AJR  Features
From AJR,   February/March 2007

Challenging Times   

Protected by family ownership, the New York Times Co. plots its future without retreating from ambitious journalism at its flagship paper, despite the wailing on Wall Street about the companyís sluggish financial performance. Itís bolstering its digital presence and unleashing its futurist-in-residence in a time of wrenching transformation in the industry.

By Rachel Smolkin

In a small back room adjoining his office on the 14th floor of 229 West 43rd Street, Arthur Sulzberger Jr. lays out his vision for a New York Times Co. of the future.

In it, the New York Times newspaper and its siblings--the International Herald Tribune, the Boston Globe and 15 other dailies--have transcended their old ink-on-paper platforms, appearing as well in text and video via the Web, mobile phones, BlackBerrys and other digital devices. A cluster of Internet sites have cropped up around them, some far removed from newsgathering but offering readers accessible information about topics as varied as weight-loss tools and iPods.

Yet journalism remains the company's unshakable core, defined, especially for the flagship Times newspaper, by its continued international reach and ambitions. Sulzberger's great-grandfather, Adolph S. Ochs, bought the struggling New York broadsheet in 1896; through four generations, during some splendid highs and despite some mortifying lows, the paper has set the standard for journalism worldwide.

Sulzberger cannot foresee "always," he tells me with some exasperation as I continue to press him with that word on all manner of topics--unfairly, of course, because who knows what the media landscape will look like next month, much less in the distant future? Will the Times keep the Globe? Will Sulzberger and his family take the company private, away from Wall Street's punishing judgment of its worth? Will he hold on to both his titles, chairman of the company and publisher of the New York Times newspaper, or accede to the demands of a major shareholder and surrender one? Will a family member always fill both those positions or, in an era fraught with change for the industry, will an outside "professional" assume one?

"There are things that are impossible to know. So I can't deal with 'always.' Let me just deal with now and where the family is in its head now, OK?" he says in response to the last question. "And the answer is yes. The family has made it clear, to me and to others, that the two positions that they feel should be held by family members are publisher of the New York Times newspaper and chairman of the New York Times Company."

His father, Arthur Ochs Sulzberger, had three titles, including CEO; when the younger Sulzberger, now 55, assumed control of the company in 1997 (he's been publisher of the Times newspaper since 1992), the CEO position went to an outsider for the first time. Janet L. Robinson, 56, who sits next to Sulzberger at the shining oval table during our interview, is the company's president and its second nonfamily chief executive. "For the foreseeable future, as long as I can see into the future, this family seems united, is united, around its commitment to this company and its commitment to this newspaper," Sulzberger says.

They are able to maintain control of both through a two-tier stock structure. The family dominates the powerful Class B shares, which represent less than 1 percent of the company's equity but shape its destiny: These shareholders elect nine of 13 board members. Only a decision by at least six of eight family trustees can alter that structure, something Sulzberger says they have no interest in doing.

"Why change it?" he asks. "It was built for times like this. It gives us the flexibility to be in the public market, to have access to the capital markets when you need them for, say, acquisitions, but it gives you the protection so critical to ensure that our journalism is kept really at the forefront of all that we do. So this is why we have this system. Now is when you need to use it, not to think about changing it."

But are you looking at taking the company private? I persist, citing recent media reports that claim he's doing just that. "No."

No interest in it, whatsoever? "That would be no."

Other media companies in a similar financial situation but lacking the two-tier protection would be--and have been, and are--facing dissolution. In January, the Times Co. stock was trading at $23, down more than 50 percent from its 2002 peak.

For the six-month period ending September 2006, the Times newspaper's circulation had dropped 3.5 percent during the week and on Sunday from the same period a year earlier, bringing its Sunday total to 1,623,697 and its weekday average to 1,086,798. At the Globe, sales had fallen 6.7 percent during the week, to 386,415, and 9.9 percent on Sunday, to 587,292.

Dragged down by the Globe's lackluster performance in an unkind New England economy, the operating profit margin for the Times' newspaper division fell to 3.5 percent in the third quarter of 2006, the lowest of the publicly held newspaper companies, according to calculations by newspaper analyst and AJR columnist John Morton. (The Times does not break out its newspaper earnings separately from its News Media Group.) By contrast, the Washington Post's profit margin for its newspaper division that quarter was 7.8 percent; the embattled Tribune Co.'s was 14.8 percent.

