Compiled by Ray Young (RPM) and John Kelly (Daily Clips)

Tuesday March 28, 2017

Survey Reveals Retailers with Best Customer Experience Three very different retailers earned the top score in a survey of customer experience. Ace Hardware, BJ's Wholesale Club, and QVC deliver the best customer experience in the retail industry, according to the 2017 Temkin Experience Ratings, an annual customer experience ranking of companies based on a survey of 10,000 U.S. consumers. Ace, BJ's, and QVC all tied for the top spot out of the 48 retailers included in this year's ratings, each earning a score of 81% and coming in 8th place overall out of 331 companies across 20 industries. Five other retailers received scores that put them in the top 10% of companies for the entire Ratings: Sam's Club, O'Reilly Auto Parts, True Value, Amazon.com, and Dollar Tree. Overall, the retail industry averaged a 74% rating in the report, and came in 3rd place out of 20 industries. The average rating of the industry improved by five percentage-points between 2016 and 2017, going from 68.6% to 73.9%. The ratings for all retailers increased between 2016 and 2017, expect for J.C. Penney, whose score decreased by one point and Dollar General, whose score stayed the same. Macy's and Old Navy improved the most, each gaining 12 points. To generate these ratings, consumers were asked to evaluate their recent experiences with a company across three dimensions: success (can you do what you want to do?), effort (how easy is it to work with the company?), and emotion (how do you feel about the interactions?). Temkin Group then averaged these three scores to produce each company's rating. In the ratings, a score of 70% or above is considered "good," and a score of 80% or above is considered "excellent," while a score below 60% is considered "poor." The ratings of all retailers in the 2017 Temkin Experience Ratings are as follows: • Ace Hardware: 81% • BJ's Wholesale Club: 81% • QVC: 81% • Sam's Club: 80% • O'Reilly Auto Parts: 79% • True Value: 79% • Amazon.com: 78% • Dollar Tree: 78% • Barnes & Noble: 77% • Advance Auto Parts: 76% • AutoZone: 76% • Home Depot: 76%

• Lowe's: 76% • Michael's: 76% • Ross: 76% • Bed Bath & Beyond: 75% • PetSmart: 75% • Walgreens: 75% • Dollar General: 74% • Etsy: 74% • Family Dollar: 74% • GameStop: 74% • Macy's: 74% • 7-Eleven: 73% • Apple Retail Store: 73% • Costco: 73% • Kohl's: 73% • Marshalls: 73% • Nordstrom: 73% • Rite Aid: 73% • Staples: 73% • CVS: 72% • eBay: 72% • Old Navy: 72% • T.J. Maxx: 72% • Target: 72% • Dick's Sporting Goods: 71% • Toys 'R' Us: 71% • Wal-Mart: 71% • Best Buy: 70% • JCPenney: 70% • Office Depot: 69% • Office Max: 69% • Sears: 67% • Gap: 66% • Kmart: 66% • Foot Locker: 64% • RadioShack: 64% http://www.chainstoreage.com/article/survey-reveals-retailers-best-customer-experience

Finish Line Poised to Close More Stores After Disappointing Q4

Shares of Finish Line sank as much as 20% Friday after the athletic apparel retailer released a quarterly and full-year report

that missed expectations.

Finish Line's Q4 consolidated net sales fell 0.4% to $557.5 million, beating the FactSet expectation for $548.1 million cited

by MarketWatch, but Q4 same-store sales fell 4.5%, compared to FactSet’s forecast for a 4.2% decline. The company

generated a loss of $9.47 million or 23 cents per share, from a profit of $4.0 million or 9 cents per share in the year-ago

period. In good news for both Finish Line and Macy’s, sales at the department store rose 35% in Q4, and for the full fiscal

year 2017, Finish Line said that consolidated net sales rose 2.5% $1.84 billion, with same-store sales increasing 0.3% and

sales at Macy’s up nearly 30%.

In a conference call with analysts, CEO Sam Sato said Finish Line shuttered 24 underperforming stores in fiscal 2017,

bringing the total number of closures to 78 over the last 24 months, and that the company has identified and plans to close

another 15 to 20 locations this year, according to a transcript from Seeking Alpha.

Dive Insight:

Much of Finish Line’s profits evaporated in the fourth quarter as the retailer was forced into massive discounts to move

inventory, Sato said in a statement Friday, though the loss line was exacerbated by one-time charges related to the January

sale of its JackRabbit business to CriticalPoint Capital for $0.

Finish Line executives attempted to perform damage control by emphasizing the company’s efforts to update its stores and

shutter under-performing locations. “We debuted our newest store format between a bold and modernized the design talent

including a complete refresh of the Finish Line logo, store front, floor, fixture and shoe walls. Following the successful

checks of 15 stores, including eight in the Chicago area, during the second quarter we expanded the program with a focus

on key strategic markets across the country,” Sato told analysts. “[W]e updated 42 stores in fiscal 2017 with the new design

and remain on schedule to touch the significant portion of the fleet over the next several years. As we got further along in the

process we gained greater efficiencies in executing a remodel allowing us to lower the overall costs per location.”

