Those five letters, printed in a rainbow-colored, lowercase font with the subtle overlay of a microchip, greeted Los Angeles Times writers and editors in a June 2 email.
"Colleagues," read the email from Justin Dearborn, the recently appointed CEO of the Times' parent company, Tribune Publishing. "Today, I am pleased to announce another important step in our transformation — the renaming of our Company to tronc, or tribune online content. At our core, we remain a content curation and monetization company focused on creating and distributing premium, verified content across all channels. The rebranding acknowledges our important evolution as a company and captures the essence of our vision for the future."
It sounded like something from the Silicon Valley–jargon parody Twitter account @ProfJeffJarviss. Curation. Monetization. Verified content. Rebranding. Tronc.
Two weeks later, tronc employees received in their inbox a video that intended to lay out the company's ambitions. It described tronc as "the future of journalism" and promised, in the words of chief digital officer Anne Vasquez, to "harness the power of our local journalism, feed it into a funnel, and then optimize it so that we reach the biggest global audience possible."
The 2½-minute video quickly became a media-world laughingstock. A Slate headline announced: "The Future of Journalism Is a Deadly Swarm of Buzzwords, According to Tronc." According to Verge, "Tronc threatens a nightmare hellscape of video content in new warning to employees." And Fortune called tronc "a word that only a highly paid corporate branding consultant could love."
However awkward the delivery, the implication of the initiative was clear: Tribune Publishing, which in addition to the L.A. Times owns 160 publications including the Chicago Tribune and the Baltimore Sun, was an old media company dedicated to printing newspapers with ink. Tribune Publishing was part of a dying industry, beset on one side by steadily declining advertising revenue and on the other by a product young people couldn't care less about.
Tronc, meanwhile, produces "content" and competes with the likes of Buzzfeed and Vox. And it will rely on "artificial intelligence and machine learning to improve the user experience and better monetize our world-class content," according to tronc chairman Michael Ferro.
Ferro, who hails from Chicago, made a fortune in tech and is relatively new to media — and was very new to Tribune Publishing when he began to transform it. The 49-year-old purchased a controlling interest in the company in February for $44.4 million ($8.50 per share). But some analysts say that because Ferro has only a 16.5 percent stake in the company, his control could become tenuous — unless he convinces shareholders of the wisdom of tronc.
That control could get even shakier considering that a highly competitive offer from a media giant is looming.
In April, the Gannett Company made an unsolicited offer to buy Tribune Publishing, kit and caboodle, for $815 million (a figure that valued the company at $12.25 per share and included the assumption of more than $350 million in debt). Gannett boasted annual revenue of $2.8 billion in 2015 and publishes USA Today, as well as more than 100 U.S. newspapers including the Arizona Republic, the Detroit Free Press and the Indianapolis Star.
After Ferro implored the board to refuse that generous offer, the board rejected it — and Gannett upped its bid to $15 a share. That would have netted Ferro $33 million just three months after his initial investment.
Ferro and the board rejected that offer, too, spawning a lawsuit that describes Ferro and the board's refusal of Gannett's offer as morally righteous but fiscally irresponsible. The plaintiff, shareholder Capital Structures Realty Advisors, seeks to force Ferro to the negotiating table.
"[Ferro] views Tribune as his chance, his 'project,' to leave a legacy and 'save' journalism," the complaint says. "He has publicly stated that he wants to work in the journalism business for the next 25 years. Ferro has admitted that he does not view Tribune as a normal company and that he has three 'constituencies.'?" Those constituencies are the shareholders, the community and the newspaper employees.
L.A.-based investment house Oaktree Capital, the third largest tronc shareholder, also is publicly demanding that the company negotiate with Gannett. Failure to do so, Oaktree vice chairman John Frank wrote in a letter to the board, is evidence of "gross disregard for your duties to shareholders."
Judging from a recent board election, when nearly half the votes were withheld in a symbolic act of protest against Ferro, a large number of investors agree with Oaktree and Capital Structures. But with a board of directors loyal to Ferro, there's little they can do.
Through a spokesman, Ferro declined to comment.
Gannett and Ferro represent near-perfect proxies for two competing philosophies of how to save journalism broadly and the Times specifically. Gannett embodies the traditional corporate model: consolidate, cut costs, look for synergies. Do more with less. It's a strategy that has largely led to declining readership and ad revenues — and the Los Angeles Times is very familiar with it.
