March 30, 2009


The Inheritance: With a doomsday clock ticking for newspapers as we know them, no one has more at stake than fourth-generation New York Times publisher Arthur Ochs Sulzberger Jr., who is scrambling to keep his family’s prized asset alive. Some see him as a lightweight cheerleader, others as the last, best defender of quality journalism. Talking to company insiders, the author examines the nexus of dynasty and character that has brought the 57-year-old Sulzberger to the precipice. (Mark Bowden May 2009, Vanity Fair)

In 2001, The New York Times celebrated its 150th anniversary. In the years that have followed, Arthur Sulzberger has steered his inheritance into a ditch. As of this writing, Times Company stock is officially classified as junk. Arthur made a catastrophic decision in the 1990s to start aggressively buying back shares ($1.8 billion worth from 2000 to 2004 alone). This was considered a good investment at the time, and had the effect of increasing the stock’s value. Shares were going for more than $50. Now they are slipping below $4—less than the price of the Sunday Times. Arthur’s revenues are in free fall: the bottom has dropped out of both newspaper and Internet advertising. He has done more than anyone in the business to showcase newspaper journalism online. It hasn’t helped much. The content and page views of the newspaper’s Web site,, may be the envy of the profession, but as a recent report from Citigroup explained, “The Internet has taken away far more advertising than it has given.” Layoffs have occurred in the once sacrosanct newsroom.

Having squandered billions during the newspaper’s fat years—buying up all that stock, buying up failing newspapers, building a gleaming new headquarters—Arthur is scrambling to keep up with interest payments on hundreds of millions in debt, much of it falling due within the next year. To do so, he is peddling assets on ruinous terms. Arthur recently borrowed $250 million from Carlos Slim Helú, the Mexican telecommunications billionaire, who owns the fourth-largest stake in the Times Company. Controlling interest is held closely by the Sulzberger family, which owns 89 percent of the company’s Class B shares. These shares, not traded publicly, are held by a family trust designed to prevent individual heirs from selling out, and ultimately to shelter editorial matters from strict concern for the bottom line. The family owns about 20 percent of the Class A shares, which is about the same percentage owned by the hedge funds Harbinger and Firebrand. The third-largest Class A shareholder is T. Rowe Price, with 10 percent. Slim comes next, with 7 percent. Given the current state of the investment and credit markets, Slim would appear to have the inside rail should the paper ever be sold, a prospect once unthinkable. It is now very thinkable. Among the other prospective buyers whose names have surfaced in the press are Michael Bloomberg, the billionaire mayor of New York; Google; and even, perish the thought, the press baron Rupert Murdoch, whose Wall Street Journal has emerged as journalistic competition for the Times in a way it never was before. (Murdoch has publicly dismissed reports of his interest in the Times as “crap,” which has served only to heighten speculation.) This quarter, for the first time since Times Company stock went public, in 1969, the fourth- and fifth-generation Sulzbergers who hold shares (there are 40 of them in all) received no dividends. As recently as last year they divvied up $25 million.

Beyond these professional trials, Arthur has personal ones. He has separated from his wife of more than three decades, Gail Gregg, a painter, and embarrassing speculation about his sleeping partners has surfaced in the tabloid columns. His son, Arthur Gregg Sulzberger, is now working as a reporter at the paper, as his father and grandfather once did, but, for the first time in five generations, the heir apparent’s inheritance is in doubt.

While the crushing forces at work in the newspaper industry are certainly not Arthur’s fault, and many other newspapers have already succumbed to them, the fate of The New York Times is of special importance: it is the flagship of serious newspaper journalism in America. The Times sailed into the economic storm that began in 2001 in good financial shape, bearing the most respected brand name in the profession. It was far better equipped than most newspapers to adapt and survive. What is increasingly clear is that the wrong person may be at the helm. Arthur Sulzberger’s heart has always been in the right place, but he assumed leadership from his father uniquely ill-equipped for this crisis—not despite but because of his long apprenticeship. To their credit, the Sulzbergers have long treated the Times less as a business than as a public trust, and Arthur is steeped in that tradition, rooted in it, trained by it, captive to it. Ever the dutiful son, he has made it his life’s mission to maintain the excellence he inherited—to duplicate his father’s achievement. He is a careful steward, when what the Times needs today is some wild-eyed genius of an entrepreneur.

The Sulzbergers embody one of the newsroom’s most cherished myths: Journalism sells. Arthur says as much at every opportunity, and clearly believes this to his core. It encapsulates his understanding of his inheritance and of himself. But as a general principle, it simply isn’t true. Rather: Advertising sells, journalism costs. Good journalism costs more today than ever, while ads have plummeted, particularly in print media. This is killing the Times, and every other decent newspaper in America. Arthur has manfully tied himself to the wheel, doggedly investing in quality reporting and editing even as his company loses more and more money. Few investors or analysts consider this to be sound business practice.

...that the Other Brother found a recent story about how it would cost the Times half as much to give every subscriber a Kindle as it does top print and deliver the paper edition. The death of newspapers raises a dilemma that conservatives seem not to be addressing as our schaudenfreude clouds our judgment. The Founders considered the press to be a sufficiently important check on the power of the state and necessary to an informed electorate that they gave it explicit protection in the Bill of Rights. But media has become big business and politically powerful in its own right. Or at least it had. Now that it's failing we're presented with some awkward choices. We need the services the press provides but don't appear willing to pay for them. We can't bail them out, because that would amount to giving the state an unacceptable level of control over that is supposed to be an independent information source about the state. So what is the business model that will keep "newspapers" viable?

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Posted by Orrin Judd at March 30, 2009 8:00 AM
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