In late December, Standard & Poor's cut the company's credit rating from A- to BBB+, a development that is not particularly significant from Wall Street's perspective but would cost the Times Co. more if it needed to borrow money in the near future, says Edward Atorino, a media analyst at the New York-based brokerage firm Benchmark Co.

"This has been a tough year," Robinson told two groups of financial analysts at annual media conferences in New York on December 6. "A tough few years actually, as we--like many other companies in our sector--have been dealing with a transformation unlike any we have seen in our lifetimes."

Dissatisfied with the results, Morgan Stanley Investment Management, which owns 7.5 percent of the Class A shares, has launched a public assault on the Times' stock structure and management. At last year's annual meeting, investors holding more than 30 percent of the Class A shares, including Morgan Stanley's London-based management fund, withheld their votes for directors to demonstrate their displeasure.

Led by Managing Director Hassan Elmasry, the fund commissioned a November 1 report by the consulting firm Davis Global Advisors that criticized the Times' financial showing compared with that of the Washington Post, another top-flight, family-owned newspaper buttressed by a dual-class stock structure. The report notes that over the past five years, the Post has "significantly outperformed" the Times on measures including revenue growth and stock performance.

It also skewers the Times' "governance" and its compensation packages for executives, citing average pay for Post CEO Donald E. Graham of $642,770, compared with Robinson's roughly $2.7 million. (In September, Sulzberger and his cousin Michael Golden, company vice chairman and publisher of the IHT, asked the board to lower their compensation last year and this year by not awarding them stock options; that money will be used instead for an employee bonus pool.)

Sulzberger's leadership has come under fire, not only through Morgan Stanley's attack but also in high-profile articles disparaging both his news and business acumen. A December 2005 piece by The New Yorker's Ken Auletta posited a "crisis of identity" at the paper and asserted that "Within the newsroom, there is a sense of rudderlessness and a fear that a series of business misjudgments may so weaken the company's finances that the brilliance of the Times..and, ultimately, the historic mission of the company will be at serious risk."

On November 8, Elmasry submitted a resolution that he hoped the Times Co. would put to a vote at its next annual shareholder meeting in April. Among his proposals were eliminating the company's two-tiered stock structure; separating the titles of publisher and chairman; and requiring that the chairman be independent of the company. But the Times Co. does not intend to include the resolution in its annual proxy statement to shareholders, which will be mailed in March, says company spokeswoman Catherine Mathis.

The day after Elmasry submitted his resolution, Morgan Stanley publishing analyst Lisa Monaco downgraded the rating of the Times' stock from "equal weight" to "underweight," effectively telling stockholders to ditch their shares.

Morton is underwhelmed by Elmasry's campaign. "My observation is that a snowball won't melt in hell before there's any change in that dual stock structure," he says, although he wishes the Times Co. would go private to quiet all the "brouhaha" about its financial performance. "Even though the family controls the shares, once you get into public ownership, you become to some extent a part of the culture," he says. "You have to listen to idiots like this guy at Morgan Stanley." (Elmasry declined to comment for this article.)

"You can imagine what happens to the New York Times newspaper if it was governed by people who were primarily concerned about the bottom line," Morton adds. "There's a reason that the Times has one of the lowest operating margins in the industry: because they spend more money on journalism."

In an era of dwindling newspaper ambitions, of paring back and turning inward, "local news" has become an unsettling mantra in a global world. While it often is touted as a way to add unique value unmatched by a cacophony of competitors, it also is invoked to provide protective cover when companies shutter costly far-flung bureaus to save money.

At the Philadelphia Inquirer, Publisher Brian P. Tierney, whose local group of investors bought the former Knight Ridder paper in June, told Washington Post media writer Howard Kurtz five months later: "I don't see us sending 25 people to do me-too coverage of Katrina" and "I can get what's going on in Iraq online. What I can't get is what's happening in this region." This philosophy, from an owner whose paper is now privately held, is a stark reminder that refuge from Wall Street is no tonic for financial pressures and fading aspirations. In January, Tierney slashed 68 newsroom positions, 17 percent of the editorial staff.

At the Los Angeles Times, parent Tribune Co. installed David Hiller as publisher in October after his predecessor publicly backed then-Editor Dean Baquet in refusing to enact further newsroom cuts. In a November memo to his new staff, Hiller wrote that the L.A. Times needed to "Focus relentlessly on growing local audience... In a related vein, a number of you have raised whether we are too focused on being like the New York Times. The New York Times has chosen a national audience strategy, and in so doing has seen significant drops in circulation and readership in their own metro market. That is not the path we want to go down."

