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May 14, 2009

The NYT looking for life support

Thomas Lifson
The struggling New York Times is reportedly facing at least two alternatives to stay alive involving rescuing angels.

Newsweek reports that entertainment multibillionaire David Geffen, who has pledged to devote his fortune to charity, is interested in buying the Times and turning it over to a nonprofit organization, to free it from the financial obligations attendant to private ownership.

Geffen declined to publicly comment on media reports that he recently tried to acquire a large stake in the financially distressed New York Times Co., parent of the storied newspaper. But two people familiar with Geffen's thinking say the answer is simple: an acquisition of the Times wouldn't be a financial investment. If Geffen were successful in landing The New York Times, said one of the confidantes, he'd convert it into a nonprofit institution. He would regard the newspaper, perhaps the world's most influential journalistic enterprise, as a national treasure meriting preservation into perpetuity. His model would be the ownership structure of Florida's St. Petersburg Times, which is controlled by a nonprofit educational institution, the Poynter Institute for Media Studies.

Presumably, Geffen would receive a tax deduction for his donation of the Times to a nonprofit foundation. If the donation were valued at the purchase price, then wouldn't the taxpayers pick up a substantial portion of the tab?  Whatever price Pinch gets the Sulzberger family fortune for its interest in the paper, we taxpayers would be subsidizing.

If the Foundation merely owns the paper's equity, and the paper operates as a commercial property subject to all the same taxes a private corporation would pay, that would be one thing. If it attempts to claim nonprofit status itself, that would be another. Either way, the NYT would have an advantage over its competitors the Post and the News. But if the NYT sought to operate as a 501C3 itself, it would be outrageous unfair competition.

Meanwhile, Nicholas Carlson of Silicon Alley Insider writes:

We hear Google (GOOG) continues to hold talks with New York Times chairman Arthur Sulzberger, who visited Google's Mountain View, Calif. headquarters last month.

The companies are said to be considering the possibilities of:

    • A potential agreement in which any time Google's search crawlers find a Web site carrying New York Times content and Google ads, Google would split the revenue it gets from those ads with the Times.
    • Google would somehow help the New York Times actually embed ads within its text so that when blogs or other Web sites use that text, the ads go with it. We have no idea how Google and the Times would do this. Neither does our source.

Maybe this will work out. Time will tell. It sounds exploratory.

Absent some outside intervention, the Times will have a very hard time staying out of bankruptcy, it has appeared for some time. Pinch Sulzberger hasn't quite explicitly admitted that he has piloted the family's patrimony into the ground, but looking for someone else to take over is pretty close.

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