Tuesday, February 26, 2008

Follow the Money

PJM has a fascinating read, by journalist Craig S. Karpel, on The New York Times’ “financial” motivation for running that recent hit piece on John McCain. As Mr. Karpel explains, the parent NYT Company is girding for a key election that is focused on boardroom, rather than presidential politics.

How does that relate to John McCain? According to Karpel, it’s part of a plan to get the Times back in the headlines, increase shareholder value and keep some unwelcome outsiders off the corporate board:

“..I’m talking about the election that’s genuinely crucial to the newspaper’s senior management, the one that’s going to be held on Tuesday, April 22, 2008, the one that decides who the directors of The New York Times Company are going to be.

Have a look at a chart of the company’s Class A stock and you’ll see why. (The holders of the Class B shares, 89 percent of which are owned by descendants of Adolph Ochs, who bought the Times in 1896, elect nine of the company’s 13 directors.) In 2002, Times shares were as high as $53. The stock is now trading below $20. During the same period, the S&P 500 index has gone from about 1,000 to more than 1,300.

The decline of the A shares has had two effects. It has attracted the attention of a group of investor/kibbitzers who, as you read this, are engaged in a proxy battle to have their slate elected to the four Times board seats that represent shareholders unfortunate enough not have been born into the Ochs-Sulzberger family. The group hopes its directors can hector the clan’s directors into selling off the company’s non-core holdings (e.g., 17 percent of the Boston Red Sox, not to mention full ownership of that journalistic bastion, the Petaluma Argus-Courier, circulation 7,400—I kid you not) and buy additional Internet-based businesses with the goal of obtaining most of its revenues from Web advertising by 2013. And it has wonderfully concentrated the minds of the paper’s senior managers.

Nothing can be done about the overriding tribulation of the dead-tree press: the enormous expense of growing, cutting, pulping, shipping, printing, folding, and delivering the end-product of the deciduous deceased. But dead-tree diehards believe the value added to the newsprint product can be increased, while simultaneously being leveraged into digital content. The key to it all, as they see it, is that old standby, the scoop. And the best kind of scoop a newspaper can have is the kind where the paper itself becomes the story.


Sources at The New York Times have told me that “the masthead”—the paper’s top 13 editors, from assistant managing editor on up—has been under relentless pressure from publisher Arthur Ochs Sulzberger Jr. to come up with stories that will themselves make news. In Sulzberger’s view, the only instance in which the Times has shot and scored during the tenure of the paper’s executive editor, Bill Keller, who was appointed in mid-2003, was its coverage of warrantless surveillance of phone calls to and from the U.S., for which James Risen and Eric Lichtblau received the 2006 Pulitzer Prize.

So it’s not a coincidence that the McCain-Iseman story was published the same day—February 21—as The New York Times Company submitted to the Securities and Exchange Commission (SEC) the preliminary proxy statement for this year’s annual meeting. The statement warns shareholders: “Please note that Harbinger Capital Partners NY, LLC and certain of its affiliates have notified us that they intend to solicit proxies for and nominate at our Annual Meeting their own slate of four nominees for election as directors, in opposition to four of the nominees we have selected. Our Board of Directors unanimously recommends a vote for the election of each of our Board’s nominees on the enclosed WHITE proxy card and urges you not to sign or return any proxy card that you may receive from Harbinger.” [Boldface and capitalization in the original.—CSK]

So far, the Sulzberger strategy of “making the paper the story” has been a major flop. The Times was roundly—and rightfully—criticized for publishing the McCain story. Even public editor, Clark Hoyt, slammed the paper’s “coverage.”

The article was notable for what it did not say: It did not say what convinced the advisers that there was a romance. It did not make clear what McCain was admitting when he acknowledged behaving inappropriately — an affair or just an association with a lobbyist that could look bad. And it did not say whether Weaver, the only on-the-record source, believed there was a romance. The Times did not offer independent proof, like the text messages between Detroit’s mayor and a female aide that The Detroit Free Press disclosed recently, or the photograph of Donna Rice sitting on Gary Hart’s lap.


A newspaper cannot begin a story about the all-but-certain Republican presidential nominee with the suggestion of an extramarital affair with an attractive lobbyist 31 years his junior and expect readers to focus on anything other than what most of them did. And if a newspaper is going to suggest an improper sexual affair, whether editors think that is the central point or not, it owes readers more proof than The Times was able to provide.

Readers will note that Mr. Hoyt’s post-mortem makes no mention of the “pressure” on editors at the Times to put the paper back in the headlines, or the looming proxy battle. And, in fairness, it’s quite possible that Hoyt was unaware of Sulzberger’s “strategy,” or the attempt to bring fresh blood to the NYT corporate board.

Still, one would think that the Times owes its’ dwindling readership a little more disclosure—the same thing it has demanded of politicians, government institutions and business conglomerates. But, if you’re expecting the NYT to generate a 5,000 word examination of the Sulzberger “strategy” and its impact on news coverage, forget about it. That sort of introspection and analysis is reserved for organizations and individuals targeted by the Times—certainly not the paper’s parent company, and the latest Sulzberger who’s driving it into the ground.

Couldn’t happen to a more deserving bunch.

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