New York Times executives are thinking far more expansively. When I refer to the Times as a national paper, Sulzberger, a primary architect of the national sales strategy, immediately interrupts: "No. It's an international paper now. I mean, important. Important. Between the New York Times and the International Herald Tribune, which carries New York Times journalism--right?--in print and on the Web, we are an international paper."

In interviews, Sulzberger, Golden and Times Executive Editor Bill Keller all point with pride to the Times' record in Iraq. When the U.S. Army rolled into Baghdad, there were 1,000 journalists in the country. By last year, the number had dwindled to 75, according to a Los Angeles Times story. The Times' leaders cite that figure, and add one of their own: The New York Times has seven correspondents assigned to Iraq.

It is fitting, then, that during its present difficulties with Wall Street's quarterly obsession, the New York Times Co. has hired a futurist.

Michael Rogers' planned career in the semiconductor industry was short-circuited when he was offered a job as a writer at Rolling Stone. He later became vice president of the Washington Post Co.'s new-media division and editor and general manager of Newsweek.com. In 2004, he founded a consulting firm called Practical Futurist and, in September, he was appointed to a one-year position as futurist-in-residence at the Times.

Rogers, who emphasizes that he's the type of futurist who tries to figure out what will actually work in three to five years, not the sort who plays with flying cars, spends his days reading engineering journals ("I understand maybe every fourth word," he says), scanning obscure blogs (one, by a Microsoft employee, ponders the future of identity) and attending conferences in Europe and Asia, which are about two years ahead of the U.S. in their use of mobile technology.

He is one of a team of six who report to Michael Zimbalist, the Times Co.'s vice president of research and development. Robinson created the R&D team last year because she felt the company needed a capacity to "look around corners," as Zimbalist puts it, to study "what the trends are going to become in consumer behavior, in technology, and how those are going to intersect with our core mission of providing high-quality news, information and entertainment."

The R&D team--a commonplace unit across Fortune 500 businesses but unprecedented within media organizations, Zimbalist says, when Robinson launched his--is tasked with leading the long-term innovation strategy. Its role is to bring "new ideas and new views of the future into the company," which includes the formidable task of transforming the organization's thinking by imbuing it with a desire to experiment, to launch a digital innovation and then smooth out the kinks rather than wasting years in the planning stages.

In September, the group helped the Times newspaper staff debut a "beta," or test, launch of Times Reader, the product of a partnership with Microsoft that attempts to create a paginated, newspaper-like experience on the computer. Ideally suited for portable computers, it offers the look and experience of the printed page and an opportunity for readers to take notes on or search through those pages.

The experimental beginning last year afforded users a chance to share problems downloading and using the application and to offer feedback about what they liked or didn't. It also gave Times executives time to think about pricing and business models before the formal launch in February. In its initial form, pricing for Times Reader mirrored that of NYTimes.com--free for general use but paid for columns and other premium content.

In early December, the Times Co. unveiled a new search function for Boston.com, the Globe's Web site, reflecting a growing conviction that papers should provide myriad services to readers within a particular region. A search for local churches, for example, turns up Globe news stories as well as Yellow Pages listings and coverage by other news outlets, including the Christian New England News Network. Similar search options are planned this year for NYTimes.com and the regional sites.

"It's as much of a marketing challenge as it is a technical one," says Zimbalist's boss, Martin A. Nisenholtz, the company's senior vice president for digital operations, about the difficulty of educating consumers about the sites' wealth of information. On NYTimes.com, visitors not only can read movie reviews but also can buy tickets or scan show times. "We really have two tasks," Nisenholtz says. "One is we need to create a differentiated search experience, and we think we can do that. But the other task is getting people simply to understand that they can do it."

Zimbalist's team also develops mobile technology initiatives. While there's no inherent connection between consumers reading a newspaper story and then scurrying off to their laptops to seek more in-depth coverage online, Zimbalist and Rogers think mobile devices may complement print better because both can be viewed on the move. In 2006, the Times Co. launched Web sites for these devices for the Times, the Globe and the Gainesville Sun. "I think that print's role in the mix may change," Zimbalist says. "Print may be kind of a guidebook to more and deeper experiences in a digital world."

The team sees video on the Web as another area with major growth potential. It's searching for easier ways to share video across the company's business units as the newsrooms increase their video output. Vivian Schiller, general manager of NYTimes.com, says that will be a major focus over the next year as the Times newspaper steps up its training of print journalists in the use of video cameras. Currently, the paper offers upwards of 25 new video packages each week on NYTimes.com; viewer traffic is highest when the videos are embedded within a story.

