Refinancing Sun Begins Hondling New $40 Million

Last month, The New York Sun celebrated its second anniversary. And the toddler daily broadsheet knows just what it wants for its birthday: $40 million.

In late March, the paper put forth a private-memorandum offering of 4,000 shares in its parent company, One SL L.L.C., at $10,000 per. Currently, The Sun is backed by $25.6 million, according to the report; its leading investors are chairman and Alliance Capital Management vice chair Roger Hertog, who, with his investment of $3.75 million, serves as chairman of One SL; Caxton Corp. chairman Bruce Kovner at $3 million; and Loews scion Thomas Tisch at $2.85 million.

Sun editor Seth Lipsky, who is president and chief executive of One SL, declined to comment about the offering or about his newspaper’s future goals. By way of discussing the plans, Mr. Lipsky referred Off the Record to the paper’s April 16 anniversary editorial, which described Mr. Lipsky’s three-for-three record of success in helping to start the Asian Wall Street Journal , the Wall Street Journal/Europe and the Forward in English.

To make it four for four, Mr. Lipsky and his companions are seeking ambitious, if not fearless, investors. Fly-by-night types hoping to cash in on the daily-newspaper bubble need not apply. The memo explains that “no Member may transfer Membership Units without the prior written consent of a majority of the Managing Members” and that “[n]o Member may withdraw from the Company without the consent of a majority of the Managing Members.”

In exchange for that commitment, investors will get a piece of a newspaper that lost $12.8 million last year, according to the memo.

But they will also get the opportunity to express their faith in the newspaper’s self-identified market niche: “a high quality newspaper on the center right.” A helpful matrix divides up the New York dailies to show The Sun in its own cell: next-door to The New York Times (Quality, Left-of-Center) and just upstairs from the New York Post (Popular, Right-of-Center).

To secure its ideological position, the memo promises an overhaul and expansion of the op-ed pages, accompanied by the hiring of “a full-time, seasoned editorial page editor.” To take care of quality, The Sun proposes improving the business page, having a column a day on the society page, finding a new art critic and beefing up the sports section.

It also has to upgrade its audience. So far, the memo confesses, The Sun has found “potentially negative” readership data: Its readership appears to be older and poorer than anticipated.

But the paper is eagerly adaptable. Already, in two years, the memo recounts, the paper has changed its slogan from “New York on Page One” to “Expect a Different Point of View.”

“More recently we have been testing the slogan ‘Illuminate Your World’ to signal that the newspaper is hospitable to a broader audience,” the memo adds.

The memo also signals The Sun ‘s intentions to change its underlying income structure. According to the cash-flow statement, the paper is currently circulation-driven rather than ad-driven, with last year’s income divided roughly 58-42 between circulation revenue and advertising revenue.

The Sun ‘s financial projections call for that difference to narrow to 54-46 in 2004 and then to reverse-to 57-43 in favor of advertising-in 2005.

That doesn’t mean, however, that circulation will be stagnant. The memo predicts that circulation revenues will grow four times over by 2005. Advertising will come out ahead by the simple trick of growing from $794,000 to $5.9 million in those same two years-more than a sevenfold increase.

Such explosive growth will launch a rocket ride: The table projects revenue gains between $6 million and $7 million for each of the next three years. It culminates in 2008, when revenue tops $30 million. Then in 2008, for the first time, The Sun expects to turn a profit: $1.316 million, to be exact.

Even with four significant digits tempting investors, though, The Sun maintains its scruples.

“When we use the words ‘will likely result,’ ‘may,’ ‘shall,’ ‘will,’ ‘believe,’ ‘expect,’ ‘anticipate,’ ‘project,’ ‘intend,’ ‘estimate,’ ‘goal,’ ‘objective,’ or similar expressions,” the memo cautions, “we intend to identify forward-looking statements. You should not place undue reliance on these forward-looking statements.”

