TIME: Almanac 1993/TIME Almanac 1993.iso/time/060490/0604220.000

Text File | 1992-08-28 | 11.0 KB | 239 lines

                                                                                PRESS, Page 76

A Search for Glitz


The house of Newhouse pursues a winning formula with toughness
-- and a revolving door

By WILLIAM A. HENRY III -- Reported by Leslie Whitaker/New York


    Samuel I. Newhouse, builder of America's biggest privately
held media empire, operated by a few simple rules. First, he
exerted no influence on the politics or ideology of his 31
newspapers and seven magazines. Second, he expected the papers'
coverage and management outlook to remain resolutely local, so
he never superimposed a high-powered team of overseers.
Instead, he relied on his own bulging briefcase and the loyalty
of his clan: several dozen relatives held jobs on the payroll.
Third, Newhouse ardently avoided publicity and, above all,
controversy. He kept so low a profile that he could walk
unrecognized through his own newsrooms. Maybe the only thing
he touted was his height: although biographer Richard Meeker
says he was 5 ft. 2 in., Newhouse claimed a full inch more.

    In the decade since S.I.'s death, the empire has grown to
a value of around $11 billion -- a family fortune that may be
second only to the Mars candy clan in the U.S. At the
newspapers and cable-TV holdings run by Newhouse's son and
co-heir Donald, the same unobtrusive style still prevails. And
while Hearsts, Knights, Ridders, Chandlers and other media
dynasts have mostly dropped out of day-to-day management of
their inheritances, about two dozen Newhouses work at properties
ranging from the Newark Star-Ledger (circ. 470,000) and the
Cleveland Plain Dealer (circ. 437,000) to Video Jukebox, a
pay-per-view cable-TV channel featuring music videos.

    But at the prestigious and influential, if less lucrative,
magazine and book divisions run by Donald's older brother S.I.
Jr., known as Si, the shadowy Newhouse style has been
supplanted by a blaze of glitz and color and, increasingly, by
tumult and frenzy. In recent years scarcely a month has gone
by without an uproar at one or another of what has grown to 20
U.S. and 41 non-U.S. magazines, including Vogue, Vanity Fair,
the New Yorker, Details, HG and Self, every one of which has
had one or more top editors ousted and design face-lifts
imposed. At the Random House book-publishing conglomerate, the
longtime chief executive, a key division head and five other
senior editors departed between November and March amid charges
that Newhouse wanted to censor the politics of books and
undervalued their social and cultural significance. He replied,
"I do not like charity cases. I believe my operations should
have the sense of security that comes from knowing their work
leads to a profit."

    Tales circulate of Si Newhouse playing supereditor,
objecting to the blaze of colors on a proposed magazine cover
or grumbling about a choice of stories. Meetings with him can
take on the character of interrogation, and they often occur
at disquietingly early hours: Newhouse generally starts his
office day at 4 a.m. Even the supporters among his employees
-- and they are far fewer off the record than on -- describe
him as exacting and occasionally fierce. One new editor was
sternly rebuked after having lunch at the Four Seasons, not for
going to that expensive Manhattan eating gallery but for
allowing himself to be seated in a less fashionable part of the
restaurant and thereby impugning the prestige of the whole
company. Newhouse is considered so temperamental and
publicity-shy that some editors stipulate they cannot be quoted
by name even to compliment him. The company's most successful
editor, Tina Brown, who transformed Vanity Fair from an
undirected, pretentious sprawl to the hottest, hippest monthly
of the moment, concedes that Si rates editors by their
circulation sales. Says Brown: "I'm very much aware of the
numbers. I don't take my job for granted. I watch the figures
very carefully." But Brown says Newhouse backs up editors who
meet his marketplace standards. When she sought to respond to
breaking news, she recalls, "He said, `I'm going to give you
a satellite.' That allows us to close 20 pages just four days
before they go to the printer. It put us way ahead of the
competition. That decision would have taken any other company
a year."

    What most sets people on edge about Si Newhouse is not his
demand for profit or his wielding of authority but the coarse
and sometimes brutal fashion in which he imposes his will. In
1987 he dumped William Shawn, editor of the New Yorker since
1952, barely a year after describing Shawn as one of the three
most influential men in his life. Having been widely lambasted
for letting Grace Mirabella learn of her 1988 ouster from Vogue
through a TV report by gossip columnist Liz Smith, Si
diligently informed Anthea Disney in person last year that she
was through at Self -- by making a clumsy unannounced visit
to her Connecticut home, where she was vacationing. Soon after
Robert Bernstein resigned in November after 23 years as
president of Random House, a seemingly orchestrated campaign
portrayed him as having shown insufficient regard for profit
margins during the previous five fast-growing years, in which
company revenues doubled. And after Andre Schiffrin left in
February as head of Random House's esteemed Pantheon division,
where profit had always been secondary to literary eclat,
company officials hastened to portray him as fiscally
incompetent. In April, as if to underscore the insult, Pantheon
named a new executive editor, Erroll McDonald, 36, who in an
op-ed column for the New York Times had scorned a pro-Schiffrin
protest rally organized by writers and editors.