The L.A. Times still enjoys a place as the biggest newspaper in the country's second biggest city and the nation's fourth largest newspaper overall, after USA Today, the Wall Street Journal and The New York Times. But under 16 years of Chicago-based ownership, including one of the longest corporate bankruptcy cases in U.S. history, the L.A. Times newsroom has been whittled down to less than half the size it was two decades ago (publications across the country have suffered similar decreases). With steadily declining revenue — again, similar to what most U.S. newspapers are experiencing — the L.A. Times is in a desperate state.
Would the Gannett strategy be more of the same? And could the Ferro strategy be better?
Ferro has been racing against the clock to convince the board — and the world — that he has big plans for the ailing newspaper group, and that the L.A. Times is central to them. He's promised to make the Times a global entertainment brand, and he's formed a partnership with Los Angeles billionaire Dr. Patrick Soon-Shiong.
"The newsgathering industry desperately needs new sources of revenue," says Jim O'Shea, former editor-in-chief of the L.A. Times, who helped Ferro, along with a group of investors, make his first foray into media with his 2011 purchase of the Chicago Tribune's smaller rival, the Chicago Sun-Times (Ferro gave up his controlling share of the Sun-Times when he made the Tribune Publishing investment). "Michael — at least he's not afraid to try stuff. He's gonna do things that are stupid and things that are smart.
"I truly believe that Michael Ferro thinks he can save the newspaper industry."
But Ferro's track record is spotty at best. While he did help stabilize the Chicago Sun-Times after it emerged from bankruptcy, his three years as chairman of the company that owned the paper included laying off every staff photographer and creating a content farm called Aggrego, which produced a flood of non-reported blog posts — and did not prove to be a significant economic or technological success.
"These grandiose proclamations, this bluster, this pretense that he has the answers that no one in the industry has come up with — that's what you have to buy into in order to accept that all of this is real," says Robert Feder, a former media columnist for the Chicago Sun-Times, who now writes a daily media blog licensed by the Chicago Tribune.
"I don't want to shit all over Ferro, because I wish there were a lot more people willing to experiment and take risks," former L.A. Times deputy publisher Nicco Mele says. "But there is no silver bullet, and to suggest that there is is wildly misleading."
Patrick Soon-Shiong had met Ferro only once when Ferro called him on the phone, asking him to invest in tronc. The South African–born surgeon, inventor and health care entrepreneur, who also happens to be the wealthiest person in L.A., had long coveted ownership of the paper, as many L.A. billionaires do.
"I was a little surprised," Soon-Shiong says. "We've been looking at the L.A. Times for a while, because we think it is a national treasure. It's something important to protect, to survive." (His daughter, Nika, interned at the Times in 2012 and 2013.)
Soon-Shiong, who also owns a piece of the Lakers, bought 4.7 million shares of tronc (nearly 13 percent of the company) at $15 a share, making him the second largest shareholder and vice chairman of the board.
The deal was a masterstroke for Ferro. Since Soon-Shiong will vote with him, it effectively gives Ferro control of a third of all tronc shares. "The bottom line is control has passed," investment banker Lloyd Greif says. "It's now firmly in Michael and Patrick's hands."
Gannett, however, is not backing down.
"The approach by Gannett, I suppose, was something that the board was dealing with," Soon-Shiong says. "But when [Ferro] approached me, I thought, this is something I could contribute to."
In addition to providing tronc with $70.5 million in cash to fund Ferro's vision, the deal included an agreement for tronc to license more than 100 patents owned by Soon-Shiong's technology company, NantWorks. These patents provide tronc with the artificial intelligence that Ferro has said will play a large role in his strategy to save newspapers.
"The thing that interests me — it's not owning a newspaper in its old context," Soon-Shiong says, "but taking the content, using the technology and transforming it. The exciting thing to me was the transforming it."
One piece of technology, he explains, would use artificial intelligence to take a text story and convert it to video, generating as many as 2,000 videos a day (media companies typically earn more revenue from video than they do from articles). The AI also would more strategically deliver stories and videos to individuals based on their particular interests.
"You have a way of generating video in a next-generational way and placing it in the hands of consumers," Soon-Shiong says. "You take content that is well done, good stories by good journalists, and now make it easily consumable."
If the 16-year history of Tribune ownership of the L.A. Times had vacillated between comedy (Sam Zell naming shock jock Randy Michaels as Tribune CEO) and tragedy (hundreds of layoffs), the tale now has swung, it seems, into science fiction. But Soon-Shiong insists: "This is reality. This is something we're going to bring very quickly to Tribune."