The approach is sound, but the implementation has been somewhat off, according to GlobalData Retail managing director

Neil Saunders, who also said that the forced discounts are unfortunate, considering Finish Line's efforts to improve its

inventory.

“The merchandise mix is disappointing given the work Finish Line has put into collaborating with its brand partners to

develop an on-trend product,” Saunders said in an email to Retail Dive. “Higher profile marketing and the refurbishment of

some stores accompanied these efforts, and are all designed to improve the image of Finish Line and allow it to support

higher price points. These latest results suggest that the strategy is not yet optimized and that Finish Line has much more

work to do in shifting its brand perception. All that noted, we do not believe that the strategic direction Finish Line is taking is

wrong; we just believe that execution has been sub-optimal.”

Finish Line’s refurbished stores are doing better, Saunders added, “which indicates that there is some hope for the changes

being made.”

And while the retailer’s Macy’s concessions provided a ray of sunshine in its quarterly and full-year results (with sales of kids

and youth sizes in line with the department store’s older, more family-oriented demographic, and with little risk of

cannibalization, according to GlobalData), Saunders warned that ongoing Macy’s closures, expected to reach 100 in coming

months and possibly more, could hurt Finish Line. “As such, getting stand-alone stores into strong, sustainable growth

territory is now a matter of priority,” Saunders said.

http://www.retaildive.com/news/finish-line-poised-to-close-more-stores-after-disappointing-q4/439028/

The Holiday is Over: Amazon will Collect Sales Taxes Nationwide on April 1 "Maine businesses can go toe-to-toe with the very best out -of-state companies, provided they are competing on an equal playing field," said George Gervais, commissioner of the Maine Department of Economic and Community Development, in a statement. "Amazon's decision to collect and remit sales tax to the state of Maine is an important first step in leveling the playing field," he said, noting that the increased revenue from sales levies will help lower the state's income taxes. After April, the only states in which Amazon won't collect taxes are Alaska, Delaware, Oregon, Montana and New Hampshire. These five states don't have sales levies. Missing windfalls The National Conference of State Legislatures estimates that states lost out on $23.3 billion in revenue in 2012 due to their inability to collect sales taxes from online purchases. How states treat sales taxes for web and catalog purchases is tied to a 1992 Supreme Court case, Quill Corp. v. North Dakota. The court ruled that states couldn't require retailers to collect sales taxes unless they had a physical presence in the same place where the buyer is located. Major online retailers — namely, Amazon — more and more fall under that rule by building data centers, warehouses and other facilities in multiple locations.

You still owe Even if your online retailer doesn't assess a sales tax because it doesn't have a brick-and-mortar location in your home state, your state may require you to pay use taxes on your purchase, according to Richard C. Auxier, a research associate at the Tax Policy Center. Use taxes, which apply to items you buy outside your state of residence, generally are assessed at the same rate as a sales tax. The burden of reporting use taxes falls to the consumer, Auxier said. "Everyone owes taxes on online purchases, be it from Amazon or a small retailer," he said. "The question we deal with is 'Who collects the tax?'" Reporting responsibilities States that assess use taxes give their residents a way to report it. California, for instance, provides a worksheet for taxpayers to calculate what they owe. New York, meanwhile, offers forms for reporting these levies when you file your income tax return. In the Empire State, you may be subject to penalties and interest on any back use taxes. In reality, states haven't been particularly stringent about collecting these use taxes — and many shoppers don't even know they owe. "Very few taxpayers report it, even when systems are in place to make use tax payments easy," said Auxier. As a result, a coalition of 24 states has adopted the Streamlined Sales Tax Agreement, which allows retailers to voluntarily collect taxes. In practice, it's easier for online merchants to add the tax at checkout, as opposed to having states pursue residents for levies owed on purchases, Auxier said. Expect your use tax holiday to come to an end as online retailers expand their operations into more states. "I'm not going to look down upon or congratulate anyone, but there's something to be said about being a good resident and paying the use tax," said Auxier. http://www.cnbc.com/2017/03/24/the-holiday-is-over-amazon-will-collect-sales-taxes-nationwide-on-april-1.html

February Ad Revs Slow, Digital And News Up After months of strong gains, February's U.S. advertising slowed down in many categories, either flat or rising modestly.

According to Standard Media Index (see related story), the entire media market showed no growth -- flat versus February a

year ago. Overall areas of gains include digital media, up 3.7%, with TV inching up 0.4% -- while broadcast was down 0.6%

and cable TV was 1.4% higher.

Looking at specific media categories, digital video rose 26.6% on pure-play digital platforms, with pure-play social media

also spiking, 9.9%. Ad network/ad exchange business was up 5.5%.

Digital media declines were registered in pure-play search, 1.7%; pure-play content, 1.9%; TV network/digital, 2.9%; pure-

play digital radio, 6.4%; mobile ad network/ad exchange, 8.0%. Standard Media Index predicts “2017 is shaping up to be

digital’s toughest year yet.”