At a newsstand Monday evening, an old man asked at the counter for the May 10 issue of The New Yorker , the one with Seymour Hersh’s exposé on prisoner abuse at Abu Ghraib. The clerk pulled out a sheet of paper and added the man to a waiting list. There’d be more in tomorrow, he explained. The man left his name and number and departed.

Most weeks, the clerk said, the stand moves maybe 20 copies of The New Yorker . Now they’d sold 150 and were trying to get more. If you’ve got an extra one, he said hopefully, bring it in.

“If it were a less disgusting story, I’d be more gleeful,” New Yorker editor David Remnick said. Mr. Remnick was on the phone from his office, where he’d been watching the Senate hearings into Abu Ghraib on TV.

It had been 13 days since 60 Minutes II -feeling the hot breath of Eustace Tilly down its neck-went on the air with photos of naked Iraqis being bullied and humiliated by United States M.P.’s. Three days after that, The New Yorker had put its own pictures on the Web, along with Mr. Hersh’s exclusive account of a report by Maj. Gen. Antonio M. Taguba that charged American forces with abuses ranging from beatings to “sodomizing a detainee with a chemical light and perhaps a broom stick.”

The images and revelations were like wet chum showered on the nurse sharks of the 24-hour news cycle. Print, broadcast and online outlets around the world thrashed into action. Daily reporters headed for the Appalachians, looking for soldiers’ friends and families in Cresaptown, Md.

Yet this week dawned with The New Yorker holding its place out in front of the news. Mr. Hersh had delivered another round of photos and scoops: German shepherds attacking a naked Iraqi, a Pentagon clampdown on information about the incriminating pictures. “This was a huge leadership failure,” one of Mr. Hersh’s retired military sources declared.

“Anyone can catch up on the knowledge that’s out there,” Mr. Remnick said. What keeps Mr. Hersh ahead of the competition, Mr. Remnick said, is “being able to pick up the telephone and call people who know something. And that takes years of cultivation.”

What also sets Mr. Hersh apart is that he’s writing for a magazine. Despite all the satellite-phone video links and e-mailed breaking-news updates, the news networks and daily papers have repeatedly found themselves chasing after stories that come from the slower media: weekly and even monthly magazines (to say nothing of the runaway glaciers set loose by Richard Clarke and Bob Woodward on the nonfiction bookshelves).

This year’s Pulitzers seemed oddly magazine-y and peace-minded. Aside from awards for photography and the reporting of The Washington Post ‘s Anthony Shadid, the only other combat-focused prize-winner was the Toledo Blade ‘s meticulously researched, long-term project uncovering decades-old atrocities in the Vietnam War.

Meanwhile Mr. Hersh-Mr. My Lai himself-was ferreting out current atrocities in the current war. And the list of winners from the May 5 National Magazine Awards could have been the table of contents of the Best American War Writing.

Where the Pulitzer board had given the public-service medal to The New York Times for a series on workplace safety, the American Society of Magazine Editors presented its public-interest Ellie to Mr. Remnick and Mr. Hersh for the latter’s dogged investigations of American war-making and foreign policy. The reporting Ellie went to Rolling Stone , for Evan Wright’s three-part series that had followed the war into Baghdad.

And the commentary prize went to Michael Wolff, now departed from New York magazine to Vanity Fair , for the media columns he’d filed from the press bunkers of the Middle East. One of Mr. Wolff’s winning entries described how he’d lashed out during a routine news briefing, asking the one-star general at the podium why the press was even there.

“Other than the pretense of a news conference-the news conference as backdrop and dateline-what did we get for having come all this way?” Mr. Wolff wrote. “What information could we get here that we could not have gotten in Washington or New York, what access to what essential person was being proffered?”

The breaking-news press still doesn’t have a good answer. The Bush administration’s well-established message discipline (and its equally well-established contempt for the media) have left reporters starved for helpful leaks and background explanations, the regular quasi-official information that nourishes beat reporting.

So irregular information rules. After two solid years of scrutinizing the relationship between the departments of State and Defense, trying to establish the extent to which Secretary of State Colin Powell is estranged from the White House and the war effort, Washington reporters got their answer last week-and they got it from GQ .

