Media Firms' Down Years Add Grist to Proxy Bids

The New York Times Co. and Richmond's Media General reported disappointing fourth-quarter and full-year 2007 earnings yesterday, exacerbating conditions that have brewed shareholder revolts at both companies.

But the companies' tightly held family ownership structures may ultimately prevent hostile moves by outsiders, analysts say.

Firebrand Partners and its hedge-fund partner, Harbinger Capital, began buying stock in the Times Co. just before Christmas and now own about 5 percent of the company. They have proposed running four directors for the Times Co. board at the company's April shareholders meeting. They think the company has underperformed -- Times Co. stock has lost two-thirds of its value over the past four years -- and that it is missing opportunities for more digital revenue.

In Richmond, Harbinger has proposed three directors for election to Media General's board at the company's April meeting. Media General, which owns the Richmond Times-Dispatch and Tampa Tribune, among other newspapers and broadcast stations, has seen its stock price plummet along with its advertising revenue. Harbinger owns about 18 percent of Media General and has 3 percent more promised through stock swaps, Media General chief executive Marshall N. Morton said in an interview yesterday.

The moves against the Times Co. and Media General are unrelated.

Both the Times Co. and Media General have dual-class stock structures that allow the family owners to maintain control of the companies through super-voting power, and they generally withstand shareholder revolts. The Times Co.'s Ochs-Sulzberger family thwarted a bare-fisted proxy attempt by institutional shareholder Morgan Stanley last year that tried to abolish the dual-class structure.

In contrast, Firebrand and Harbinger are taking a gentler approach, telling Times Co. Chairman Arthur Sulzberger Jr. in a recent letter that they would keep the dual-class structure and seek only the four board seats available to outside shareholders. The family has the right to appoint nine of the Times Co.'s 13 directors.

"They can't force the issue because they have no leverage," Benchmark analyst Edward Atorino said of the Firebrand-Harbinger bid for Times board seats. "They're taking the approach, 'We're nice guys, we want to come help you out.' "

Firebrand is run by Scott Galloway, founder of e-tailing site RedEnvelope and a business professor at New York University. Harbinger invests in distressed companies for its parent company, Harbert Management.

Galloway thinks the Times is a "world-class brand" whose value has slipped because it has failed to move urgently enough into the digital delivery of its content, according to a source close to the situation who spoke on the condition of anonymity because the process is ongoing. If Galloway's directors are elected, they would urge the Times Co. to sell its non-core assets, such as its share of the Boston Red Sox, and buy more digital properties, the source said.

Neither Harbinger nor Firebrand would comment.

Yesterday, the Times Co. reported that fourth-quarter earnings from continuing operations in 2007 were down (44 cents per share) from the comparable period in 2006 (46 cents), with revenue and profit also down. Growth at the company's About.com and other digital properties was offset by the continued slump in newspaper advertising.