Does The New York Times need a change of ownership? On April 18, Morgan Stanley portfolio manager Hassan Elmasry launched a shareholder protest against The Times’ corporate structure, calling for the abolition of the two-tier stock system that gives the Sulzberger family control of the company.
Over the last several months, a different version of Mr. Elmasry’s plan has been floated around West 43rd Street: Instead of getting rid of the Sulzbergers, why not get rid of the shareholders? Could Arthur O. Sulzberger Jr. undo the work of Arthur O. Sulzberger Sr. in 1969 and take The Times private again?
“It’s a smart idea,” one Times staffer said.
Mr. Elmasry’s revolt—in which he and other shareholders controlling nearly 30 percent of publicly traded Times stock refused to cast votes for board candidates backed by the Sulzberger trust—suggested that special-class stock or not, the family may not be able to stay above the tides of Wall Street opinion forever.
“I’m not sure it’s possible to protect yourself against these pressures,” the financier Felix Rohatyn said. “That doesn’t mean in the short run you can’t do things to reduce them, but in the long run, these issues will remain.”
“In terms of going private, they’d be buying at a good share price,” another Times staffer said. “If you are ever going to go private, the stock has never been lower.”
Still, such a move would be a multi-billion-dollar proposition—somewhere in the $9-10 billion range, by one estimate. Newspapers are usually valued at 12 to 14 times their operating cash flow, according to industry analyst John Morton; The Times, as a premium brand, would trade a bit higher, at 14 to 16 times its cash flow. Last year, the New York Times Company recorded an operating cash flow of about $625 million.
“It would make me happy if they [went private],” Mr. Morton said. “But it’s expensive.”
Under the current stock structure, the Sulzberger family owns less than 1 percent of The Times’ $3.5 billion market value. Outside investors own the other 99-plus percent. To buy them all out at once, an investor would have to pay a premium.
Morgan Stanley’s Mr. Elmasry, by contrast, controls 5 percent of the stock. Over the past year, according to a source familiar with the background of the shareholder revolt, Mr. Elmasry wrote letters to Times management expressing his frustration with the company’s performance. He secured meetings with Times C.E.O. Janet Robinson and chief financial officer Leonard Forman, but repeatedly failed to get a meeting with Mr. Sulzberger. Finally, in March, Mr. Sulzberger granted a meeting, but Mr. Elmasry left dissatisfied. In a public statement accompanying his protest, Mr. Elmasry called the publisher’s $1 million salary and $500,000 bonus “substantial” in the light of the company’s “underperformance.”
The day before the shareholder vote, Mr. Sulzberger showed up in the newsroom to celebrate the paper’s three Pulitzer Prizes. He wore suit pants but no jacket, and he sported a new haircut, notably shorter on the sides, that tamed his boyish curly locks.
“He was trying to look serious,” one person was overheard saying at the scene. “He was trying to look older.”
But whatever doubts Times staff may have about their newly shorn, sometimes-artless boss, some would prefer a return to family control to the uncertainties of market demands—particularly at a time of brutal industry-wide cost-cutting.
To counter the likes of Mr. Elmasry, though, Mr. Sulzberger would need a financial backer. Several Times staffers raised the name of Steven Rattner, the former Times reporter who went on to become deputy C.E.O. of Lazard and then to found his own investment firm, Quadrangle Group.
Mr. Rattner and Mr. Sulzberger are longtime friends. The two are at the gym at dawn many mornings, and Mr. Rattner serves as an informal advisor to Mr. Sulzberger on business matters.
Mr. Rattner did not return calls and an e-mail seeking comment; Mr. Sulzberger, through a spokesperson, declined to comment.
Even with Mr. Rattner on his side, Mr. Sulzberger would need to find a pool of investors willing to shell out billions for a company whose profit margins are far below the industry average.
“It would be a huge piece of engineering,” one media investment banker said. For the plan to work, the banker added, The Times could generate some capital by selling off some of its assets—including The Boston Globe, which it acquired for $1.1 billion in 1993, and some of its other regional papers.
Alex Jones, director of the Shorenstein Center at Harvard University and the co-author of The Trust: The Private and Powerful Family Behind the New York Times, said the Sulzbergers are unlikely to take The Times private.
