Why The Sulzberger Family Won't Sell The New York Times Anytime Soon

on August 13 2013 4:23 PM
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The New York Times building is seen in New York, Feb. 7, 2013. The New York Times Company posted a profit on Aug. 1 of $20.1 million, after a loss of $87.6 million in the same period last year. REUTERS/Eric Thayer

Just one day after New York Times Company (NYSE:NYT) Chairman Arthur O. Sulzberger Jr. said his family would not “seek to sell the Times," he sold 50,000 Class A shares in the company last Thursday, churning the already-greased wheels of a rumor mill foretelling a possible surprise sale of the nation's paper of record. 

The stock, about 3 percent of Sulzberger’s total stake, sold for $600,000, or $12 per share, according to a U.S. Securities and Exchange Commission filing on Monday. The sale was part of his estate planning nearly a year after the death of his father and predecessor, Arthur Ochs “Punch” Sulzberger Sr.

Still, the timing, days after the blindsiding sale of the Washington Post to Amazon founder Jeff Bezos, was precarious. The move fueled fresh, if hasty, speculation that ownership of the Times – long beset by the woes of the ailing print industry and struggling with declining revenue – could change hands for the first time in 117 years.

But, despite indefinitely suspending dividends in 2009 to the family that has largely lived off the company’s yields for decades, the Sulzbergers clearly are not selling the Times.

The company began narrowing its once-teeming portfolio of media properties last year, drastically paring down its assets in a series of deals that shed liabilities but also gave it fewer products to offer buyers.

It sold its 16-strong Regional Newspaper Group in January 2012 to Halifax Media Holdings for $143 million in cash. About.com, its foray into cheap, search-engine-optimized content, sold to Barry Diller’s IAC/InterActiveCorp (NASDAQ:IACI) last September. And the New England Media Group, headed by the Boston Globe, was purchased by Boston Red Sox owner John Henry for $70 million in cash.

Besides filling the company’s coffers with much-needed cash, the divestiture turned out to be part of the “new strategy for growth” announced by new CEO Mark Thompson in April. Honing in on the core New York Times brand, he vowed in a statement to launch new products and services “based on the unique strengths of the Times journalism” and lead the company “on a path to sustainable growth.”

On Oct. 15, the company will rebrand the International Herald Tribune, its Paris-based global edition once co-owned with the Washington Post, as the International New York Times.

Sure, a streamlined Times Co. could be more attractive to the types of buyers that would purchase a metro daily – billionaires with an appreciation for newspapers’ prestige or influence. After all, News Corp (NASDAQ:NWSA) and 21st Century Fox (NASDAQ:FOXA) Chairman Rupert Murdoch – a newspaper enthusiast who wields his inky assets as political scepters -- snatched the Wall Street Journal and its associated properties for $5 billion in 2007.

Henry, a billionaire investor and sports team mogul, emerged as the Globe’s new owner after a seven-month auction, proclaiming it “one of the most well-respected media companies in the country.” Meanwhile Bezos, a multi-billionaire known for his long-view patience and eccentric passion projects, bought the Post last week, vowing to preserve the journalistic tradition that cultivated the Watergate investigation that felled a president.

And industrialist Charles Koch – who, along with his brother, Bill, is a well-known champion of conservative causes – confirmed last month to the Wichita Eagle that he would consider bidding on the Tribune Company’s newspapers, which include the Los Angeles Times and the Chicago Tribune.

“The biggest reason to think that they’re not selling is because Arthur and Michael [Golden, his cousin] said that they’re not selling,” Seth Mnookin, who dissected the Sulzbergers’ stewardship of the Times in a six-page New York magazine July 2011 cover story, told International Business Times. “If you look back at the history of this generation’s leadership, I can’t think of any situation where they said one thing and did the opposite.”

Not everyone in the Ochs-Sulzberger family – which, despite owning only a 13 percent stake, controls the company’s board majority through Class B stock – may agree.

Some family members have foregone paying careers, living instead off dividends that haven’t been paid out since February 2009, the first time in four decades that the payments were suspended. Two years earlier, the company raised the dividend to 23 cents per share from 17.5 cents in a move questioned by many analysts.

“The Times Company, and the Times as a brand, means something very different to Arthur and Michael than it does to other members of the family,” Mnookin said, emphasizing that the two have “spent their lives and careers pouring themselves into the New York Times.”

“That is not universally true – not to say that there aren’t people in that generation that care about the Times – but it shouldn’t be downplayed that there was a chunk of this family that was regularly getting a steady income from the Times that now is not,” he said. “That type of dynamic is ultimately what happened at the Journal.”

The Bancroft family owned the Wall Street Journal for a century before infighting over the future of a business wounded by the Internet’s evisceration of the traditional newspaper model surrendered it to Murdoch’s 10-figure bid, despite fears that the Australian media magnate’s sensational brand of journalism would spoil the staid daily’s reputation.

“The money got [the family’s] attention and enforced their consideration of reality,” Peter Kreisky, a media consultant, told the Journal at the time. “It focused the minds of the family and the board on how difficult it would be to maintain the newspaper in the long term as an independent entity.”

Some Sulzbergers could sell out. Since 2010, the family’s ownership of Class A stock has dropped from 19 percent to 13 percent.

“Since there aren’t any dividends it looks like they are selling their shares,” Bill Grueskin, a dean at Columbia University Graduate School of Journalism, told IBTimes. “At a certain point, when you go from 19 percent to 13 – what happens when that goes to 5 percent or 2 percent?”

A family with a measly minority stake, but complete control? “Whether that means they’re about to sell it or not, I don’t know,” Grueskin said.

The Times is still a ship in rough seas. But there is wind in its sails.

Two weeks ago, the company posted a net profit of $20.1 million, or 13 cents a share, on stronger circulation revenue and lower operating costs, though weak advertising dragged down total revenue. It lost $87.6 million, or 58 cents a share, in the same period a year earlier.

Shares in the company were up about 1.4 percent to $12.21 on Tuesday afternoon.

“The New York Times, unlike many of its newspaper peers, is profitable,” Liang Feng, an analyst at Morningstar, told IBTimes. “They don’t need more capital flowing in, unlike the Washington Post Company needed to keep the Post running.”

Barring a “calamitous economic event” or a major drop in circulation, Feng said the Sulzbergers “want to see this through.”

A viable model for profitability and growth has yet to surface for newspapers or, for that matter, written-word journalism. For years, startup news sites like the Huffington Post and Business Insider have repackaged papers’ shoe-leather reporting in bite-sized rewrites crafted with Google’s search algorithm in mind, further draining the cash-strapped legacy publications.

BuzzFeed -- often mocked for its trademark cutesy animal videos and stereotype-driven, image-heavy listicles – has subsidized its burgeoning roster of serious reporters with addictive advertorial content targeting the “millennial” demographic coveted by advertisers. More staid newcomers like Politico, the brainchild of two Washington Post veterans, have launched premium paid services, taking cues from companies like Thomson Reuters (NYSE:TRI) and Bloomberg L.P., which bankroll extensive newswire operations with lucrative subscription data services.  

But, while its upstart rivals enjoy flush rounds of venture capital and the luxuries of infant legacies and flexible staff rosters, the Times is a public institution, a hallmark of American democracy, an inheritance which the current chairman feels as bound to as the very name he bears.

“Going back several generations, a core part of the Sulzberger family is owning and caring for the New York Times, a sort of mission and an obligation,” Mnookin said. “This is a public trust that has been entrusted to them, and they need to keep it going forward.”

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