    Opinions differ on whether Si's tense style of management
is necessary. While it is true that the divisions run by his
brother have prospered under a low-key leadership, newspapers
and cable franchises tend to be de facto monopolies, while
magazines and books must battle for attention in an
increasingly crowded market and thus must be aggressive to
survive. In any case, it is hard to quarrel with the results.
As the family fortune has soared, the magazine and book
divisions have contributed their share. Random House, bought for

expansion into the global market and is deemed by financial
analysts to be worth perhaps $1.5 billion today. The magazines
have generally prospered, even in a declining ad market,
despite the fact that several of them compete for the same
young and fashionable female readers. Newhouse plainly believes
there is room for more: next year the company will launch
Allure, a beauty magazine aimed, says editor Linda Wells, at
"women who don't have hours to spend lounging around in the
tub." Newhouse is equally willing to have competing titles for
men. After paying a reported $2 million for Details, a modish
magazine centered on Manhattan's avant-garde downtown club
life, he visited the magazine's offices in February to explain
that he was repositioning it as a fashion-oriented monthly for
younger males, possibly a good description of GQ, which Conde
Nast already publishes.

    In addition to business triumphs, the Newhouses won a
singular victory in March against the Internal Revenue Service,
which was suing for $609.5 million in taxes on S.I.'s estate.
Although S.I. had held the only voting stock, his heirs argued
that voting and nonvoting shares should be treated equally
because any stockholder dispute could result in protracted
litigation and block a potential sale. The U.S. Tax Court
agreed and thus effectively ensured that the family would not
have to sell off properties, as other media clans have had to
do, to pay the tax bill. Wrote Washington Post economic
columnist Robert Samuelson: "The scheme's beauty, of course,
is that the Newhouses can apparently have it both ways. For
estate tax purposes, the value of the company is artificially
lowered. But should the family ever want to sell, it can easily
realize the company's full market value by offering all the
firm's securities as a package."

    Will S.I.'s less tangible legacies survive equally intact?
Says Si's son Wynn, 35, a computer programmer in Boston who
quit the family business: "The force of my grandfather's
personality is imprinted on the entire family. It's a general
drive that has come down to succeed and to be a family. The
original unity still holds almost completely. But we're only
up to the third generation. We have seen many other families
that have fractured."

    In his own case, although he and his father are now close,
a rocky parent-teenager relationship worsened when Wynn,
working as a young photographer for the family-owned Staten
Island Advance, was fired by one of his uncles for refusing to
cut his long hair. Si did not intervene. Says Wynn: "I don't
think my father is that cold. He does have a well-developed
poker face. He doesn't always let on what he's thinking."

    Neither do other members of the family. TIME sought
interviews from six of the family members -- all male -- who
work for the company. All declined, including Si, his brother
and some descendants who are said to be heirs apparent. Says
Si's friend, magazine entrepreneur Peter Diamandis: "The only
certainty about what will happen to the company is that,
whoever runs it, the boss's family name will be the same."


____________________________________________________________ THE
HOUSE OF NEWHOUSE [Prices show the estimated value of the
divisions.]


    MAGAZINES ($2.4 billion):

     - Details      - The New Yorker      - Parade      -
Bride's     - GQ      - Glamour      - Gourmet      - HG
 - Mademoiselle      - Self      - Vanity Fair      - Vogue
   - Conde Nast Traveler      - Woman      - Street & Smith's
Sports Group     - 41 foreign publications

    BOOK IMPRINTS ($1.5 billion):

     - Random House      - Alfred A. Knopf      - Crown
Publishing     - Pantheon Books      - Schocken Books      -
Times Books     - Villard Books      - Vintage Books      -
Clarkson N. Potter     - Harmony Books      - Orion Books
  - Ballantine/Del Ray/Fawcett/Ivy Books      - Other
publishing: juvenile books, audio and video,
promotional books, direct mail and various foreign
operations

    NEWSPAPERS ($2.5 billion):

     - Springfield Union News/Sunday Republican      - Staten
Island Advocate     - Jersey City Journal      - Newark
Star-Ledger     - Trenton Times      - Syracuse
Herald-Journal/Herald-American/Post-Standard     - Flint
Journal     - Bay City Times      - Saginaw News      - Ann
Arbor News     - Jackson Citizen Patriot      - Muskegon
Chronicle     - Grand Rapids Press      - Kalamazoo Gazette
   - Cleveland Plain Dealer      - Harrisburg Patriot-News
  - Portland Oregonian      - St. Louis Post-Dispatch      -
Huntsville Times/News     - Birmingham News/Post-Herald
- Mobile Press-Register     - Pascagoula Mississippi Press
   - New Orleans Times-Picayune

    CABLE GROUPS ($2.5 billion):

     - NewChannels      - MetroVision      - Vision Cable