“Because they have the two-tier structure, and because the family culture is so strong, it’s pretty much a bullet-proof situation to resist pressure,” he said. “This is not a family that has a lot of dissent. The sense of who they are is fixed.”
For his part, Mr. Sulzberger has previously batted away suggestions of private ownership. At the World Economic Forum in Davos this past January, Mr. Sulzberger told the audience at a panel discussion on “The Future of News” that The Times is better off as a public company.
Is it right to put an 18-year-old kid in this position?” asked one New York literary agent, referring to Harvard student-author Kaavya Viswanathan, who has been accused of plagiarizing her ethnic/chick-lit/young-adult novel How Opal Mehta Got Kissed, Got Wild and Got a Life. “It sounded like there were pressures to meet deadlines … and then you rely on cliché and you rely on the books that you’ve read.”
Ms. Viswanathan, whose troubles were first reported by the Harvard Crimson, stands accused of copying 13, 29 or 40 (depending on who you ask) passages from two books written by Megan McCafferty, Sloppy Firsts and Second Helpings. Her publisher, Little, Brown, threw $500,000 at the then–high school student, who was prodded through the book-writing process by a fleet of “packagers” and crashed her manuscript during college exams. Who, then, is responsible for the screw up: the 19-year-old first-time author, or the team of adults who were handling her?
Opal Mehta was a product of a new way of handling fiction in the publishing world. According to one publishing executive at a house that declined to bid on Ms. Viswanathan’s proposal, the book was sent out not as a traditional completed work, but as “a partial novel manuscript.”
The publishing executive described this approach as “kind of appalling when you think about it.”
Publishing houses have taken to buying not a written product, judged on the quality of the text, but a prospective product, judged by its potential marketing hook.
“It’s really all about everybody wanting to have another reality-based roman à clef, because the whole trend in the world is that nobody wants fiction, and this is a fiction hybrid,” said the executive. He cited a recent proposal that just made the rounds, for a novel written by a former personal assistant to Paris Hilton potentially titled The Devil Wears Nada. It was being shopped on the basis of 50 written pages.
“I used to be much more careful, especially when it came to first novels,” said Jennifer Weis, executive editor and manager of concept development at St. Martin’s, who publishes a great deal of women’s fiction. “But now, if it’s a high concept, you want to get a sense from the partial—is it a concept that can be book-length? Is it a great concept?”
17th Street Productions, a book “packager” that is now called Alloy Entertainment and which produced Opal Mehta, thrives in this environment. (One author said that the company is “sort of everywhere, but no one really knows it.”) Run by a group of men—president Les Morgenstein, editorial director Ben Schrank and vice president of book development Josh Bank—the company is known for its racy series Gossip Girls, A-List and The Clique, which focus on fashion-obsessed and/or sexually precocious teenage girls (all three are edited by Cindy Eagan at Little, Brown Children’s). Typically, authors are guided by Alloy/17th Street editors, who might also confer with editors at the book’s publishing house. One author who worked with the company said that she split all revenues 50-50—the advance, royalties, film rights, etc.—with Alloy. The company also has a reputation of being something of a mill, where young employees cycle through, occasionally handing over their best ideas—which get farmed out to recruited outside writers. According to one source who worked with the company, its best-selling novel The Sisterhood of the Traveling Pants was conceived of by one employee, and written by another, Ann Bradshares.
Ms. Viswanathan represented the company’s first stretch into the world of adult literary fiction: a book that was sold to a high-minded editor, with an Indian Harvard-bound author, but which at its heart was a young-adult story about a high-school girl.
Jennifer Rudolph Walsh, Ms. Viswanathan’s agent at William Morris, is said to be close with Mr. Morgenstein, Alloy’s president, and has also sold many books to Little, Brown.
Ms. Weis is working on her second book with Alloy. The procedure was typical of the company’s operations: Ms. Weis said the company came up with the concept for the book, found the author, Sarah Miller, and hired Ms. Rudolph Walsh to sell the project. (It was sold as a two-book deal, for a healthy six figures.)
