These Are Troubled Times

But is the paper's stock structure in danger? In a word: No

A good newspaper provokes a terrible, swooning sentimentality among journalists: Those gorgeous expanses of words and pictures! That miracle realized on a daily basis! And none does so more than The New York Times. Despite massive, well-annotated recent failures (greetings, Jayson Blair and Judith Miller) it remains, deservedly, the planet's most significant print property. But its parent's stock is a loser even by the sluggardly standards of its industry peers, and it's undergoing a sustained attack from Morgan Stanley (MS ) portfolio manager Hassan Elmasry. He's taking aim at the two-tiered, family-controlled stock structure and the management of Chairman Arthur Ochs Sulzberger Jr. and Chief Executive Janet Robinson (not necessarily in that order). T. Rowe Price Group, which owns about 15% of the common stock, is expressing displeasure as well. Investors holding around 30% of the common stock withheld directors' votes at last year's annual meeting. Advisory groups Institutional Shareholder Services and Glass, Lewis recommend shareholders do the same at this year's meeting on Apr. 24.

But no Thrilla-in-Manila showdown looms. The company is controlled by a trust that was set up, the proxy states, "to maintain the editorial independence and integrity of The New York Times." The votes of six of its eight trustees, all of whom are family, are needed to change the trust. Former Times Co. executives find that prospect comical, and no dissidents within the tight-knit and -lipped family have surfaced.

TO PUT THIS IN PERSPECTIVE: In the '90s, a disgruntled faction did arise within the Bancroft family, whose shares control Dow Jones & Co. (DJ ) For those of you keeping score at home, Dow Jones was never sold. It was years before its top management changed. And no shareholder bought Times Co. stock without knowing exactly what kind of company it was.

The Times Co., which last year posted operating margins of about 15%, has not been a great business lately. But—hey! That's an improvement over the barely profitable stretches of its past. (You can easily interpret the company's history as a triumph of product quality—with all its costs—over management.) Unlike past agitators, Elmasry recognizes that merely screaming about stock structure won't change a family's mind. This is why, at a February board meeting to which he was invited to air his gripes, he artfully pitched family members on how breaking up the Times' dual-class stock would better protect the crown jewel of the Times itself. (This logic is lost on me, but points to him for trying.) He's also impatient with the shrug-shoulders excuse that because newspapers are mature and challenged their stocks have tanked. His presentation cited at least one company in another stagnant, long-in-the-tooth business—retailing—that has prospered relative to its peers.

This is a smart point, but it may not be applicable. The New York Times—which last year generated 63% of company revenue—does not, like other newspapers, sell access to a defined geographic market. It sells access to a national elite. Its claim to that audience—how to say this without sounding like a sob sister for capital-J journalism?—is based on the distinctiveness of the Times, with all its premium-brand bona fides. Should a way to make real money off top-shelf Web content arise, the Times is uniquely positioned to do so, assuming the franchise stays strong.

As for whether market forces ever enhanced, or even recognized, the value of a premium print product—well, that's crazy talk. There was a hard-drinking Southerner last century who liked to write. For years market forces told him his work was unsalable. Had he listened to the market, he'd have quit. For whatever reason, he didn't. The sentimental response is to be glad William Faulkner kept at it. The cold, calculated response is: If William Faulkner Inc. had sold shares in the lean years, today you'd be really, really happy you bought in.

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By Jon Fine

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