Although Soon-Shiong is respected as a philanthropist and health care entrepreneur, his ideas for transforming the newspaper business are being met with some skepticism.
"The NantWorks patents could help [Tribune] later on," says investment researcher Hamed Khorsand, "but it doesn't solve the issue at hand, which is getting a digital strategy and generating online ad revenue."
"People are intrigued by [Soon-Shiong]," says Drex Heikes, a longtime L.A. Times editor (and former L.A. Weekly editor-in-chief), who left the paper a few weeks ago. "But the Times has lost and continues to lose first-rate journalists. And they're replaced by people who are often long on technology and short on journalism."
Soon-Shiong says he backs Ferro's vision of turning the Times into a global entertainment "mega brand," as CEO Dearborn put it in a May 4 conference call with investors, during which he laid out Ferro's vision of opening seven new foreign bureaus in Hong Kong; Seoul, South Korea; Mexico City; Moscow; Rio de Janeiro; Mumbai, India; and Lagos, Nigeria.
The proposal is an about-face from the previous L.A. Times strategy, which was to make the paper more regional, with fewer foreign bureaus.
"Over the years there's been a succession of publishers, and each one had a different idea of what the L.A. Times should be," says former Times executive editor Leo Wolinsky. "That's one of the things that killed the paper, in my view."
Weeks after he bought a controlling interest in Tribune Publishing, Michael Ferro did what nearly every person coming to Los Angeles dreams of doing: He attended the Oscars.
Though he would later explain that he needed to schmooze with would-be advertisers and muckety-mucks such as Harvey Weinstein, Ferro's attendance, along with that of CEO Dearborn and publisher Tim Ryan, meant that Times journalists themselves would be shut out of the event, as the paper had been given only six tickets.
"We on the film team were shocked to learn this week that the paper has not allocated a single one of its Oscar tickets to a reporter," the film staff wrote in a pleading email to Ryan and editor-in-chief Davan Maharaj. "Entertainment coverage is a bedrock of this paper's identity. To fail to send a single reporter on a year when the Oscars are at the center of a cultural debate over diversity is not only embarrassing, it's bad journalism."
In the end, Ryan gave his tickets to two reporters. But the episode left the L.A. newsroom with a less-than-ideal early impression of Ferro, one that some in Chicago say is consistent with the image he projected there. "That incident involving him going to the Oscars didn't surprise anyone in Chicago," Feder says.
In 2011, Ferro's friend and mentor, John Canning, convinced him to become the lead investor and public face of a group buying the Chicago Sun-Times. Ferro, whose media strategy includes renaming things, branded the new company "Wrapports," a portmanteau of "wrap," an old-timey newspaper term, and "ports," a new-timey tech term.
"I am a technologist," Ferro told the City Club of Chicago in 2012. "I've been building portals since there was a time to build them."
In the same speech, he promised to make the Sun-Times the "No. 1 local newspaper in America" and said the company was recruiting: "We're putting the 'for hire' sign out. We want the best and brightest."
The Sun-Times had been losing money long before Ferro arrived. He initially invested his own money in the paper, but eventually the publication started cutting. It closed six suburban bureaus. It killed the business section, replacing it with a Sunday business magazine called Grid, which later became a monthly publication, then went online-only. It eventually folded.
In June 2013 came the hammer blow: The Sun-Times' entire staff of 28 photographers was laid off. In addition to relying on existing freelancers, the publication tasked its reporters with taking pictures for their stories on their smartphones.
"I knew the photographers would be going from the day we took this paper over," Ferro told Chicago Magazine in 2013. "We took a year and a half too long to do it. ... I can tell you 100 percent, before we bought this we had that cutlass ready." (In May 2014, four photographers were hired back.)
Then there was Aggrego, a content farm created to produce short blog posts aimed at readers in other cities. These readers would, in theory, go to Sun-Times "portals" — for instance, losangeles.suntimes.com — and read city-specific "content" created by interns working in Chicago, who were paid $10 an hour. The content was fast and cheap. Some posts were little more than an embedded YouTube clips with a sentence or two.
"Ferro seems to come from a mindset that content exists out there, already, in some form, that the process by which it is created is not his concern, that all he has to do is find the smartest way of obtaining it and exploiting it," Feder says. "He seems to think that's what journalism is, not the process of gathering and writing and editing; that seems to go unmentioned."
