At 66, David Geffen has amassed a fortune that Forbes estimates at $4.5 billion in its annual list of the global megawealthy. The Hollywood impresario, one of the world's most prescient investors, has scored mammoth returns in art and hedge funds, having cashed out of the financial and art markets well ahead of the crashes. But the foundation of Geffen's wealth—and his first love—remains the media industry, where his touch has been consistently golden, managing and producing legendary music acts such as Joni Mitchell and the Eagles and to helping launch DreamWorks.
So why is Geffen, having already sought unsuccessfully to acquire the Los Angeles Times and now reportedly eyeing The New York Times, so keen on stuffing his portfolio with an investment that seems dead on arrival—newspapers? 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. "David would hope the newspaper makes a profit," said the confidante. "But he believes that operating without the ultimate responsibility of paying dividends or necessarily having to be profitable is the best way to run an institution like The New York Times."
The Geffen sources NEWSWEEK spoke to are knowledgeable about his investment decisions and specifically about his overture to acquire a Times stake, but they declined to be identified. "The New York Times is a very special institution," said one of the persons. "It's essential to be preserved. And David believes the correct model to preserve it is nonprofit."
Like the rest of the newspaper industry, the company is besieged by financial, technological and consumer trends that imperil its future. Readers and advertisers are abandoning print for online news outlets, including the official sites of newspapers like NYTimes.com, where content is almost universally free to readers. Newspapers "have the possibility of going to unending losses," legendary investor Warren Buffett said recently. "We would not buy them at any price."
The New York Times Co. has been in virtual crisis mode for months, with precipitous declines in advertising and circulation and the burden with massive amounts of debt. The parent company has been so concerned about its plight that, independent of Geffen, it also recently considered converting to nonprofit status. "But the option is more complicated than it might seem at first blush," Scott Heekin-Canedy, president and general manager, said last week in answer to a reader's online query. "For a host of reasons we have ruled this out for the present." Heekin-Canedy didn't elaborate, however. "These were proprietary internal discussions," a company spokeswoman subsequently told NEWSWEEK, declining further comment.
The fact that Geffen isn't looking at the Times as a classic investment suggests that he would have approached the publishing company's management, including Arthur Sulzberger Jr., about his intentions. Sulzberger is chairman of the company, but more importantly the leading member of the Sulzberger-Ochs family, which has controlled the publishing company for 113 years. Citing unnamed sources, Fortune magazine first reported that Geffen sought unsuccessfully to acquire the nearly 20 percent stake of the New York Times Co. owned by Harbinger Capital Partners, a hedge fund that first invested in the publishing company on a hostile basis. For now, Geffen apparently has ended discussions with Harbinger, though he is said to remain interested in pursuing the Times.
It's unclear how Geffen would implement the nonprofit structure were he to gain control of the paper. In March, Sen. Ben Cardin of Maryland introduced legislation to facilitate a newspaper's conversion to nonprofit status. The Geffen sources told NEWSWEEK that he envisions himself as the next Nelson Poynter, the late proprietor of the St. Petersburg Times and a legend in journalistic circles for his fierce independence. The Florida newspaper (where this reporter began his career) is the widely recognized prototype of the nonprofit structure that is now generating growing interest in some quarters of an industry facing an existential crisis. Poynter, who died in 1978, willed his control to the nonprofit and highly influential Poynter Institute, viewing the mechanism as the optimal way of preserving the St. Petersburg Times' independence and local ownership. Today, under the complex ownership structure, the St. Petersburg Times operates in many respects like a for-profit newspaper. One of the nation's great daily reports, it snared two Pulitzer Prizes last month. Only The New York Times, with five, was awarded more.