Theodore Newhouse Dies at 95
NEW YORK (AP) -- Theodore Newhouse, an expert in newspaper management and production who helped build one of the world's largest news organizations, died Saturday after a long illness. He was 95.
Newhouse was associate publisher of the Newhouse newspaper group and with his brothers, Samuel I. and Norman Newhouse, built and operated the family-owned enterprise.
Today, the Newhouse holdings include 26 newspapers in 22 cities; the Conde Nast magazine group; Parade, the Sunday newspaper supplement;
American City Business Journals, a group of business newspapers published in more than 30 major cities in America; and interests in cable television programming and cable systems serving 1 million homes.
The Newhouse brothers helped develop and institute such innovative newspaper management policies as local autonomy for publishers and editors of group-owned newspapers. Samuel I. Newhouse died in 1979, and Norman Newhouse died in 1988.
The company is now run by S.I. Newhouse's sons, Samuel I. Jr., the chairman, and Donald, the president, who is also chairman of the board of directors of The Associated Press.
Ted Newhouse was business manager for 45 years of the Long Island Press, his home base in the New York City borough of Queens, until the paper shut down in 1977.
He also was the family's representative on the boards of the National Advertising Bureau and the New York City Publishers' Association.
Survivors include his wife, Caroline, two granddaughters, Julie Lobel and Amy Bermant Adler; and six great-grandchildren.
Media magnates Si and Don Newhouse control a $7.5-billion empire. It's a tightly private show, but there's no hiding wealth this big.
IN THE MID-1970s, when Sam Newhouse, the sire of the media fortune, was still alive and hale, his family gathered in Connecticut to celebrate the 20th wedding anniversary of his younger brother, Ted. Sam's sons and heirs, Si and Don, were there, amid squads of other family members drawing their livings from Newhouse newspapers and magazines and television properties. The guests lunched at Ted's summer home, in a setting of green grass and success that was worlds removed from the New Jersey attics and tenements in which this family had once subsisted. As the lunch progressed, Ted rose to give the first toast. Heads turned expectantly toward his wife, Caroline. But time enough for that salute. In a gesture that summarized it all, Ted raised his glass and said simply, ''To Sam.''
Sam. What is there about this plain name, that it collects wealth? Before he died in 1979, at age 84, Samuel Irving Newhouse built a huge private business, now grown prodigiously more valuable. In its 1986 list of the richest Americans, Forbes magazine estimated that his two sons controlled ''at least $2.3 billion.'' A fortune richer, and heading the list, was another Sam: Walton, Samuel M. He and his four children own nearly 40% of Wal-Mart Stores, a stake worth $4.5 billion when the list was published last fall. The market has risen since, and Wal-Mart more so. In mid-June, the Waltons' holdings were priced at just over $7 billion; by mid-July the value had jumped to more than $8 billion.
The summer stock market surge has buttressed the Waltons' status as America's richest family. But the Newhouses are surprisingly close behind. Giving S.I. Jr. and Donald Newhouse credit for ''at least $2.3 billion'' is a gigantic understatement. By FORTUNE's calculations, the true value of their empire is at least $7.5 billion. That makes theirs the largest private American fortune -- one that is not based on the gyrating market valuation of a publicly owned company.
The Newhouse brothers' wealth is a staggering total for two men many Americans have never heard of. Each controls more than any du Pont or Rockefeller or Ford. Underlying the estimate of the Newhouses' wealth is a gemlike collection of properties: 26 daily newspapers, most of them monopolies; 11 big-name magazines in the U.S. and a rackful of others overseas; a leading book publisher, Random House; the ninth-largest cable TV operation in the country. Underlying the estimate also are today's facts of life about media properties: Everybody prizes their cash flow, everybody wants to own them. They have been trading hands at rich and ever-ascending prices. Assessments of monopoly newspapers have in particular changed. Once considered endangered by both the decline of the central city and competitive media, they are now widely viewed as near essentials for readers and local advertisers -- and as gold mines to own.
The Newhouses have participated only modestly in the recent race for properties. Their revenues and profits have surely grown, but not by amounts that would explain a world-class fortune. Essentially their wealth reflects their persistence in just holding on, as they grew ever more valuable, to the properties that Sam Newhouse accumulated.
The empire is worth $7.5 billion because the properties, at going rates, would logically bring that much in a sale. Since these people are private -- ''in every sense of the word,'' says Si Newhouse -- that appraisal does not rest on published revenue and profit figures. But circulation data are available, advertising lineage can be measured, cable subscribers can be counted (see box). Revenues, in short, can be estimated. What all the numbers point to is monumental wealth.
