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.
Would this decline in reputation have occurred without the rise of the Internet? To some degree, yes. You can mark the turn in the Times' reputation from the early 1990s, when it began to put, on the front page, an increasing number of opinion pieces and feature reporting (most infamously, a glimpse into the apartment of William Kennedy Smith's purported rape victim).
At first, this was dismissed as a mere pandering to the changing tastes of a readership raised on television and gonzo reporting. But it was a first glimpse of the pandering to a supposedly hipper, more sophisticated audience that would become pandemic across the Times' pages under the threat of the Internet age.
At about the same time, I got an early glimpse of how the Times would mishandle the technology side of its business as well. One day, several years after I'd stopped writing my column for the paper, I received a letter from the Times demanding that I retroactively sign over all electronic rights to my stories and columns on file at the newspaper.
As a businessperson, I could understand the thinking behind the Times' actions, but as a writer, it planted a little seed of distrust in the Gray Lady: I knew I would think twice before I would ever write for that publication again -- and I'm sure I wasn't the only journalist thinking the same thing.
This controlling attitude towards its content -- the antithesis of the desires of the providers of that content, who wanted to maximize readership and impact -- only grew more virulent in the face of the growing Web revolution and its successful movement towards open content.
At the Times, this philosophy peaked with the amazingly stupid decision to put the paper's columnists, still among the most influential on the planet, behind a subscription firewall. The Times eventually backed down, but after years of reducing those writers to secondary players in the national conversation, their influence had been seriously diminished.
Increased editorial influence on its reporting, an on-going effort to enforce a business model on a market that didn't want it -- the Times wasn't alone in making these mistakes; indeed, they characterized almost every newspaper in America. Which is why they are all in trouble.
But the Times made one more mistake -- one which it alone could make, and which I think ultimately led to yesterday's meltdown. Most newspapers adopted the always dangerous strategy of trying to become more like one's competitors rather than establishing the defensible position of being even more true to oneself. Like most newspapers, the Times decided to become more timely, more hip, and more judgmental than the electronic media -- when it should have become better reported, more objective, and better written; professionalism being the one arena where the new competitors would have a hard time competing.
What made the Times' decision not to pursue this strategy particularly stupid was that it was, after all, 'America's newspaper of record', a role in which it justly reveled. But you can't hold that title while pandering to the political and cultural views of readers on the Upper West Side. And you can't claim "all the news that's fit to print" when you neglect to notice that an American soldier in Iraq just won the Medal of Honor. In the old days, if the Times didn't cover it, it didn't happen. That insulation is long gone: if the Times doesn't cover it, the blogosphere will -- and millions of readers will starting wondering about the judgment and biases of the New York Times.
Frankly, investors in the Times would be fools not to question the business judgment of the company -- and major shareholders, like Morgan, would be criminally irresponsible to their clients if they didn't start challenging the decisions of Times management -- or not read the "dual class" stock structure as a way for the Sulzbergers to not answer those questions.
If you surfed the Web yesterday you couldn't miss the fact that millions of folks out there were cheering the impending End of Times. I didn't. I want the Gray Lady to straighten out, clean herself up, and regain her old dignity. America needs an honest woman as its newspaper of record.