The Rapid Decline of the New York Times

It's about as much fun being a newspaper publisher as an airline president these days, so Arthur Ochs "Pinch" Sulzberger, Jr. of the New York Times deserves our sympathy. Last quarter's earnings were dreadful. Earnings per share from continuing operations were down almost 75% from the previous quarter as newspaper advertising revenue declined over 10% -- a decline which according to the May earnings report accelerated to 11.9%. Just last week, Lehman Brothers forecast that in a year, its common stock would decline in value by almost half.

Pinch is trying to save the independence of the family-controlled publishing concern (regarded within the family as a public trust), but in the process has put a legendary newspaper empire on a path of decline, eating into capital to pay dividends to the shareholders, paying off employees who accept buyouts, and hoping that the comparatively small internet operations of the company will someday grow enough to balance the decline of the newspaper business.

If he succeeds, the New York Times Company will end not with a bang, but a whimper: Liquidated -- with all stake holders addressed, if not fully content. It is a dreadful comedown for a career that began almost regally.

Pinch represents the fifth generation male heir of the Ochs/Sulzberger family to head the corporation. In 1987, at the age of 35, Pinch became assistant publisher to his publisher father "Punch" Sulzberger, succeeding him in 1992. Today he is also the chairman of the board. Pinch inherited the pre-eminent newspaper in America and arguably the world -- a robustly growing and diversifying media conglomerate.

A family trust elects 10 of 15 directors, through control of 88% of the Class B shares of the New York Times Company (NYTCo). Class A shareholders, who supply roughly 90% of the firm's capital, elect the remaining 5 directors.

If all shareholders carried equal voting weight, the company would long ago have been a candidate for acquisition or breakup at the tender mercies of Wall Street fund managers. NYTCo has underperforming assets. The core newspaper franchise maintains its residual magic as a brand name; and within the lush niche -- urban professional high income people of sophisticated tastes and liberal politics -- the Times has carefully cultivated, its name remains incomparably authoritative.

It remains the best-known American newspaper worldwide. It is focused on its niche and tends to their needs, prejudices, and disposable income. Even those who criticize the media institution's editorial slant -as a recent Vanity Fair piece describes in detail - love to hate it.

Buyers with larger and more diverse media platforms, such as Google and Bloomberg (even Rupert Murdoch has been mentioned in a Times blog) could better utilize the information-gathering potential of the existing journalistic organization, while bringing more flair and money to the project of competing in the declining print newspaper business.