TV news platforms continued to see strong results, now four months post-election -- up 11.7% across cable and broadcast

networks. Cable TV news was up 7% overall and in prime-time had a 31% gain.

CNN was 12% higher; Fox News Channel, 18.7%; and MSNBC 22.5%. Average 30-second unit costs grew 73.5% for

MSNBC; 48.4% for Fox ; and 24.3% for CNN. Fox’s “The O’Reilly Factor” and “Hannity” command the highest advertising

30-second unit cost $14,000 and $12,500 a spot, respectively.

CBS’ “Grammy Awards” price climbed 13% in February versus the same month a year ago -- to $890,725. ABC’s “Academy

Awards” inched up 2% to $1.89 million.

AMC’s “The Walking Dead” was the highest regularly scheduled TV series -- broadcast or cable -- $332,300 for a 30-second

ad.

Looking across other media, all showed declines: Magazines, 12%; newspapers, 15%; radio, 31.3%; and out-of-home,

10.6%.

http://www.mediapost.com/publications/article/297927/february-ad-revs-slow-digital-and-news-up.html

Amazon is Exploring More Brick-and-Mortar Retail Concepts A new report by the New York Times details an array of initiatives by Amazon to expand its footprint in brick-and-mortar

retail. The stores would mostly feature products, such as groceries and appliances, that have proven persistently difficult to

sell online.

Amazon is already moving forward on groceries in particular, and will soon open two Seattle outlets where shoppers can

pick up orders made through AmazonFresh online. It aims to open up to five more of these pickup locations across the U.S.

by next year. They could be a boost to the grocery delivery service, which sources told the Times has struggled to make a

profit.

Another idea making the rounds is a larger Amazon grocery store in which shoppers could browse fresh produce and meat,

while packaged goods could be assembled into orders by workers in an attached warehouse. The Times’ sources disagreed

on whether that concept was still under development.

Also apparently in the early stages is an idea for an Amazon electronics store, modeled on Apple stores, that would feature

Amazon’s own devices. Another concept is a home furnishings and appliance store that would feature augmented reality

‘showrooms’ to let shoppers both see products in person, and envision what they would look like at home.

There’s more certainty about Amazon Go, a convenience store that promises frictionless checkout and payments. Despite

technical hurdles, Amazon aims to open Go outlets across Britain and the U.S., also by next year. The report also details a

push for physical grocery stores in India, dubbed “Project Everest,” for which Amazon has already sought Indian government

approval.Though many of these stores are still little more than concepts or tentative experiments, analysts describe a

strategy mixing online and offline retail as crucial to Amazon’s continued expansion.

http://fortune.com/2017/03/26/amazon-retail-concepts/

One Reason why Retailers are Struggling: Americans are Tapped Out If you are wondering why US retailers are feeling a strain, look no further than the latest report from the Federal Reserve

Bank of New York that stated 33 percent of Americans said they could not come up with $2,000 over the next 30 days if the

need arose.

Many Americans do not have the means for emergencies or for a family member’s needs — like a quarter of a ObamaCare

deductible, or even enough for 25 percent down payment on the average cost of a funeral — according to the New York

Fed’s Consumer Credit Access Survey.

No matter how you look at it, average Americans are tapped out.

There is one glimmer of hope in terms of the financial fragility: The study shows that since the election, there has been a

modest uptick in the percentage of households that feel they could come up with the cash.

In October, 65.9 percent of households said they could get the cash. Today, it’s 67.2 percent. The report’s data also point to

more Americans giving up on applying for credit — not even for credit cards or a mortgage, or even a personal line of credit

often used for starting small businesses.

The percentage of people in the study who indicated that they would likely apply for a minimum of one type of credit over the

next 12 months fell from 27.8 percent in October to 26 percent, the lowest level on record in the study.

Think about that: 75 percent of Americans don’t think they will even bother applying. And the fall is even worse for those with

credit scores under 680.

Let’s face it, it’s always hard to chase dreams like starting a business or buying a home. In today’s economy, it’s so damn

near impossible that people have given up.

President Trump’s optimism has helped turn the tide of business leaders and the financial markets, but the kitchen table

economics will not change for many Americans until credit becomes less hamstrung by regulation.

http://nypost.com/2017/03/26/one-reason-for-struggling-retailers-americans-are-tapped-out/

Target Unveils Dual-Store Concept

Target Corp. released design elements for some of its future stores and remodeled locations this week — stores that have

two entrances, one for convenient quick trips and the other to browse Target's brands.

The new concept's prototype is scheduled to open in the Houston suburb of Richmond this October. The new 124,000-

square-foot store will have two entrances, one keyed toward lifestyle shopping, for items such as apparel, accessories and

housewares, as well a Starbucks Coffee shop. The other will be geared toward convenience, with easy access to grocery,

alcohol, self-checkout lanes and an order pickup counter. There also will be dedicated parking spaces where Target staff will

bring out online orders outside the entrance.

The first entrance in the newly designed Target layout. This one will have access to lifestyle shopping choices like apparel,

furniture and accessories.

