Wednesday, July 17, 2002

Shorting The New York Times Company

-- "The long-term story for the New York Times is still very good," (J.P. Morgan analyst Barton) Crockett said. "They're growing circulation, which is unique in the industry, especially since they're raising circulation rates." -- from Reuters

It is widely believed that most analysts on Wall Street are fools. Mr. Crockett is obviously not a fool. With business scandal all the journalistic rage, he chose the prudent path both for himself and for J.P. Morgan Chase. He sucked up shamelessly to The New York Times.

But it's an interesting question, don't you think? What are the long-term prospects of The New York Times Company and, in particular, the "paper of record." One suspects that if Mr. Crockett were completely candid he would say: "not good."

There are three major problems. First, New York Times management is dysfunctional. This is partly due to the company's bizarre family ownership arrangement and partly due to the fact that the whole point of the corporation is to milk cash cows in the outlying precincts to feed the paper at its core.

Second, under the direction of Sulzberger the Younger, the Times is now wasting mucho dinero on television projects that will fail. The whole idea of New York Times television is ridiculous. The point of The New York Times, at least in theory, is that it's much more substantive, much more subtle and much smarter than television. The notion that a gaggle of New York Times chin-strokers makes interesting television is insane. Sulzberger the Younger believes NYT TV is the future. How weirdly retro is that?

Third, and most important, The New York Times newspaper is squandering its greatest asset, which is its reputation for delivering high quality information. What The New York Times newspaper delivers all too frequently these days is political opinion masquerading as news. Whether its the phony story about global warming in Alaska or the equally silly story about the Bush Administration's imaginery "cuts" in the Superfund, almost every day brings front page news that is loaded with liberal spin.

And people are noticing. Even liberal websites, like Slate, seem amazed by the Times's open exhibition of bias. All of which is made worse by the paper's ceaseless and moronic Bush-bashing on its editorial and op-ed pages.

Perhaps the biggest problem of all is that no one at The New York Times seems to think that any of the above is a problem. They think the paper has never been better. They say that the seven Pulitzer Prizes this year prove that the paper has never been better. They view all criticism of the paper as essentially ill-informed and/or mean-spirited.

When the reality as seen from inside the building and the reality as seen from outside the building so diverge, trouble always follows. NYT Corporation stock sells at a multiple of nearly 40. The company has mediocre management. It is wasting money on projects that won't work. And it is sullying its reputation for reporting the news "without fear or favor." Sounds like a short to me.