Boom! And down goes the biggest newspaper name of all.
As you may have read, yesterday brokerage giant Morgan Stanley dumped its entire stake -- $183 million worth -- in the New York Times, in which it was the second largest shareholder. Not surprisingly, Times stock immediately slumped, bottoming at a nearly 3 percent drop to $18.28 -- the lowest it has been in a decade.
The actual damage is probably even larger than that. The Morgan Stanley sell-off has been expected for some time now. Ever since April, after Hassam Elmasry, managing director of Morgan's Investment Management Group failed in his attempt to challenge the Sulzberger family's iron grip on the Times, the market has been expecting Morgan to pull out -- and it is probably no coincidence that the stock has been in downward slide ever since.
On the surface, this appears to be a battle about power. The Sulzbergers have run the Times for several generations -- long enough to be synonymous with the enterprise. But, despite having the family scion, Arthur "Pinch" Sulzberger Jr. running the business, time (and the need for capital) have reduced the family's control -- and allowed in less sympathetic investors like Elmasry and Morgan.
It was in an effort to shore up that slipping control that the Sulzberger's created a "dual-class" stock structure for the Times, which gave the family super-voting over and above the hoi polloi of mere investors. The second, unstated, reason for this unusual financial structure was to protect the position of "Pinch" Sulzberger, whose leadership has been increasingly under fire.
But speaking as a technologist and a veteran journalist (and someone who once wrote for the Times), I think there are even deeper levels to this story -- those dealing with the often foolish choices entrenched companies make in the face of technological revolutions.
Over the last few years, we've seen a number of newspapers find themselves in deep financial distress as they've failed to deal effectively with the challenge posed by Cable News and the Internet, and particularly (on the editorial side) the blogosphere and (on the business side) Craigslist, Google, and eBay. Here in Silicon Valley, the two major newspapers, the San Jose Mercury-News and the San Francisco Chronicle, are shadows of their former selves, the former even been dumped in a humiliating fire sale.
But when B-school students a half-century from now read the case study about the 'death' of newspapers, it will be the New York Times they read about.
As hard as may be for younger readers of this column to believe, twenty years ago, the New York Times was unquestionably the newspaper of record for the United States and (with the London Times) for much of the rest of the world. It had the most famous reporters and columnists, its coverage set the standard for all other news, and its opinions, delivered ex cathedra from the upper floors of the Gray Lady on 43rd Street set the topics of this country's political debate.
Incredibly, almost every bit of that power has been squandered over the last two decades. It's been a long time since anyone considered the Times to be anything but the newspaper of opinion for anyone but the residents of a few square miles of midtown Manhattan. Indeed, about all the newspaper has left of the old days under "Pinch's" dad, Arthur "Punch" Sulzberger, is that old Time's imperiousness -- earned back then, and more than a little absurd today.