Howell Raines on Rupert Murdoch's "Very Dangerous Trends"
Howell Raines, who was fired from the Times as executive editor in 2003, made his Portfolio magazine debutwith an 1850-word column on media mogul (and Fox News owner) Rupert Murdoch for the April edition. Raines showed a less dyspeptic mood than he showed in his fly-fishing autobiography "The One That Got Away," in which he described Murdoch and his Fox News enterprise this way:
Fox Television showed us the future - outright lies and paranoid opinions packaged as news under the oversight of Rupert, a flagrant pirate, and Roger Ailes, an unprincipled Nixon thug who had assumed a journalistic disguise in much the same way that the intergalactic insect in Men in Black shrugged into the borrowed skin of a hapless hillbilly.
For a news hook, Raines used Rupert Murdoch's vague feints toward making a play for the NYT Co., currently protected by a dual-class stock structure that puts most of the company's voting stock in the hands of the family of publisher Arthur Sulzberger Jr.
Ironically, Raines' new column laid out a useful takeover map for Murdoch.
....it seems obvious to me that Murdoch now plans to do to the Times what he was advising me to do to the Journal. He will spend whatever it takes to undermine the Times' standing as America's leading general-interest newspaper. But my real fear is that Murdoch or some other unsuitable purchaser will then buy the Times through a combination of financial and psychological pressures on the strong, but hardly ironclad, Sulzberger family trust that controls the vast majority of the company's voting stock. There is no more important question in American journalism than the future of the Times, and I don't think the newspaper or the journalistic profession is taking Murdoch in particular or the takeover issue in general seriously enough.
It is an article of faith in the Times newsroom that the Sulzberger family trust, updated in 1997 from a previous agreement, is bulletproof. It may be, against the threat it was designed to counter: a renegade cousin or two stampeding the family into selling. But is it built to withstand repeated proxy battles with hedge funds or investment banks attacking the New York Times Co.'s dual-class stock structure? In recent weeks, New York investor Scott Galloway and his Firebrand Partners, along with the hedge fund Harbinger Capital Partners, have bought huge blocks of Times stock. This points to the trust's vulnerability to converging trends unique to this moment - the financial decline of the Times, predatory investors, Wall Street and family anxiety about stock prices, and the emergence of Murdoch as the most powerful individual in mass communications. These factors could bring us to the point where the unthinkable is possible.
When Arthur Sulzberger Jr. fired me in 2003, I took quite a beating from media reporters on journalistic issues. Since then, I've watched Arthur get roughed up by the financial press for his business decisions. Any tendency toward schadenfreude on my part has been offset by two powerful factors. As a Times pensioner, I want the paper to make money under public-spirited owners. As a reader, I believe a Murdoch takeover of our last independent national newspaper would be a disaster for the trustworthy reporting on which our civic life depends. The Sulzbergers are one of the most admired publishing families ever. Throughout his career, Murdoch has used his newspapers and broadcasting properties in a broadly unprofessional way - political muscle to advance his commercial interests.
Raines, who says he harbors no ill-will to the paper that fired him, pointed out a potential NYT Co. Achilles' Heel:
There's no argument that the Times is financially vulnerable, a fact that calls attention to a small but crucial trapdoor in the family trust agreement. In November 2006, the Times saw fit to print the news that by a vote of six to two, the governing board of the family trust could "change the company's corporate structure" - that is, set in motion a sale of the Times to an outside buyer. This came in response to the attempt by Hassan Elmasry of Morgan Stanley to incite a revolt among the owners of class-A stock, who can elect only four of 13 directors. The family owns the great majority of class-B shares through the family trust, electing nine of the 13 and thereby controlling the paper. In my 25 years at the Times, I never heard it suggested that the paper could be sold without unanimous family consent. Now we know that six of eight trustees out of an eventual 50 or more heirs hold this crucial power, a provocative fact in view of stock performance.
While going through takeover possibilities (Google?), Raines picked his favorite: Going private.
Recently - and more accurately - Murdoch said in one of his Australian papers that he had considered buying the Times but that Washington regulatory agencies make that impossible.
Ho ho ho. What regulatory agencies? It's unlikely that a McCain White House is going to pump oxygen to the F.C.C., S.E.C., or antitrust division of Justice in time for them to block a media deal of this magnitude. And would any Democratic president choose to start a new term by signing up for the ceaseless pummeling on Fox that would result from thwarting Murdoch? For now, the thing to watch is the newspaper war promised by Murdoch. If his heavy spending on the Journal has the side effect of further depressing Times stock, a lot of cousins could start looking over their shoulders and fingering their calculators.
In a video interview on the Portfolio.com site with Lloyd Grove (the former Washington Post gossip maven), Raines flashed a little more hostility:
"As Murdoch becomes more and more successful with stocks, in politicizing the kind of journalism that is considered normal in this country, I think both of those are very dangerous trends."