User-generated video opportunities are expanding as well. NYTimes.com will unveil user-produced options around Valentine's Day for couples featured in the paper's Weddings & Celebrations section. Its leaders aren't sure what form these will take but expect more riveting videos than, say, couples divvying up their wedding cake. Times' readers are "very creative, very smart, so what we anticipate is we're going to get a really interesting diversity of video," Schiller says. "I would be shocked if they were all, like, cutting the cake."

A large part of the mission of the digital operations team and the R&D unit is attempting to anticipate where the rapid pace of transformation will take the industry. As he calls up Times Reader on his sleek notebook computer to show off its cool features, Nisenholtz notes, "We don't expect this version of the Reader to have a material impact on our business, but we hope that we will be really well-positioned if one of these things starts to really go, like the iPod did. I mean, the iPod took the music industry by storm. They didn't even know what hit them. And we don't want to be in that position."

Central to the success of all this creative thinking is how many users the new technologies will attract, and how much revenue they ultimately will generate.

Times executives are pleased with their foray into the perilous world of paid content on the Web. Schiller says TimesSelect, the paid portion of NYTimes.com that debuted in September 2005 (home subscribers get it free; others pay $49.95 annually), had netted 206,000 paying subscribers in December, exceeding the company's expectations.

NYTimes.com is the largest newspaper Web site, with 13.2 million unique visitors in the U.S. in December, according to Nielsen//NetRatings. The Times Co. represents the ninth largest Internet presence, with 44.2 million unique visitors to all of the company's Web properties that month.

At the investor conferences in December, Robinson said she expected the company to significantly outperform the industry in online ad revenue growth in 2006 and 2007. The company's digital revenues have jumped from 4 percent of total revenues in 2004 to an anticipated 8 percent in 2006. "In 2007, we believe our total digital revenues will grow approximately 30 percent, or more than $80 million, mainly due to organic growth," she told analysts.

The Times' two-pronged strategy for digital expansion includes not only that "organic" growth, the creations from Zimbalist's team and others, but also "inorganic" growth, the revamping of the company's portfolio through acquisitions of small and mid-size Internet companies.

In March 2005, the Times Co. purchased About.com for $410 million, its largest acquisition since it bought the Boston Globe from the Taylor family for $1.1 billion in 1993. On the site, an amalgam of consumer information, "guides" create content that offers advice on topics ranging from decorating candlesticks to planning trips to the pediatrician. (One seasonal entry on "Sex Tips for Surviving the Holidays" counseled, "sex talk often gets lost around Christmas time, maybe because stress, too much alcohol, and spending time with your extended family are not the greatest aphrodisiacs.") Visitors can also send in their own questions.

The Times has attempted to heighten the quality of information on the site, replacing 200 of the 588 independent contractors who serve as guides; up to 100 additional guides are anticipated this year. Although About.com represented only about 2.5 percent of the company's $740 million in revenues in the third quarter of 2006, executives are encouraged by its growth. Ad revenues from January to November for About.com were up an estimated 51 percent from the same period a year earlier; its operating profit margin for the year was 38 percent as of September.

When we spoke in December, Michael Golden cited a recent Yahoo! column that listed About.com as the second-best Internet acquisition behind MySpace. "When we bought it, there were a lot of people in the company that thought it was outside our space," Golden acknowledges, but he says the information it provides, while not news, is useful to millions of consumers every day. "With a few notable exceptions of individual opinions," he says laughing, in an apparent oblique reference to Elmasry's opposition to the site as untested and overpriced, "I think the jury's in on this one, and it was a great acquisition."

In August, the Times Co. bought Baseline StudioSystems, an online subscription database for information on the film and television industries, for $35 million. In September it picked up Calorie-Count.com--as its name suggests, a site featuring weight-loss tools and nutritional information--for $900,000. In each of these acquisitions, the Times saw an opportunity to profit from and improve the product as well as a chance to add value to its company. About.com, for example, brings in search engine expertise.

"One of the challenges for a smaller newspaper is, 'How do you own your own community in a digital era?'" Sulzberger says. "One small way to tell, perhaps, is when you Google, when you type in the name or your town or city in Google, where does your newspaper come up?" He wants the Times' community newspapers to appear among Google's leading entries, and hopefully even as No. 1 (he concedes the Gainesville Sun will probably always lag behind the University of Florida football team). He thinks the new acquisitions can help achieve that goal.