The G doesn’t mean “Government,” any more than the Q really means “Quarterly.” But it was the men’s magazine-whose current issue features a bikini cover shot-that delivered the on-the-record goods: Mr. Powell’s friend and mentor, Harlan Ullman of the Center for Strategic and International Studies, describing “a tremendous barrier between Cheney and Powell”; Mr. Powell’s chief of staff, Larry Wilkerson, comparing Paul Wolfowitz to “Vladimir Lenin on a sealed train to Moscow.”

Mr. Wilkerson capped off the piece by telling writer Wil Hylton, who’d asked about Mr. Powell’s future, “I don’t think he’d want to do another four years.”

Some initial news reports reacted by first challenging Mr. Hylton’s sourcing, airing disputes about whether Mr. Hylton’s interviews had been on or off the record. That noise subsided after GQ declared it had interview tapes and transcripts, and after Mr. Ullman told the Associated Press he stood by his remarks. But the furor offered a narrow and displaced version of the real question: Why we no have?

“I was on Paula Zahn, and she asked me about six times, ‘Why doesn’t Powell say anything when I interview him?” Mr. Hylton said. The answer, he added, has nothing to do with any Hersh-inspired back-channel digging.

“I didn’t get this story,” he said. “They gave it to me.” According to Mr. Hylton, he’d approached the State Department with the intention of doing a personality profile about Mr. Powell, but the press office rebuffed him and declared that the only way to get access would be to do substantive interviews about Mr. Powell’s diplomatic pursuits.

The daily press, Mr. Hylton said, may be too deeply estranged from the executive branch to get a similar offer. When he joined the regular press mob for a stakeout of Mr. Powell-”They say ‘stakeout’ so you don’t feel so much like a sheep”-one press veteran told him that there’d been better access in the old Soviet Union.

Thus the urgent breaking news ended up with a publication that barely knew what to do with it. The actual June issue of GQ , which will carry Mr. Hylton’s article, is still inching its way through the glossy’s leisurely production process. “We almost didn’t go out with this when we did, because the May issue’s still on the newsstands,” Mr. Hylton said.

For now, readers who need their State Department update have to go to the GQ Web site and click on “Colin Powell Wants Out,” a little way up and over from “Who’s your favorite character on the O.C.?”

Publishing exclusives to the Web in the real time is one of a series of adjustments magazines need to make to compete with their quicker competitor. Mr. Remnick said The New Yorker closed at 3 a.m. last week, knocking out one story to make room for Mr. Hersh’s follow-up.

“We are not The New York Times ,” Mr. Remnick said. “I don’t pretend to have 15 investigative reporters and a gigantic foreign staff.”

The magazine also doesn’t have much tradition of photojournalism. But in a case where the photos were the story, The New Yorker ran a pair of them with Mr. Hersh’s first story, then put the rest up online.

“We weren’t running them because they were the equivalent of Irving Penn or Richard Avedon,” Mr. Remnick said. “I just thought the one of the guy standing on the box all rigged out was haunting.”

On May 10, the New York Post ran an op-ed that had been adapted from a speech by 9/11 commissioner and former Navy Secretary John Lehman. The original version, delivered to the U.S. Naval Institute’s 130th annual meeting, ran long for a Post op-ed-about twice as long as standard-and contained various references to the values of the U.S. Naval Academy and the Naval Institute.

Off the Record’s analysis shows that the edit tightened and refocused the piece-changing some of its overtones from Annapolis-friendly to, well, Post -friendly. Selections Post readers were spared:

“We have very real vulnerabilities.”

“Our airline security is still full of holes.”

“We have absolutely no successful programs even begun to remediate against those efforts.”

“Some will recall the Phoenix memo and the fact that there were people in the FBI saying, ‘Hey, there are young Arabs learning to fly and they don’t want to learn how to take off or land. Maybe we should look into them.’”

“Just by chance about six months ago, I picked up a book by V.S. Naipaul, one of the great English prose writers.”