The new store designs also included an upgraded grocery selection with more fresh produce and quick grab-and-go options,

large glass windows at the front of the store and curved, more circular center aisles.

The designs were revealed by CEO Brian Cornell at Shoptalk, the retail and e-commerce event held in Las Vegas. The store

designs are part of Target's plans for $7 billion in capital expenditures in the next three years. That will allow for the

remodeling of 600 of its 1,800 stores and the opening of 100 new small-format stores in dense urban neighborhoods and

college campuses.

“The new design for this Houston store will provide the vision for the 500 reimagined stores planned for 2018 and 2019, with

the goal of taking a customized approach to creating an enhanced shopping experience," Cornell said.

Minneapolis-based Target has more than a dozen locations in the Milwaukee area.

Target has unveiled future-focused stores before, and they haven't all planned out. Earlier this year the retailer, facing

worse-than-expected results for the fourth quarter, pulled the plug on its hyped “Store of the Future,” which incorporated

behind-the-scenes robots picking items for shoppers.

http://www.bizjournals.com/milwaukee/news/2017/03/23/target-unveils-dual-store-

concept.html?ana=e_me_set1&s=scroll&ed=2017-03-

24&u=xQeDzsnDNIz7tZRd3rOZapkwQDb&t=1490382913&j=77735651

There is one Thing that Would Help Make Mobile Purchasing Easier

What’s stopping mobile users from making purchases on their phones?

Well, for one thing, the screens are too darn small.

That was one of the findings of a PricewaterhouseCoopers survey conducted in September 2016. The data was part of a

UK-focused report that compared consumer usage and attitudes in the UK with those in China and the US.

About one-third of US internet users ages 18 and older surveyed said a challenge of purchasing products via mobile devices

was that the screen is too small.

Meanwhile, about one-quarter said that mobile sites aren’t easy to use—likely a response at least in part to mobile phone

screen size.

Another 19.0% said the lack of security on mobile sites is a challenge of purchasing products via a mobile device.

Connectivity was close behind: 17.0% of respondents said they have a slow data connection, which makes buying via

mobile devices challenging, and nearly as many (15.8%) said they have no Wi-Fi access.

According to eMarketer’s latest estimates, some 147.3 million people in the US will use a mobile device to make a purchase

this year. That works out to slightly more than 55% of all mobile phone users.

https://retail.emarketer.com/article/one-thing-that-would-help-make-mobile-purchasing-

easier/58d4411cebd4000e20e0fcc2?ecid=NL1014

Study Identifies Gaping Hole in Media-Buying Practices

Brands need to start pulling their search teams into the media-planning sessions if they want to have a fully integrated

campaign that can produce the highest return on investment. The findings from a joint study made public Thursday identify a

gaping hole in how media-buying teams communicate and the positive return on investment that search brings when all

teams can sit in the same room to determine the strategy and media buy.

Companies have begun to break down the silos that contain data within specific media campaigns and now they must think

about breaking down those same walls to rethink how they collaborate on buying media, said Rob Wilk, VP, North America

search sales at Microsoft.

"Search budgeting should happen much earlier in the budgeting process when the rest of the planning gets done," he said.

Microsoft -- which powers nearly one-third of PC searches in the U.S. through its search engine Bing -- and Catalyst, a

global digital marketing GroupM agency, commissioned a study from Forrester that analyzes today's search return on

investment across all channels and how marketers can take a holistic approach to the media.

The data shows that despite the ability of search to support other media channels such as television and display or social, it

is often omitted from the media mix.

Forrester expects the global online population to grow from 3.4 billion users in 2016 to 4.2 billion in 2019, and eMarketer

estimates that paid search will reach $34.9 billion in digital ad spend in 2017.

The study shows that 19% of consumers identified search as the most influential channel when researching their most

recent purchase, compared with 7% who said the same for any form of offline media.

Findings also show that marketers struggle with advancing their search programs. Wilks believes it is more of an

organizational struggle, as more companies think about omnichannel campaigns. The study found that 52% of marketers

cite cross-media attribution as one of their top three challenges in budget allocation, and 53% cite a lack of data to inform

their strategies.

Perhaps this is because media planners grew up with television and print advertisements, and not all realize that search

aligns well with both. "Search lacks a prominent seat at the planning table, although it’s a primary source for consumers to

find information," Wilk said.

Budgets are determined without someone on the brand's search team present, said Kerry Curran, senior partner and

managing director of marketing integration at Catalyst/GroupM. "The search team needs to have a seat at the table early on

when the media is being allocated, creative briefs put out, and the media team starts thinking about how they will connect

with the target audience," she said.

Marketers often don't think about aligning search with TV media or display and video. Curran pointed to numerous Catalyst

case studies where brands have seen an increase of impressions in other channels based on paid-search campaigns. "It's

clearly evident in search spikes after a brand runs a Super Bowl ad," she said. "If you look at the search volume around

branded terms of any of the companies running ads during the Super Bowl, you see search spikes in brand queries during

the subsequent days."