Former Times Vice Chairman and General Counsel James Goodale played a key role in the company during its first major acquisition, that of Cowles Communications properties including three Florida newspapers, Family Circle magazine and a Memphis TV station, in 1971. "We thought it was very risky because we hadn't done it before, but it really wasn't as risky as it is today," Goodale says, referring to the Times Co.'s Internet acquisitions. "You just don't know, when you buy a publication on the Net that's only three or four years old, what the hell it's going to do."

But he believes the Times is right to try. "I think they've got to do exactly what we did. They've got to find a stream of income that they can live off of in order to make sure the New York Times print newspaper is there," diversifying to protect the core.

Media analyst Ed Atorino thinks the Times could have a growing impact on the Internet. "They want to leverage the brand, leverage their information base," he says. "Anything related to the Web is the way these guys have to go."

In her November report, Morgan Stanley's Lisa Monaco was less sanguine. She noted that About.com has "performed well" under Times ownership and that the Times Co. has succeeded in driving traffic to its Web sites. "However, to-date revenues and profits online have been rather insignificant. So, it's hard to see how or what would drive an acceleration in online growth to the levels where it can offset the loss on the print side," she wrote. "Moreover, we think that competition for ad dollars from the Yahoo!'s and Google's of the world is only going to intensify."

It is, perhaps, a tad disconcerting, even a little amusing, to think of the mighty New York Times Co., monopolizer of Pulitzers, owning Internet sites with names like Calorie-Count.com. But it's also a reflection of the urgent need for newspaper companies to adapt in a disruptive era. "The truth is in some ways that's a tough burden for the New York Times Co. to bear," says Mark Jurkowitz, associate director of the Project for Excellence in Journalism. Because of "what that brand stands for in the world of dead trees and print, even if they are making intelligent, far-sighted moves..it may be shocking to people."

Increasingly, the Times Co. stands for news and information in print and digital forms. Aside from its 17 percent interest in New England Sports Ventures, which owns the Boston Red Sox, Fenway Park and most of New England Sports Network, a regional cable outlet, nearly all of its holdings are related to dispensing information; even the NESV investment can be seen through that prism with the inclusion of the cable network.

It has no equivalent to Kaplan, the Washington Post Co.'s wildly successful test preparation company, nor, Sulzberger says, does it want one. "God bless Kaplan," he says. "It was a great decision by the Grahams to get it and then to make it what it is... But we're looking for properties more aligned to the sort of core purpose of the New York Times Co." In other words, news and information.

As it steps up its focus on Internet video, the Times is getting out of the traditional television business. In September, it sold its 50 percent ownership interest in the Discovery Times Channel, a digital cable outlet, back to partner Discovery Communications, recording a loss of $8 million. That same month, the Times Co. announced that it would sell its nine local TV stations.

Although both moves involve television, executives describe them as unrelated. "It's hard for an individual local station in a market like Memphis, Oklahoma City, Norfolk, Fort Smith [Arkansas] to really distinguish itself," Golden says. The one in Scranton, Pennsylvania, led its market, but "it didn't create a huge payoff. It didn't create the financial return that a newspaper with that dominance would have in its marketplace," and, given the current and emerging competition, "We didn't see a clear path that these assets were going to be worth more in 10 years than they are now." In January, the Times Co. agreed to sell its broadcast group to Oak Hill Capital Partners, a private equity firm, for $575 million.

Times executives proudly cite their award-winning programming on the Discovery Times Channel, which extended New York Times journalism to a new platform and garnered three Emmys and other awards. But it never gained traction in the exploding cable frontier. "Those digital channels are very, very tough," Golden says. "We did all the things right, but the audience was very small."

Still, Golden and Sulzberger say the partnership was valuable because it allowed the company to build its "video muscle," as Sulzberger puts it. Although Web video has taken a different direction than long-form TV journalism, he says that was not a foregone conclusion. "It did jump-start us in the video world. It sent the signal to the newsroom that we are serious about this."

Michael Oreskes, now executive editor of the International Herald Tribune, was tapped in late 2000 to be a Times assistant managing editor and its director of electronic news. The former Times Washington bureau chief recalls going to lunch with Sulzberger during the Democratic National Convention in Los Angeles and listening to his boss discuss how the company should prepare itself for the Internet age.

"The whole conversation was about, 'How do we develop a video journalism capability in the newsroom of the New York Times?'" Oreskes recalls. "It was clear that in order to be a journalistic organization in a new world, you have to be able to present things in video and other forms. Arthur saw that five, six, seven years ago. The television part was about building the skills. It was not about being in the television business. I think he deserves a lot of credit for that. I think it was a visionary thing..and I think it's succeeded."

