What the Buy Provides Tronc
In buying Us Weekly, Tronc would add about $15 million to $20 million in annual earnings before interest, taxes, depreciation and amortization at a 4 to 5 times multiple that likely would be accretive. Tronc would buy a company, like itself, transforming from legacy print to digital, and seeing declining revenue -- both in print and in digital ad sales -- according to sources familiar with the company's performance.
Tronc would add to its collective digital audience of 60 million monthly unique visitors. Us Weekly generates about 21 million unique visitors per month, according to Comscore. With half of those unduplicated by current Tronc traffic, Tronc would move up to about 70 million monthly unique visitors overall. (The Times contributes more than 60% of Tronc's overall audience.)
One Ferro goal, sources said, is to move his company closer to the 100 million visitor threshold.
In January, Tronc bought The Daily Meal and The Active Times, as it acquired digital business veteran Jim Spanfeller's Spanfeller Media Group. The company closed that deal -- officially an "immaterial" one as explained by Tronc -- along with another recent one, also unannounced, to buy The Cube, a high school sports video site. The goals: buy new audience, new ad revenue and new content, relatively cheaply.
As Tronc makes these food and celebrity purchases, it also has licensed content from low-cost widget producers such as SNT Media.
One Tronc path, then, becomes clearer: growth through acquisition and partnership. While the current financials may make the deal work, as Tronc would certainly take out some of Us Weekly's corporate cost structure, reducing head count overall, the longer-term question of real synergy emerges.
One big question: How much and how prominently will Tronc's publications, including the Times, Chicago Tribune, Fort Lauderdale Sun-Sentinel and Baltimore Sun, feature Us Weekly or Daily Meal stories, or other alien-seeming content? Journalists will be concerned about the lowering of content standards, to be sure, but the larger business question is how useful and synergistic any integration will be to generate new revenue associated with Tronc's newspaper brands. Are the new brands compatible or conflicting?
At a time when digital display cost-per-thousand rates are seeing continuing downward pressure, the value of lower-cost, lower-quality content generation is more in dispute than ever. While Tronc, along with its daily newspaper peers, tries to position itself as a "premium" buy (through fledgling Nucleus and other ad networks), few would put Us Weekly in that bucket.
That midmarket Us Weekly content may be original, but its subject matter, from the Kardashians to Red Carpet fashions, is widely and freely (over)covered all over the web.
Us Weekly's own downward business trajectory is itself troubling, at least in the longer term. Overall, revenue should total $125 million to $150 million. With circulation falling and advertising down, it looks like another fading print property, with a reasonable share of overall revenue being digital. Advertising accounts for 65% of Us Weekly's revenue, with circulation contributing the remainder, sources said.
For a company intent on claiming its increasing credibility as a digital publisher, the Us Weekly purchase may have its charms for Tronc. At the same time, it begs the larger question of leveraging those core daily newspaper brands -- and their journalism -- at a time when reader revenue is becoming job one across the serious news-publishing industry, and at a time when subscriptions to those publications are booming.
In all of what Ferro's new Tronc has proclaimed over the year-plus of its life, we've seen little and heard little about the company's belief in those core news products. In chasing his digital dream, Ferro may well be missing the signature opportunity now offered by the assets of which he bought control early in 2016.
Indeed, the Times, and in fact, all of Tribune, once were considered world-class brands. They've been diminished, but with reinvestment -- and all of that Ferro financial engineering legerdemain -- maybe they, too, could generate new meaning and grab new market share in these odd Trump times.