Curran said the company also works with conquesting, where brands run ads or content online adjacent to editorial content

related to the competitor or its products. Paid-search ads were run against competitor keywords within 15 second of the

competitor's commercial airing on broadcast television.

"By getting search a more prominent seat at the planning table, we're able to better amplify other media buys," Curran said.

http://www.mediapost.com/publications/article/297780/?mc_cid=408bb02b18&mc_eid=43c6a6c187

Twitter Considers New Revenue Streams

In another bid to boost its bottom line, Twitter is pondering a premium Tweetdeck-like service for professionals willing to pay

for social insights.

“We’re exploring several ways to make Tweetdeck even more valuable for professionals,” a company spokeswoman said in

a statement on Friday. If and when Twitter launches such a service, it will likely feature social-activity tracking and planning

tools similar to those offered by SocialFlow and HootSuite.

In the past Twitter has played with the concept of a more structured measurement service. Last summer, it debuted a

Dashboard app for businesses, which could track discussion about products and key words, as well as hashtags that failed

to show up as “@” mentions.

Without much explanation, however, Twitter said it was shuttering Dashboard at the beginning of 2017.

As its business outlook dims, Twitter is obviously in search of new revenue streams. For the first time, for instance, the

social giant recently announced plans to host its own presentation during the Digital Content Newfronts. Along with other

platforms and publishers, Twitter plans to vie for a piece of brands’ annual ad budgets,on May 1.

The move is part of a broader effort to invest in original video content and bring advertisers into the fold, Matthew Derella,

Twitter's vice president of global revenue and operations, said earlier this month.

In the fourth quarter, Twitter saw revenue increase by just 1% to $717 million, year-over-year, while monthly active users

were up just 4% to 319 million.

Worse yet, ad revenue totaled $638 million, down slightly year-over-year.

Analysts didn’t hide their disappointment with the once high-flying company.

“Current quarter results were weaker-than-expected, with a big negative from what guidance implies about the coming

quarter and the year,” Pivotal Research Group analyst Brian Wieser said in an investor note. “We are altering our long-term

forecasts on the company and reducing our price target from $17 to $15 on a [year ending 2017] basis,” he said.

http://www.mediapost.com/publications/article/297857/twitter-considers-new-revenue-

streams.html?utm_source=newsletter&utm_medium=email&utm_content=headline&utm_campaign=101673&hashid

Stop the Presses: Film Documents End of 'Life, Printed Daily' at the Tampa Tribune

Deborah Kerr and her crew were filming a day in the life of a newspaper when the company unraveled and its owners sold

the 121-year old institution to o long time local competitor, thus ending the bay area's newspaper war and decades-long

careers to hundreds of reporters, photographers, editors and pressmen.

In the film, viewers will hear from former employees in News, Advertising, Circulation, Packaging and the Press Room about

the stark reality ot what is happening in the newspaper industry and its effect on the more than 600 employees whose lives

were changed forever by the closing of this Tampa landmark. and the readers left bereft of community news when the

Tribune stopped hitting their driveway.

“This is an important story to be told - especially since The Tribune didn't get to write its own obituary." Said Kerr.the movie's

director. producer and head of Be Brave Productions. “I want people to realize the impact of newspapers on our daily lives

and to show the dedication and commitment of how who beathe life into newspapers 365 days a year. With charges of fake

news taking root. the light needs to shine on these dedicated people who brought readers stories from the world and their

own back yards."

Tampa Theatre will host a red carpet reception with the filmmakers at 5:30 p.m. followed by the world premiere of Stop The

Presses at 7:30p.m. Following the screening, director Deborah Kerr be joined on the Theatre’s stage by executive producer

George Kerr, cinema photographer Ian Longan and sound designer Joson Henne for a paneldiscussion and audience Q&A.

https://www.youtube.com/watch?v=uB7ARC2_1BY&app=desktop

Newsonomics: Michael Ferro’s Creeping Privatization of Tronc

On Thursday, Michael Ferro solidified his control of Tronc, the company he seized a more tentative kind of control of just 13

months ago, deposing then-Tribune Publishing CEO Jack Griffin in a quick coup de press. This week’s move looked

financial, but too, speaks deeply to power and control.

Officially, Tronc paid $56.2 million — more than 25 percent of the company’s $200 million cash holdings as of the end of

2016 — to buy out the remaining shares of Oaktree Capital. Tronc paid $15 per share, a 14 percent premium to the day’s

closing market price. Getting that deal done wasn’t easy for Ferro, as Oaktree — a long-time major holder of Tribune, then

Tribune Publishing, then Tronc shares — demanded and got an even better deal, one unusual in “stock buyback”

transactions. Within the next year, should Tronc itself be sold for more than $15 per share, Oaktree would see upside. In its

“price protection” deal, Tronc would be obligated to pay Oaktree additional compensation. For instance, if Tronc ends up

getting sold for $18 a share within the next 12 months, Oaktree could gain another $11.2 million.