“She wrote up a sample, like, 30 or 35 pages as well as an outline of a concept of where the book was going,” said Ms. Weis. “It was a heated auction, and this book sold for a lot of money.”
Once upon a time, Christian Winthrop recalled, a campaign press secretary’s day had an end to it.
“When deadline was over, at around 6 or 8 o’clock, you could close your computer, shut off your cell phone and go home, eat dinner and have a glass of wine,” said Mr. Winthrop, press secretary to Republican Senate candidate John Spencer. “I am now working 24 hours a day.”
The difference, according to Mr. Winthrop and other campaign veterans, is the proliferation of political blogs—particularly among major newspapers.
“It was impossible to keep up with,” said Sakina Cole, press director for Newark mayoral candidate Cory Booker, about dealing with the blog The New York Times set up to cover Mr. Booker’s showdown with incumbent Sharpe James. (When Mr. James withdrew, the pace slackened.)
Blogging, Ms. Cole said, demanded immediate information—which could lead to less thorough reporting. “If a volunteer answered the phone and gave information, they would blog it,” Ms. Cole said of the Times reporters. “Everybody has a blog they need to feed. If you don’t respond, you will be penalized.”
But—with The Times launching a statewide blog, the Daily News bulking up its blog coverage, and the New York Post expected to follow suit—most press officers representing major candidates up for election this year said they expected newspaper blogs would uphold the ethics and standards of their print editions.
“They are newspaper reporters that are bound to a higher standard,” said Christine Anderson, the press secretary for Democratic gubernatorial candidate Eliot Spitzer. “And that makes them more relevant to me.”
And as newspaper reporters, they’re accustomed to getting answers—whether they’re trying to round out an article for tomorrow’s paper or seeking quick comment for an item going up in 20 minutes.
“It is another huge step in the tightening of the news cycle to a news second,” said Ann Lewis, director of communications for Senator Hillary Clinton’s re-election campaign and a former director of communications for President Bill Clinton. “When I was in the White House, we had a couple of hours, and then Wolf Blitzer would be on the lawn. Today it has moved even faster. You have an hour and a half, even less.”
Several press officers said that blogging reporters are only after quick information, often delivered in sound bites.
“It forces your campaign operation to react,” said Mark Benoit, deputy campaign manager for Democratic Attorney General candidate Mark Green. “You almost have to rehearse. You can’t say, ‘Let’s call three consultants and talk to the candidate.’ You have to know the answers yourself.”
“The downside is that there sometimes are decisions that you really need time to be thoughtful on,” said Ms. Lewis, who recalled that it took days for the Kennedy administration to produce an official reaction to the rise of the Berlin Wall. Too often, Ms. Lewis added, the time it takes to compose a correct answer is now misconstrued as “ducking.”
Still, many press officers were eager to point out the upsides of having major papers involved in blogging. Not only can a press office follow the blogs to predict where a paper’s coverage is headed, but it also can try to incrementally steer the story. Press officers can also use blogs to geographically target voters: A policy that plays better upstate, for instance, might be leaked to an item-hungry reporter at the Albany Times Union (whose political blog, Capitol Confidential, is a must-read in New York political circles). News more appealing to a downstate audience might go to a city paper.
“Blogs provide a unique opportunity to be used as a sounding board for something we might do later on,” said Andrea Tantaros, spokeswoman to Republican gubernatorial candidate Bill Weld. “You’re testing an idea in the blogosphere—you can see what the pushback will be from either side.”
To monitor the reaction in blog forums, many press offices have designated staff—often volunteers or interns. “A summer intern is not just licking envelopes,” Mr. Benoit said. “Now you need people who are more sophisticated and blog-conscious.”
But not all corners of the political universe are caught up in the second-by-second campaign. Chris Owens, a candidate for U.S. Congress out of Brooklyn, currently has no press secretary. In the predominantly black district where he is running, Mr. Owens said, the digital divide is stark, and blog coverage was the furthest thing from his mind. “When you talk about people monitoring political blogs, you are not talking about the people in my district,” said Mr. Owens. “I’m not saying it is good or bad, but to some extent those folks are having a conversation with themselves. I’m out shaking people’s hands.