Wednesday, January 23, 2008

Who would you rather have running The New York Times: Arthur Sulzberger, Jr. or Google?

A couple years ago, Business Week ran a lengthy cover story about the future of The New York Times at a time of weaker earnings, a changing media world, and the aftermath of the Jayson Blair scandal. The story, which ended on a note of guarded optimism, almost seems quaint today.
The New York Times, like all print publications, faces a quandary. A majority of the paper's readership now views the paper online, but the company still derives 90% of its revenues from newspapering. "The business model that seems to justify the expense of producing quality journalism is the one that isn't growing, and the one that is growing -- the Internet -- isn't producing enough revenue to produce journalism of the same quality," says John Battelle, a co-founder of Wired and other magazines and Web sites.

Today, Sulzberger faces an even bigger challenge than when he took charge of the Times in the mid-1990s. Can he find a way to rekindle growth while preserving the primacy of the Times's journalism? The answer will go a long way toward determining not only the fate of America's most important newspaper but also whether traditional, reporting-intensive journalism has a central place in the Digital Age.
And that was before things really started going to hell. Since then, the Times' stock has continued declining -- losing 70% of its value in the last five years. The Judy Miller scandal tarnished the paper's journalistic reputation (nobody died when Jayson Blair lied, to paraphrase a popular bumper sticker). The experiment with hiding the paper's columnists behind a paywall flopped, succeeding only in eroding the relevance and impact of the opinion section. And the appointment of neocon apparatchick Bill Kristol had not yet further dimmed what luster the Op-Ed page once had.

Still, even under the floundering leadership of "Young Arthur," as publisher Arthur Sulzberger, Jr. is known to his family, The New York Times is a national resource. No other newspaper in the world devotes the financial resources to reporting that the Times does -- as much as $300 million per year. There's a lot of talk these days about new media, but new media don't come close to devoting resources on such a scale to reporting.

The muddle can't continue forever. Although the Sulzberger family has treated its control of the Times as a public trust far longer than any of the other great American journalistic families, if stock prices keep falling, their principles will be sorely tested. If the market cap drops below $2 billion, the stock will be put into play. The company will need a white knight to save it from the predators like Rupert Murdoch (who, in any case, recently acquired the paper's chief national competitor, The Wall Street Journal). Who would make sense as a purchaser? Jim Ellis asks, why not Google? (via)
The company that has the most to gain from buying the New York Times is Google. If it proffered a Murdoch-like, no-auction bid of $4 billion, wouldn't the Sulzberger family have to accept it? Every single class B shareholder would accept the offer. It's their only exit. It is also likely that Times employees and retirees would enthusiastically support the deal; it's their only exit as well. So it would all come down to whether the Sulzberger family (smaller in number and not as far-flung as the fractious Bancroft clan that owned Dow Jones) would accept the deal.

The choice for the family would be basically this: double your money or double down on "young Arthur," as the NYT's Chairman and CEO is sometimes called. In the back of their minds, the prospect of doubling down on "young Arthur" could only mean that the company's stock will continue its relentless decline. The prospect of doubling up with Google offers realized value, a global platform and thus a much clearer path to future growth. Everyone would be a lot richer than they are now. Assuming a cash/stock transaction, some might be a whole lot richer in the future.
Interesting idea. Of course, as Ellis notes, the Sulzberger family has no intention of selling. But until recently, neither did the Bancroft family that owned The Wall Street Journal. Things can change.

Certainly Google is far from perfect. But they have been spectacularly successful at running one of the most successful businesses of the information age, and more to the point, they understand the playing field on which the future of the Times will be determined. They should -- the playing field is in part their creation.

1 comment:

Wren said...

Whoa, Sam.

There's a part of me that doesn't want to see any newspaper, not least the NYT, turn into a wholly digitized and advertorialized shadow of it's former self. And yet everything changes, doesn't it. I imagine my great-grandfather was cussing the Model A, too, already nostalgic for his horse and buggy.

You're right. Chances are the Sulzbergers WILL sell before too many more years pass. If we're lucky, it will be to a company like Google and NOT like Murdoch.