At the core of the company's changing portfolio and ambitions for a new digital era stands the ink-on-paper New York Times.

It's been a rough few years at the nation's premier newspaper, bedeviled by the twin humiliations of serial fabricator Jayson Blair and the Judy Miller imbroglio, then vilified as unpatriotic by the Bush administration and its allies. But you wouldn't know it to hear Executive Editor Bill Keller skewer the competition.

When we talk in mid-December, he begins by citing the three excellent rivals he feels are indispensable reading: the Wall Street Journal, the Los Angeles Times and the Washington Post. Then he lets loose.

The Dow Jones Co., which owns the Journal, "seems to be pumping out a lot of smoke to mask a retreat," covering business for business and offering a more "magaziney" approach, Keller muses, leaning chin on hand and looking contemplative. "My sense is that they're hollowing out the reporting behind it. This really struck me between the eyes during the war on Lebanon... Not every day, but a lot of days during the war in Lebanon, they were writing stories that could have been written from their offices in New York. They were smart, analytical, almost op ed pieces. I mean, I'm not faulting their analysis. But you sensed a real absence of reporting on the ground."

Next up, the Tribune Co.'s Los Angeles Times: "Nobody knows who's going to own it six months from now, and nobody knows what the owner will decide is his business model, so that's kind of hard to say," he stipulates. "But what they have been going through is a fairly relentless cost-cutting exercise driven by people in Chicago..who all but say it would be just fine if the L.A. Times were the Chicago Tribune. The Chicago Tribune is an OK paper. It's a fine paper. It's not the L.A. Times."

And then the Post: "The Washington Post, you know, has become an education company that happens to own a newspaper," he observes. While professing "unqualified admiration" for Don Graham and Post Executive Editor Leonard Downie Jr., he says "the reality they're dealing with is that it's not really a journalism company"; rather, the Post "is one of the properties that the Kaplan Co. owns," and is "certainly under a lot of pressure." Its talent is getting "picked away from outside," Keller continues, citing Allbritton's recent coup in luring two of the Post's top political experts to its nascent Web site. He concludes, "They'll probably go hire all the good people from the L.A. Times." (He adds later, "All the good people who are left after we've finished our own hiring.")

His own paper has not been immune to the difficult business environment. The Times Co. eliminated about 750 positions companywide between 2004 and 2006; 69 of those were buyouts in the Times newsroom. Later this year, the Times will narrow the width of its paper from 54 inches to 48 inches, as have the Wall Street Journal and other dailies. Executives say the reduction will save about $12 million annually. But so far, Keller says, his paper has avoided compromises in staff and resources that harm news coverage.

In part to lure lucrative advertisers, his team has launched glossy luxury magazines. These include T: The New York Times Style Magazine, which features the Times' first perfume critic; and Key, a high-end real estate publication. Keller says he's invested some of the new revenues, mostly from these but also from weekly section redesigns, into core newsgathering functions, creating an "overdue" computer assisted reporting unit and adding a few reporters to the Washington bureau.

He says the newsroom has put the tumultuous Miller episode behind it. "I think there ought to be a statute of limitations on the Judy Miller question," he says wryly, "but yeah, I really think we have. It took a long time. It was like a virus in the system, and the Washington bureau felt it probably more deeply probably than anyplace else," not only the legal morass, but the "toxic rain" over Miller's WMD coverage and her "operating style, which tends to leave a lot of bruises."

The mood also has brightened after a rancorous period leading up to the midterm elections, when the Times became a favorite punching bag for the Bush administration and its "Amen chorus within the Fox News world and Murdochland," in Keller's words. Twice the Times defied administration pleas and published national security stories based on classified information (see "Judgment Calls," October/November ); the first of those, printed after a year-long delay, won a Pulitzer Prize. "It feels like the zeitgeist has shifted a little back in our favor," Keller says, helped in part by recent scoops by the Times' Washington bureau, including revelations of one classified memo by National Security Adviser Stephen J. Hadley expressing doubts about Iraqi Prime Minister Nuri Kamal al-Maliki, and another by Donald H. Rumsfeld two days before he departed as defense secretary calling for a "major adjustment" in Iraq.

