February 23, 2016

With CEO Jack Griffin’s unexpected ouster today, all bets are off on where the company is headed strategically.

Specifically, I think the stage is set for Tribune to entertain offers for its various newspaper properties, pull back to focus on the Chicago Tribune and invest the proceeds in new media tech ventures.

As I wrote last fall, it made no sense for Tribune to bow to pressure and sell the Los Angeles Times, its largest property, so long as it was following Griffin’s strategy.  He was focused on pursuing national advertising along with a company-wide digital catch-up initiative — and scale was of the essence.

Griffin articulated his approach consistently in a pitch to the investment community.  There was scant evidence, though, in financial reports that it was even beginning to work.

Hence the steep tumble of Tribune shares from more than $20 when it spun off from Tribune TV and digital holdings in August 2014 to  $7.21 as markets closed Tuesday.

Griffin worked much of the time from New York rather than headquarters in Chicago, and I suspected a retro approach of a longtime national ad sales exec in the Big Apple — a mismatch to the prospects of regional papers, whatever a chain’s scale.

So who would want to buy the component parts of Tribune Publishing?

For starters, billionaire Eli Broad, fired publisher Austin Beutner and other well-heeled Angelenos could get re-energized in a hurry about returning the L.A. Times to local ownership.

Gannett is openly prowling for acquisitions and (unlike Tribune Publishing) has the strong balance sheet with ample cash on hand and borrowing capacity to make them.

Credible rumor has it that Gannett covets the Orlando Sentinel and the Sun-Sentinel of Fort Lauderdale. Those would be a sweet statewide fit with its current base of Fort Myers, Tallahassee, Pensacola and the four Journal Media/Scripps properties it will get in Naples and the Stuart area in a soon-to-be-completed merger.

Warren Buffett’s BH Media could easily take a look at the Hartford Courant and The Morning Call of Allentown. (In fact, a Call reporter queried Buffett’s office several years ago and was astonished to get a return email saying Allentown was exactly the kind of community he liked for the newspaper business).

I’m less sure about potential happy homes for the Baltimore Sun and Newport News Daily Press. Several local ownership efforts in Baltimore have been rebuffed over the last decade. Newport News could fit BH Media’s geographic footprint in Virginia and North Carolina — as Hartford would New Media Investment Group’s in New England.

I should be clear that all this is speculation — not based on any insider reporting.

However, were this to come to pass, it would turn the nation’s second and third largest metros to one-dominant-paper local ownership.  That would become the prevailing model for the biggest of cities (New York, Washington, Dallas and Boston as well).

Lead investor and Chairman Michael Ferro’ newly installed CEO Justin Dearborn (the top tech guy from Ferro’s health care businesses) would only say in a press release announcement that Tribune Publishing:

has a significant opportunity to leverage technology to increase the value of its content and distribution channels….Although this is a different medium than my last technology company, it has the same challenge on how to create the highest value for our content.

(Neither Ferro nor Dearborn will be available for interviews until after next Wednesday’s fourth quarter earning release, spokesperson Dana Meyer told me).

Even at today’s depressed prices, those sales would generate a tempting kitty of several hundred million dollars to invest in the Chicago Tribune, tech startup products or acquisitions.

On the other hand, some of the logic for keeping Tribune Publishing intact remains.  Many business and editorial functions have been consolidated. Tribune was one of the first chains with a hub — in Chicago — for copy editing and page makeup at smaller papers.

Griffin upped the consolidation ante for cost-control reasons and brought aboard Denise Warren, formerly of The New York Times, to turn around digital. Whether she and other Griffin appointees will fit with the new regime is unclear — almost certainly not if the company is split up.

But from what I’ve read about Ferro, he’s not going to let a few big severance payments get in his way.

Another pending matter — with a very short fuse — is whether Tribune Publishing will bid to acquire the Orange County Register and several smaller papers of Freedom Communications, now in bankruptcy reorganization.

Final bids are due March 9 with an auction March 16.  Tribune would be competing with Digital First Media and, potentially an insider’s group that initiated the bankruptcy.

Following through on the bid make sense if the company stays together. With the acquisition a year ago of the Union-Tribune of San Diego, Tribune would gain four leading papers in the three huge Southern California counties. (That could be an attractive play for the L.A. high rollers as well).

I’ll leave it to my colleague Jim Warren and other old Chicago hands to track whether a merger of the Tribune and Sun-Times (in which Ferro has a controlling stake) makes sense.

A final question is whether Ferro at Tribune will prove to be a benevolent billionaire owner in the mode of Jeff Bezos (The Washington Post), John Henry (The Boston Globe) and Glen Taylor (Star Tribune).

Or will he be more like greeting card exec Aaron Kushner whose odd print-first strategy ran the Register into the ground? Or like turn-of-the-century L.A. Times publisher Mark Willes, who tried without success to import strategies from his time at General Mills to publishing?

Ferro’s track record at the Sun-Times — which included an ill-conceived foray into low-quality, nationally targeted content farm copy — is not altogether encouraging.

But Ferro has paid shrewdly for a second chance with the much stronger Tribune. He was also able quickly to bring along the rest of Tribune Publishing’s board to pursue his vision — whatever that proves to be.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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