The buyout, and its potentially even steeper price, shows how badly Ferro wanted to get Oaktree out of Tronc’s business.

Los Angeles-based Oaktree, a highly regarded investment company, has been a constant irritant to the high-flying Ferro.

Just last summer, it publicly threatened to take him to court, alleging multiple management improprieties, and had done all

the research necessary to file suit. But it held its fire, hoping to keep its name out of the multiple controversies that have

swirled around the company in the last year. Oaktree, which had pushed Tronc to accept Gannett’s $18-plus per share offer

last year, hoped its payday would come — and so it waited.

This spring, the day came. In buying out Oaktree’s 3.75 million shares, board chairman Ferro pulled off a twofer. Using

Tronc’s own company funds for the selective “stock buyback,” rather than his own money, he first removed that lawsuit

threat that still hung over his head; Oaktree agreed, as part of this sale, to drop its potential claims. Second, he deprived his

new arch-enemy, his own vice-chairman Patrick Soon-Shiong, of a vital ally as Soon-Shiong himself has prepared to buy the

company out from under Ferro.

As I reported Wednesday, Soon-Shiong had plotted his own bid to buy Tronc — and then likely carve out his hometown Los

Angeles Times (and probably its sister San Diego Union-Tribune) while selling Tronc’s other seven dailies, likely and

ironically to Gannett, confidential sources had told me. Times ownership has been the billionaire medical tech investor’s goa l

for awhile, and he planned to act on it. In this rat’s nest of corporate intrigue, it had been Ferro who had brought Soon-

Shiong into his company just last June as his white knight. Then Soon-Shiong paid $70.5 million for 12.9 percent of the

company at $15 a share — Ferro’s early defense against Gannett’s hostile offer. Soon-Shiong also became vice-chairman,

though his relationship with Ferro has been described by most as “rocky” from the start.

Why did Ferro buyout Oaktree now?

Oaktree’s 10 percent stake, added to Soon-Shiong’s own 24 percent, would have amounted to 34 percent of the company.

That would have given Soon-Shiong a stronger foundation from which to launch a buyout.

At this point, even veteran (one-year veteran, that is) Tronc watchers may well be confused by the company’s recent

cascade of moves. But it’s worth keeping in mind that they all seem to have a common thread: the perpetuation of Ferro’s

control over America’s second-largest newspaper chain by annual revenue. In fact, this week’s events tell us something

even more: As Ferro’s Merrick Media investment company moves toward 30 percent ownership of Tronc, we’re seeing the

creeping privatization of the company. Ferro entered only last January, with a 17 percent stake, and then has steadily

moved up, with his board approving to 20, then 25, and now approaching 30 percent. That’s the creep. On that question and

others, Tronc declined comment for this story.

In numerous ways — from the Oaktree buyout to the buying up of enterprises with which his former company was involved

to the $2.7 million leasing of private jet service for his own use — Ferro acts more like a privately owned company

chairman/CEO than one heading a single-class public company. Securities law mandates that public company directors act

in the interest of all shareholders. Ferro’s many moves have certainly blurred that line, if not crossed it. But the question has

hung in the air: Who of stature would bring a challenge?

For much of last year, it seemed like Gannett’s acquisition of Tribune Publishing/Tronc would leave that question to history.

Then, though, the Gannett deal blew up, its backfire still wounding the country’s largest public newspaper company, while

Ferro, Road Runner-like, sped on his merry way, escaping unscathed. That’s the story, so far, of Ferro and Tronc.

The Gannett battle over, Ferro faced two noisy dissident shareholders: Oaktree, dispatched today with high-priced hush

money, and HG Vora, an activist shareholder that smelled profit last year as Tronc was in play and bought into the company

speculatively. Recent acquisitions of Vora’s holdings by both Merrick Ventures and Soon-Shiong has removed it from the

picture. Ferro’s way forward now seems clearer with those two pesky investors gone and Gannett still on the sideline, licking

those wounds.

As he finalized his Oaktree deal, Michael Ferro needed to confront his other threat, the one with those deep, deep pockets

of $9 billion: Patrick Soon-Shiong, his fallen knight.

He who controls the calendar…

If intrigue has become part of that Tronc brand, as Ferro rechristened longstanding American icon Tribune last June, this

latest palace intrigue might surprise even the most loyal of Tronc followers.

On March 9, Tronc filed its proxy statement, the company offering up its slate of directors for the next year, to be voted on at

the company’s annual meeting. As the board numbers narrowed from nine to seven, one of the two names left off the list

was shocking: Patrick Soon-Shiong’s. Ferro’s 2016 savior was not only losing his vice-chair position, but also his director’s

position. (Ferro’s instinct for self-preservation is of the highest order.) But before he did that, with a call going to the

surprised investor, he pulled another rabbit out of his corporate trick book. Ferro knew that his control had almost been lost

early on — and only because Gannett, in its own pursuit of the company, had missed a deadline. Gannett had failed to meet

the early-in-the-year deadline to offer up its own alternative slate of directors, a slate that would have been pro-Gannett sale.

