You are using an outdated browser.
Please upgrade your browser
and improve your visit to our site.
Skip Navigation

Why You Should Be Short Newspapers, And Long The Nyt

In my continuing effort to catch up on items I meant to do this week, let me take a minute to riff on Lawrence Wright's fascinating profile of the Times' sorta sugar daddy Carlos Slim in the second-to-last New Yorker. (Full text not online, alas.)

A major theme of the piece is the disconnect between the Timespeople's assessment of the paper's prospects and Slim's (apparent) assessment of its prospects. So you get passages like this one:

And so when Slim began investing in the Times last year many smart people were dubious. "We were saying, 'This guy is crazy,'" an adviser to the Times Company board told me. The stock subsequently slid from fifteen dollars to six; Slim lost millions. The stock-purchase warrants that came with the loan, however, placed him in an advantageous position with the Times. He could become one of the main stockholders, in addition to being the company's leading creditor. It would be difficult for anyone to take over the paper without his involvement, and if the Times went bankrupt he would presumably be entitled to a substantial portion of the company's available assets. ...

It's not clear if Slim wants to control the Times, and, if so, why. "Why would anybody want it?" the writer said. "You want it because you can change it ideologically, or you want to have the same pride that the Sulzbergers have in owning The New York Times. It has a value that transcends economic value." The writer went on, "If this was Rupert Murdoch or Sumner Redstone or Michael Eisner or David Geffen, you would say, 'Oh, I get this.' But this is Carlos, and he's totally about the economics." The writer admitted to being baffled about Slim's motivation. "That's the great mystery of this play," he said.

Allow me to hazard a guess: This is all about the economics. The Times is the greatest journalism brand in the world. Journalism is going through a period of intense, painful consolidation, at the end of which there will be many fewer competitors, leaving the ones who survive with extraordinary market power and more cultural influence than they have today. The Times will unquestionably survive because it is the best, which will make it an incredibly profitable enterprise. In fact, I'd wager to say that the worse things get for the media industry generally, the better things get for the Times.

I was semi-confident of this assessment long before Wright's piece (as, I'm sure, were others). His contribution is to show how Slim is a man who knows an emerging monopoly when he sees one. In fact, Slim, in Wright's telling, has built his whole career on snatching up enterprises with enormous market power, which is sometimes hidden to others, then exploiting that market power to rack up huge profits. There's no reason to believe the thought process is any different this time around. As Wright concludes, "If the Times emerges, as some observers think it will, as one of the few major news sources in English, then Slim may find himself in a familiar spot: putting his money on a monopoly." Exacty--put me down as one of those observers...

So why are people inside the Times building so depressed? A number of reasons, some betters than others. The better ones: The Times has made some bone-headed financial moves in recent years, many of which Wright catalogues: It spent a lot of money buying back its own stock when it was in the 30s and 40s; today that stock is worth just over $6 a share (though that's up from about $3.50 back in March); it overpaid for the Boston Globe back in the early '90s and missed a chance to sell it a few years ago for a price ($600 million) equal to about half its current market cap; it moved into a pricey new headquarters a few years ago, just as the news business was heading south; etc.

Other good reasons: Consolidation will be great for Times shareholders, but lousy for Times employees (and most people in my line of work), since less competition in output also means less competition for labor, which will lower wages and make labor more expendable generally. Also, wrenching transitions, even if they end well, are, you know, wrenching. The Times may dominate the media landscape of the future. But at the moment it's just losing a lot of money ($74.5 million in the first quarter), which is causing a lot of belt-tighening and generally denting morale. 

The less good reasons: 1.) The Internet and the blogosphere. Talk to people who work at the Times and you detect a sense of beseigement--all these bloggers who freeload off their content but never miss an opportunity to kick them in the teeth. My advice: Don't worry about it; the Internet is your friend. It's destroying your competition faster than it's destroying you, which is ultimately going to make you more profitable and influential. When the dust clears, there will be a bunch of bloggers (some very good), some terrific niche operations like Politico, and some lean aggregators like the Huffington Post. But the Times (and maybe the Journal) will provide the content that makes the web go round. (My advice to the WaPo: become a better version of Politico and graft it onto a first-rate local consumer-journalism website.)

2.) The gnawing anxiety that a Murdoch type (or, who knows, a Carlos Slim type) will seize control of the paper from the Sulzbergers and turn it into a right-wing rag. This is just not going to happen. The Times brand name--the thing that makes it a future cash cow--is tied up with its elite, paper-of-record status. Trashing that would be suicidal, and no one is going to spend billions of dollars to commit suicide. And if a rich lunatic did try to do that, I don't think it would be hard to line up money from some wealthy liberal or non-ideological philanthropists to reconstitute the Times in some slightly different form (with many of its current writers and editors), which is precisely why the rich lunatic wouldn't dare.

Most of the time you tell people not to put their retirement savings into the company that employs them, since it doubles down on their financial risk. In this case, you're almost tempted to tell Timespeople to invest in their employer as a diversification strategy, since their fortunes and the company's look semi-inversely related. (Though I stress the word "almost"--as I say, transitions are killers. I don't think the Times will have to go through bankruptcy to get from point A to point B--there are too many attractive, deep-pocketed suitors willing to keep it out of Chapter 11. But, while I'd bet some money on that proposition, I'm not sure I'd bet my retirement on it.)

Update: Wright offered some more thoughts about Slim and the Times on The New Yorker's blog.

--Noam Scheiber