Here’s one for you: If a newspaper writes about its own bleak financial predicament in an aggressively rosy light, is that securities fraud?
Under the headline, 'Resilient Strategy for Times Despite Toll of a Recession,' Richard Pérez-Peña, the Times business reporter who covers the newspaper industry, gives an upbeat, even breathy, overview of the company’s present business predicament.
Now, it is true, and perhaps a reporter’s sort of joke, that nothing in Pérez-Peña's piece, except its thesis, its headline, its tone, and quotes from Times CEO Janet Robinson’s most recent analyst call, together with some noncommittal statements from financial analysts, indicates anything but an unabashedly dismal situation and a recent history of mind-boggling incompetence.
On that basis, perhaps the paper can avoid an SEC prosecution: The horrifying facts are there, speaking for themselves, regardless of the bald-faced (possibly, now that I think of it, even tongue-in-cheek) sugar coating.
Here’s the dope on Times, supplied by the Times:
• Advertising revenue has fallen 19.5% in the last 2 years.
• The Times has not reduced its newsroom costs—which, the article says, is part of its strategy: It will prevail, because everybody else is economizing.
• The Times has invested heavily in digital delivery—but this still represents only 12% of total revenue, and now digital revenues are falling.
• The Times is in a cash bind and has had to take a loan from Carlos Slim, a Mexican billionaire of dubious reputation, at a dangerously high 14% annual rate.
• The Times, says Pérez-Peña, didn’t really need the Slim loan, but, on the other hand, one of the company’s two credit lines is expiring in May with no “realistic prospect of renewal." The company, without the Slim loan, could borrow, on a short-term basis, $400 million, but within the next year it has to repay $729 million.
• “The company,” says Pérez-Peña, with some lightness of spirit, “has also made a long chain of decisions that depleted its cash.” For instance, it spent $2.7 billion, three times the present value of the company, to buy back its shares at historic highs.
• Six years ago, Pérez-Peña notes, the company paid $65 million for the 50% of the International Herald Tribune it did not own. Then it invested more in the paper, which now loses money. (He doesn’t say how much, but speculation is that it could be more than $40 million a year.)
• Even in the face of an industry downturn and the first signs of a credit crisis, the Times raised its dividend in March 2007. (The dividend supports the Sulzberger family, which controls the Times.) It backtracked in November, drastically cutting the dividend.
• The company’s future rests, Pérez-Peña says cheerfully, “on questions no one can answer. When will the recession end? When it does, will the decline of print advertising slow to a modest pace? Will Internet ads make a big comeback?”
(Arthur Sulzberger Jr. AP Image)
Now, it is obvious that Pérez-Peña has a tightrope to walk between an excruciating reality and what increasingly seems like the fantasy world of his employers. His own resilient strategy seems to be something like that of the ever-helpful person with the really big bowl of macaroni salad at the funeral. Or, it’s a strategy taken from comedy news—the story just obviously means the opposite of what it says.
The publisher, Arthur Sulzberger, declined to be interviewed for the story about his company in his own paper.
More of Newser founder Michael Wolff's articles and commentary can be found at VanityFair.com, where he writes a regular column. He can be emailed at michael@newser.com