Missing that deadline, Gannett only could muster an impressive-but-impotent protest vote at the company’s annual meeting.

So this year, seeing new trouble on the horizon, Tronc set an even earlier annual meeting date. That meeting is now

scheduled for April 18 — some six weeks before last year’s annual meeting. It’s unlikely the timing was accidental. By the

hour that Soon-Shiong received the call that he was off the board, it was already too late for him to file his own alternative

slate of directors for 2017, thus handicapping any bid he’s preparing for the whole company.

Before Thursday’s buyout of Oaktree, Soon-Shiong already had a tough decision to make. Should he go forward with an

offer to buy the company, presumably for a price similar to what Gannett had almost paid, of $18+ per share? Or was that a

fool’s errand, given his inability to nominate an offer-friendly slate of directors? Now, though, with likely buyout-friendly

Oaktree’s 10 percent stake absorbed under Ferro’s direction, the odds of Soon-Shiong succeeding with a hostile acquisition

decrease further.

The billionaire’s options

So what he might he do?

Soon-Shiong may have been recently eclipsed by Elon Musk as the richest Los Angeles resident, but his pockets still have

$9 billion. Famously brilliant, he’s equally known as a man of so many interests that his concentration on any of them at any

time is unpredictable. Just a month or two ago, he harbored a dream of becoming Donald Trump’s “health czar,” but his two

visits to Trump Tower haven’t yet proved fruitful. Spurned by Ferro, he may turn his direction back Tronc-ward, where he’d

then face a strategic choice: Make a bid, or sue, or do both. Or just wait ’til next year. Soon-Shiong, publicly quiet throughout

this Tronc months, was unavailable for comment.

Most straightforwardly, Soon-Shiong could simply make Tronc’s new board, his former associates, an offer they shouldn’t

refuse. An easy number here: $18.40 a share, or what Tronc, we believe, had finally acquiesced to, to sell itself to Gannett

last fall before the deal fell through. But Ferro is most likely to strong-arm any new bid — and besides, Soon-Shiong would

probably start lower, with a predictable new war of words ensuing. If, though, Soon-Shiong — both because of his desire to

own the local L.A. Times and to satisfy his heightened battle with Ferro — went higher, the Tronc board would have an

increasingly hard time saying no. At $20 a share, a price Ferro had told associates last year he would have to accept, the

deal would be still harder to reject.

However, Soon-Shiong and his advisers know that Tronc’s financials don’t merit that price — and as a disciplined

businessman, he may not be willing to go that far.

Would Soon-Shiong consider a lawsuit, or the threat of a lawsuit? I’ve recounted over the past year the many allegations

that Ferro — in rejecting Gannett, in making business deals with those formerly associated with his Wrapports company

(that ownership now held in trust, he says), and in doing private placements of shares or now selectively buying back

shares, as he’s done with Oaktree — has not acted in the best interests of all shareholders. That potential “breach of

fiduciary duty” would have been the basis of a lawsuit if Oaktree had filed it, and it could now be Soon-Shiong’s.

The courts would have a field day with the pricing of the company’s shares over time. Michael Ferro’s Merrick Media bought

its original 17 percent stake for $8.50 a share, or $44.4 million in February, 2015. The company rejected Gannett’s $18 offer ,

at one point, and then has enabled Ferro (and Soon-Shiong, for that matter) to up their percentage ownership in the

company, as they’ve bought on the market at $15 a share. Coincident with the buyback sale of the Oaktree shares, Tronc’s

board has now allowed Ferro to buy up as much as 30 percent of all shares, a figure he is within a couple of percentage

points of at this writing. (Soon-Shiong will soon request his own ownership limit be upped to 30 percent as well.)

“Why,” one observer close to the action asks, “are they allowing Ferro to buy more stock at a lower price than they were

willing to sell the company for?”

While the noisiest shareholders have cashed out, the stock still sits at $13, and much of that price likely rests on continuing

belief that it will be sold. In this swirl of pricing issues, best understood by securities attorneys, the big question is: Were

Tronc shareholders overall fairly treated?

If Soon-Shiong doesn’t bring court action, there are no other likely parties in the wings to do it.

In fact, Soon-Shiong may well decide to just play out the clock. He could prepare his offer — and make sure he meets the

early 2018 deadline to file a slate of directors who would be friendly to his offer for the company. It’s ironic that Gannett , last

year, considered the same scenario, but failed to come back in 2017, its own performance and deal financing issues

dissuading it.

Of course, we can offer the usual newspaper Miranda warning: A lot can happen in a year. Trump could run through his

appointments quickly and Soon-Shiong could get a nod that would make L.A. Times ownership seem a distant goal. A new

Moody’s report forecasting “newspaper print ad revenue will decline by low-to-mid teen percentages through the first half of

2018, falling more steeply for national newspapers than for community newspapers…As a consequence, the industry’s

organic EBITDA will decline by 7 percent to 10 percent through early to mid-2018.” Tronc’s full-year 2017 financials may

alter its desirability or price.