Ferro, however, regularly defends high-quality, watchdog journalism. "Journalism is important to save right now; it's being taken over just like the weird politicians," he told the Chicago Tribune in a March interview. "Bloggers — that's not journalism. You don't use blind quotes most of the time. People believe Buzzfeed — it's garbage. That's the type of stuff I'm worried about." Journalism, he said, is "the fourth branch of government."
Yet some of the action that unfolded at the Sun-Times tells a different story.
Weeks after Ferro took over, the liberal-leaning Sun-Times announced that it would no longer be endorsing political candidates. But in 2014, the paper unexpectedly endorsed Republican gubernatorial candidate Bruce Rauner, a wealthy investor running against Democratic incumbent Pat Quinn. Rauner was a friend of Ferro's, not to mention a former Wrapports investor. He sold his 10 percent stake in the company to Ferro two months before launching his campaign.
Sun-Times political reporter Dave McKinney wrote a story about an alleged threat Rauner made against Christine Kirk, CEO of a company Rauner invested in and sat on the board of. In a lawsuit, Kirk alleged that Rauner told her: "If you go legal on us, we'll hurt you and your family." She alleged Rauner told another board member: "I will bury her. ... She will never get another job anywhere, ever. I will bankrupt her with legal fees."
The Rauner campaign tried to block the story by claiming McKinney's wife, Democratic political consultant Ann Liston, was working for an anti-Rauner political action committee (she wasn't). McKinney's story was published, but he says he was told not to work on a follow-up, and soon thereafter was taken off the political beat entirely. McKinney resigned.
"Readers of the Sun-Times need to be able to trust the paper," McKinney wrote in a letter to Ferro, which he posted online. "They need to know a wall exists between owners and the newsroom to preserve the integrity of what is published. A breach in that wall exists at the Sun-Times. It's had a chilling effect in the newsroom. While I don't speak for my colleagues, I'm aware that many share my concern. I'm convinced this newspaper no longer has the backs of reporters like me."
One of the myths about the newspaper industry is that it's getting killed by the internet, by technology and social media. The reality is more complicated — and more troubling for journalism.
"It's not just about the internet," former L.A. Times deputy publisher Mele says. "It's about changing habits and deep cultural changes. People are valuing opinion over news. People are less engaged in the day-to-day of their own communities. People are much more mobile and transient. If there was one trend that is really underappreciated, it's, since Watergate, the continuing erosion of trust in the institutions that once made America great — the press first and foremost."
Even Ferro acknowledged the challenges, in his interview with the Chicago Tribune. "I don't think it's a puzzle," he said. "It's a maze ... because you keep hitting dead ends and you have to go over again."
Under Gannett, the L.A. Times would likely be a cog in the Gannett machine — perhaps the most important cog, but a cog nonetheless. It's the sort of Wall Street–friendly owner that might raise the stock price but not the quality of journalism.
"It's not an exciting prospect," says former Times metro editor Kevin Roderick, who now blogs at L.A. Observed. "But what you're comparing it to is the unknown, with Ferro and his people. An unknown darkness."
Even if Ferro's technological gambit can help the Times, his potentially tenuous grasp on the company means he might not have much time.
"Public markets are historically very shortsighted," investment banker Greif says. "They don't operate on the basis of one-year plans, let alone five-year plans. [Ferro] for sure has a short leash. In 180 days to 365 days, people are going to expect to start seeing results. Otherwise this could be a single-digit stock."
A plunge like that could cause board members to reconsider their loyalty to Ferro and take another look at the Gannett offer.
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Most modern newspaper owners who've been moderately successful, such as John Henry (Boston Globe), Jeff Bezos (Washington Post) and Glen Taylor (Minneapolis Star Tribune), don't face the same threat. They all possess one thing that Ferro lacks: private ownership.
Privately owned papers are free to run at a loss for years. They aren't subject to the whims of the market, the desire of shareholders to see dividends or growth. They don't have legal responsibilities to increase value. They can, for the most part, do whatever the hell they want.
"A private owner, first of all, can stop the bleeding," says newspaper economist and media reporter Ken Doctor. "He can say, 'This is an important institution.' Not keep laying off people. Stabilize it. Know that short-term profits are going to decline. Make basic, prudent investments in digital. That's what you get with a private owner — patience."
But Ferro — and the L.A. Times — don't have that luxury. Instead, they have tronc.