In August 2005, the Times merged its digital and print newsrooms, although Keller says the physical integration will become much more pronounced when the company and newspaper settle into their new headquarters on the west side of Times Square later this year. (The Times plans to rent at least five of the 28 floors it had planned to occupy in the 52-story New York Times Tower.) The phased move into the roughly $600 million building is expected to begin in April. Once there, Web producers will be placed on every section desk in the newsroom, and Keller plans to gradually shift more newsroom resources from print to digital.

The Times also is working more closely with its Paris-based sister paper, the International Herald Tribune. In October 2002, the Times Co. forced the Washington Post Co. to sell its half-interest in the money-losing paper for $65 million. Now in full control, the Times has bulked up the IHT's editorial staff and positioned the paper to fight for dominance on a global stage (see "International Intrigue," February/March 2006 ). Although the 242,182-circulation broadsheet is still losing money, Golden says that after several years of sharp declines, advertising was up 15 percent in 2004, 17 percent in 2005 and an anticipated 12 percent to 15 percent in 2006. He says the paper is on track to reap a profit at the end of 2007 and for all of 2008.

In November, Keller and Oreskes announced they were dropping the identifiers under bylines showing which of their papers an article originated in. "The NYT and the IHT will henceforth fly the same flag (which, agate-wise, is no flag.)," the two editors wrote in a staff memo.

In a telephone interview, Oreskes adds, "We want to think about the New York Times and IHT as one 24-hour news organization. Again, this is very much about the Internet. Therefore, it's necessary to work like a global, 24-hour organization... We've moved considerably down the road of coordinating the two and operating more and more as one organization."

One paper still struggling to find its footing in the New York Times Co. is the Boston Globe. The Globe anchors the company's New England Media Group, which also includes Massachusetts' Worcester Telegram & Gazette and a 49 percent interest in Metro Boston, a frothy free daily aimed at young professionals and commuters.

In Wall Street parlance, this group is a weak performer, beset by circulation losses and declining ad revenue, which plunged 12.4 percent in the third quarter of 2006 compared with the same period a year earlier. The merger of the Federated and May department stores has hurt: Filene's, formerly the Globe's largest advertiser, last appeared in the paper in March. In January, the New England Media Group announced it would cut an anticipated 125 jobs, including 19 from the Globe's newsroom and opinion pages. Later that month, the Globe said it was shuttering its three foreign bureaus.

"In an era in which major metro dailies are suffering disproportionately from the problems of the newspaper economy, the Globe has probably suffered disproportionately in that class," says Jurkowitz, a former Globe ombudsman and media writer. "For the most part, the New England Media Group has been the worst performing sector of the Times Company on a fairly consistent basis."

On November 22, the Globe reported that the Times Co. had rejected a proposal to buy the paper from a trio of Boston businessmen--retired General Electric chief executive Jack Welch, ad executive Jack Connors and Joe O'Donnell, a local concessionaire. "[G]iven how the paper has struggled, the company may be better off selling the Globe and focusing its attention on the flagship paper and About.com," Morgan Stanley's Monaco wrote in her report.

But Jurkowitz notes that the Times' commitment in the region extends beyond the Globe. "A divorce from New England and a troubled experiment in New England does not simply entail finding a buyer for the Globe," he says. He adds that the Globe is a proud newspaper with a rich legacy, and a sale now would stain the company more deeply than discarding its local TV stations or even some of its smaller regional papers. "For the newspaper company with the best reputation in the country to have to bail out of New England under the shadow of 'They didn't really do so well with the Boston Globe,' that would go right to the core of their reputation."

Even before the January announcement, the Globe's newsroom had not been spared. At the end of 2005, the Globe and Telegram & Gazette eliminated about 160 jobs through buyouts, more than 30 of those from the Globe's newsroom. The Globe jettisoned its non-Washington national staff, and although the 10-person D.C. bureau also covers national news, Globe Editor Martin Baron concedes there are fewer general interest national features in the paper.

Unlike the Inquirer's Tierney, though, he didn't sound ready to cede a Katrina-like news event to his sister paper and other national heavyweights ó at least when we spoke in early January, before the latest round of cuts. "I don't think that it makes sense for our paper when there's major national tragedy of that sort to say 'hands-off,'" he said. "We are a regional newspaper, but our job is to reflect the interests of this area and the personality of this area. This is an area that has major interest in what's happening around the world, around the country."