Further, the company has just spent a quarter of its cash on hand to buy back the Oaktree shares. Some of that cash came

from Soon-Shiong’s 2016 investment; you could say Ferro just spent all but $14 million of that Soon-Shiong infusion to get

Oaktree out of his hair. How much cash will Tronc now have at year’s end? Further, there’s this March footnote: Tronc pulled

out of the bidding for Us Weekly three days before a planned announcement, an acquisition that would have cost it close to

$100 million of that cash. Did Ferro make the choice to abandon that deal and make the Oaktree one? He didn’t have the

cash to do both.

Then, there’s the big question of what Tronc will become. Promising transformative Tronckification last spring, the company

then slowed its efforts, believing a sale was likely — a fact even acknowledged by CEO Justin Dearborn. Now, as it

refocuses on operations, Tronc has brought in Tribune, Wrapports, and (briefly) Advance executive Tim Knight to lead its

digital division, TroncX. Further, it has become The Washington Post’s largest client for its Arc platform, setting itself on a

new technology path via outsourcing. At this juncture, then, it’s still impossible to answer the question: What is a Tronc?

As this week closes, the Noises Off-like set that serves as Tronc’s corporate stage presents at least three questions. How

far will Michael Ferro continue to push his virtual privatization of the company? How will the question of public company

shareholder interest be asserted, and by whom?

Most importantly, and again lost in all the palace-of-Ferro intrigue, we’ve got the all-but-undiscussed question: What’s in the

public interest here? While the nation is in political flames, the ownership and leadership of some news companies — The

New York Times, The Washington Post, and CNN in the lead — have stepped up to the challenge. Meanwhile, the Los

Angeles Times — the next largest daily newsroom after the Post — does good, steady professional work, but hasn’t been

given the mandate or resources to up its game. Nor have papers that were once industry leaders, like the Chicago Tribune

and the Baltimore Sun. This question is the one that should be our main story here — but it hasn’t yet been in Tronc’s one-

year history.

http://www.niemanlab.org/2017/03/newsonomics-michael-ferros-creeping-privatization-of-

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Tronc May Need to Placate Other Shareholders in Wake of Oaktree Sale

As if things hadn't already been messy at Tronc (TRNC) .

Ten months after curiously changing the company's name from the iconic Tribune Publishing and five months after Gannett

(GCI) pulled an offer to buy the company at a hefty premium, the owner of the Los Angeles Times, Chicago Tribune and

other big-city dailies is in the midst of yet another battle for corporate control.

The two people fighting over Tronc are none other than its chairman, Michael Ferro, the company's largest shareholder, and

his sometime friend and No. 2 shareholder, Los Angeles biotech billionaire Patrick Soon-Shiong. Ferro on Thursday sought

to limit Soon-Shiong's ability to take control of the newspaper publisher when Tribune's board elected to spend $56.2 million

to buy out its third-largest shareholder, Oaktree Capital Management.

In doing so, Ferro will rid himself of a critical shareholder and minimize Soon-Shiong's ability to collaborate with other Tronc

investors to take control of the company. In a Securities and Exchange Commission filing, Chicago-based Tronc said it had

agreed to purchase 3.75 million shares in the company from Oaktree at a price of $15 per share, a 14% premium to the

stock's closing price on Wednesday. In the event that Tronc is sold at a higher price than $15 with a year, Oaktree would

reap additional funds.

Most importantly, Tronc's board approved a measure to allow Ferro's Merrick Media to raise its stake to as high as 30% from

a current level of 24.8%. Soon-Shiong's Nant Capital holds 24% of Tronc.

The horse-trading and corporate jockeying comes nearly five months after Gannett, the country's largest newspaper

publisher, pulled its offer to acquire Tronc for $18 a share. Gannett had been stymied in its effort to buy Tronc after Ferro

teamed with Soon-Shiong to assert that the company was best served staying with current management.

Shares of Tronc gained 4.2% on Friday to $13.71.

"Ferro is now fighting with his white knight; the guy who helped him thwart Gannett has now emerged as a rival," Cowen &

Co. managing director Lance Vitanza said. "There is a certain comic irony to this that it notable."

It remains unclear whether other minority shareholders also will be given the opportunity to sell back their stock to Tronc at

$15 per share, the level at which both Ferro and Soon-Shiong previously made bulk purchases from HG Vora. Why, some

might ask, should Oaktree and HG Vora receive special treatment compared with other nonmanagement shareholders?

"Shareholders are likely to feel that Ferro is off the rail here. Everyone would have liked to sell the company at $15 a share,"

Vitanza said. "The fact that Ferro is cherry-picking and saying, 'I'm going to buy these shares at $15, and everyone else is

stuck' is not going to leave a good taste in anyone's mouth."

The latest deal between Tronc's chairman and a major shareholder at least demonstrates that some large investors still

believe there's value in a legacy print company.

"If nothing else this underscores the intrinsic value that a lot of smart people continue to see in newspapers, and the Tronc

assets in particular," Vitanza added. "I'd rather have people fighting to buy the company than fighting to sell it."

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