Based on its decision not to instruct Judith Miller to obey the law in the Plame affair, we now have a clear understanding of the New York Times’ view of the proper order of things in America. Here’s the pecking order:
The New York Times
Various leftish fads and causes: Gitmo, Abu Ghraib, Augusta, al Qa Qaa, etc.
New York Times readers
New York Times Shareholders
The New York Times should have told Judith Miller that she was fired if she did not obey the law; by not doing so, the NYT placed itself above the courts. It is hard to think of a more perfect symbolic act by the Times to illustrate where it believes it sits in the pecking order of society. By contrast, the readers and shareholders of the New York Times have been treated very shabbily in recent years, in our view as a direct consequence of the ideological excesses of the newspaper. Many of them have voted with their feet.
Placing readers last
As we have reported previously on several different occasions, the New York Times has suffered huge losses in circulation in its home market in recent years. These numbers are obscured in the SEC filings of the New York Times Company, but they are available to anyone willing to go through the effort to calculate them.
The New York Times reports its circulation numbers on a consolidated basis, which can be misleading, given the Times’ push for greater national distribution in the last twenty years. The consolidated numbers paint a picture that is not too bad. But the Times’ performance in its home market, the 30 counties around Manhattan, has been a disaster:
1993 NYT home market circulation: 758,400
2004 NYT home market circulation: 562,350
Decline in circulation: 26%
The Times now places third in its home market behind the Daily News and the Post, and the bad news for the Newspaper of Record is likely to get even worse, according to a report which we have previously cited from Editor and Publisher:
“Decline in both quality and quantity of circulation at several key newspapers owned by the New York Times Co. and Tribune, points to the potential for further pricing pressure from advertisers in future quarters,” the report observed. “In particular when ABC guidelines move to a strict limit on days omitted allowance, the New York Times’ newspapers may suffer further circulation declines.”
We note that the New York Times Company will report earnings this Thursday. Analysts expect profits to be down 14% from the same period last year.
Placing shareholders last
The stock market has figured this bad news out of course and has had the predictible reaction. Over the last two years, the market has killed NYT stock, taking it from almost $50 a share to around $30:
The results are even worse when you look at the Times stock versus the market as a whole, in this case the S&P index:
While the broad market has gone up 10%, the New York Times’ shareholders have lost almost 30% of their money. Put another way, New York Times shareholders have lost over 40% of the money they would now have simply by being in a diversified portfolio. Disastrous.
How can a public company get away with this?
Normally, in a public company, you would expect the independent directors to take action to stem the losses and to enhance shareholder value. The New York Times is not a normal public company, however.
The New York Times gets away with its appalling stewardship of its franchise, because it is not in business principally for its readers or its shareholders. There are around 144,000,000 shares of the New York Times that trade freely, but these do not have any power. Control of the New York Times resides in a mere 738,810 shares of non-trading class B stock which reside in a family trust and have the power to elect 70% of the Board of Directors. Pause a moment to take this in: one half of one percent (0.5%) of the stock of the New York Times gets to elect 70% of the directors.
The New York Times is upfront about all this of course in its Proxy Statement filed with the SEC, in which it details the objective of the family’s 1997 trust:
The primary objective of the 1997 Trust is to maintain the editorial independence and the integrity of The New York Times and to continue it as an independent newspaper, entirely fearless, free of ulterior influence and unselfishly devoted to the public welfare…
Evidently the term “public welfare” does not include the welfare of shareholders.
When will the family revolt?
The politics of family businesses can be particularly nasty. It is one thing to profess all sorts of high-minded claptrap when you’re riding high on the hog; it’s quite another when the dividends dry up and the tuition at Sarah Lawrence is due. We’ll wait and watch. We are looking forward to the mini-series.
(HT: Donald Luskin)