He proudly cites his paper's record over the past few years: a 2003 Pulitzer for public service for its coverage of sexual abuse by priests in the Roman Catholic Church; a 2005 Pulitzer for explanatory reporting about stem cell research; its 2006 series on the Bush administration exporting Christian faith-based initiatives around the world; and its groundbreaking coverage that year of President Bush's "signing statements," documents in which Bush repeatedly has asserted his perceived power to ignore laws when they conflict with his legal interpretation of the Constitution.

In June, the editorial operations of Boston.com merged with the print staff. "We're moving relatively quickly to turn our newsroom into a true multimedia organization," Baron says, adding that although the Globe has a partnership with New England Cable News, it needs to develop its own video capability.

In December, Boston.com--which was created to have a look and personality distinct from the print edition--attracted 3.8 million unique visitors, making it the sixth-largest newspaper site. The print edition of the Globe ranks No. 13 in circulation, so "that's quite an achievement," Baron says.

He takes a pass, though, when asked if the Globe is a better paper today than before the Times Co. bought it. "I wasn't here, so it's not for me to say," says Baron, who became editor in July 2001 after serving as an associate managing editor at the Times and as executive editor of the Miami Herald. He adds that the Times Co. has "invested a lot in this market."

Sulzberger bristles when asked to assess his company's stewardship of the Globe. "Compared to what?" he asks. He notes the Taylor family approached his father and his father's executive team about buying the paper and cites the recent pressures there, including consolidation in the retail market and the Globe's traditionally heavy dependence on its help-wanted and classified advertising base, another newspaper mainstay under siege in the Internet era.

"Through very rough seas, I think our management, the New York Times Co. management, has been good," Sulzberger says. "Not painless, but good." In September, the company named P. Steven Ainsley, who had been president of its Regional Media Group, as Globe publisher and head of the New England Media Group. During the last year, Times Co. leaders also installed new chiefs of production, advertising, and circulation and marketing at the Globe.

When I ask Sulzberger if the Times will own the Globe in 10 years, he shrugs and nods, as if an affirmative answer is obvious. So in your mind, that's a certain thing? "There is no certainty in life, so that's unfair," he retorts. "Is it our plan to continue to own and grow the Boston Globe? Yes, that is our plan."

Two chroniclers of the Times believe the company's future, and that of its flagship paper, rest squarely on the organization's continuing commitment to journalism.

Susan E. Tifft, who with her husband, Alex S. Jones, exhaustively documented the Ochs-Sulzberger dynasty in "The Trust: The Private and Powerful Family Behind The New York Times," says it wouldn't be fair to say the Times stands alone in its quality journalism. "But I think that the distance between it and the next tier down has gotten much, much bigger," Tifft says. "The distance could get wider between the New York Times and everybody else, and it's kind of lonely at the top."

Gay Talese, whose famed 1969 account of the Times newspaper, "The Kingdom and the Power," was reissued in January by Random House, hasn't been a fan of either Keller's or Sulzberger's. In his New Yorker piece, Auletta quoted Talese as saying of Sulzberger, "You get a bad king every once in a while."

When I ask Talese to elaborate one year later, he takes a long-term view of the Times' enduring power as an institution, if an unbecoming one of its current leaders. "There's so much that's happened on [Sulzberger's] watch in the newspaper that has not been flattering, but maybe that's because there's much more attention paid to media than there was before," Talese says. "He's more a public property than his forebearers, than his father or grandfather. The New York Times can have a bad king. We can have bad presidents. Still the Republic goes on. We survived Garfield."

Yet Talese read the entire paper the other day, he remarks, and thought it was fabulous. "It has to give us information in the New York Times that we cannot get elsewhere. If it does that and does that and does that, it makes itself very necessary. It does not matter what is on 'Hardball' and Fox News and the bloggers," he says. If it pursues serious work and presents it in a readable way, if it avoids further embarrassments, then "I think it makes itself unique and necessary."

Analysts and shareholders can argue over whether the Times needs a Kaplan of its own, whether it should buy nascent Internet companies and whether the quality of its "governance" is subpar from a financial perspective. None of that will matter if the Times loses its eminence as journalism's North Star. At a time of alarming retrenchment in the industry, its stewards still value that status, even if Wall Street does not.

"I don't think there's another company of our ilk better positioned to succeed," Sulzberger tells me. He's talking about the need for regional papers to own their communities, for the Sarasota Herald-Tribune to pop up on Google when a traveler searches for the best restaurants in the southwest Florida city.

What about the journalism? I ask.

"At the core of all of this is journalism," he replies. "Please, if you walk away from this conversation with anything--we are a journalistic organization. It is the journalism that will see us through... If you lose that, you've lost your touchstone."