan and provides the company with additional capital to accelerate growth through additional strategic acquisitions and digital initiatives.
As an element of this investment, Michael Ferro, the chairman and CEO of Merrick Media, joins Tribune Publishing's board of directors as non-executive chairman. Eddy Hartenstein, who served as non-executive chairman since Tribune Publishing's spin-off from Tribune Media in 2014, remains on the board of directors.
Michael is an excellent addition to our board. An innovative technology and media entrepreneur, Michael has a successful track record developing companies in the midst of transformation.
Michael previously served as director and chairman of Merge Healthcare and as chairman, chief executive officer and founder of Click Commerce, which pioneered the market for Internet portals. Most recently, Michael served as chairman of Wrapports LLC, whose investments include the Chicago Sun-Times, Chicago Reader and several high-growth digital businesses. Mr. Ferro will retain his economic interest in Wrapports LLC but has relinquished all operating involvement with the Chicago Sun-Times.
Michael is a strong believer in journalism, in the importance of independent news and editorial voices and the value that is derived from the content our talented journalists create.
With this substantial investment, and with the unrivaled reach of our premium brands, Michael and I both believe that we have a tremendous opportunity ahead and we are confident that the future of Tribune Publishing Company is strong.
We recognize that many of you may have questions and we invite you to join a webcast today at 2 p.m. ET/1 p.m. CT/11 a.m. PT. If you have questions, please submit them to tribune.publishing@tribpub.com in advance. Instructions for how to access the webcast will be distributed just prior to the start of the call.
Jack