THE CONTEST of Newhouse vs. Walton has its nuances. The Newhouses have an estate tax problem hanging over their heads that could somewhat reduce their wealth. But the Newhouse fortune also has a substance that the Waltons' lacks. As the Waltons' $1-billion gain in just one month shows so dramatically, stock market valuations can be extremely volatile. The values of private companies, on the other hand, tend to be more stable.
What's more, the market value of Wal-Mart stock reflects not only the superb business in existence but also the expectation that Sam Walton, 69-year-old merchandising genius, will be profitably expanding this business for some time to come. If the Waltons were to move to sell their stock, the market would surely knock down the value of the company. That means the Waltons could not walk away from Wal-Mart with the fortune for which they are given credit.
The soul of the Newhouse fortune, on the other hand, is properties. A buyer of these would be lathering over their intrinsic values and would not likely mind in the least if a few managers named Newhouse were not included in the deal. Who's running the store isn't the key here; the store itself is. That fundamental would make the Newhouse empire salable for a full $7.5 billion and perhaps more. Si Newhouse, 59, and Donald, 57, will not be happy to see themselves certified as close to the wealthiest in the realm.
Physically, they are short and inconspicuous, and hug the background in their lives as well. When FORTUNE asked for cooperation on an article, Si, talking in his measured way, said no: ''My brother and I feel this goes against all our principles.'' Asked again later, and learning then that substantial reporting had been done, the brothers reconsidered. But Si described the timing as ''a bit off.'' The whole Newhouse establishment would cooperate in September, he said, if the article were postponed. FORTUNE declined.
In this empire, the decisions of Si and Don are absolute. When Sam Newhouse died, he passed his voting common stock in the principal family company, Advance Publications, in trust to his six grandchildren and made his two sons the sole trustees. Si and Don are also the outright owners of Newhouse Broadcasting, which harbors the cable TV business, and own preferred shares in Advance. The brothers reign as an autocracy of two, personally close by all accounts and seldom if ever at odds.
As chairman of Advance, Si oversees book publisher Random House and the Newhouse magazines. These include The New Yorker, Parade, and a Conde Nast list of nine U.S. magazines (among them Glamour, Vogue, Bride's, House & Garden, Gourmet) and nearly 30 overseas (including British, French, Italian, and German editions of Vogue). That's a powerhouse of publishing names, but Si's part of the empire accounts for only about $1.6 billion of the estimated value. Don, president of Advance, oversees the heavyweights: the newspapers and Newhouse Broadcasting. The newspapers, the third-largest group in the country after Gannett and Knight-Ridder, are estimated to be worth more than $4 billion. The cable systems, operating in 17 states, have a value of at least $1.7 billion.
Si and Don do not flash their wealth. In business they are regarded as able managers who work harder than their subordinates. Si's hours have become legend: ''This letter for Mr. Newhouse?'' asked the guard at Si's New York office late one afternoon. ''He won't get it until he comes in at four o'clock tomorrow morning.''
FROM their father, who believed as much in nepotism as in newspapers, Si and Don inherited a faith in family management and vigilance. Newhouses and their in-laws work everywhere in the business. Si's older son, S.I. III (called Sam), 35, is publisher of the Jersey Journal, in Jersey City, and Don's older son, Steven, 30, is editor. Don's younger son, Michael, 27, is assistant publisher of the Trenton, New Jersey, Times. Norman Newhouse, uncle of Si and Don, operates out of New Orleans, overseeing the city's Times-Picayune and a string of other papers. One of his sons, Jonathan, is executive vice president of The New Yorker ; another, Mark, is publisher of the Newark Star-Ledger. The family seems to sense a shortage of kin. A few years ago a Newhouse editor asked a family member why the Newhouses weren't trying to buy the Chicago Sun-Times, then for sale. The reply, only half-joking: ''No relatives available to run it.''
Acquisitions may have been pushed from the family's mind in the past few years by another preoccupation: a celebrated tax case involving Sam Newhouse's estate. This problem ballooned after the executors, Si and Don, filed a return in 1980 declaring the taxable estate to be $91 million, on which $49 million tax was owed. No way, said the IRS financial analyst assigned to this case. He determined the taxable estate to be $962 million and the tax $658 million, the biggest in history. Moreover, the IRS charged that the original return was so far off base as to constitute fraud. It imposed a 50% penalty -- $305 million -- to be added to the $610-million tax shortfall.
Rounds of hassling ensued. Late last year the IRS dropped the fraud charges and settled back to arguing about this mere bagatelle, $610 million (plus interest). The core of the argument concerns a) the value, at Sam's death, of the main Newhouse company, Advance Publications; and b) how much of the value was assignable to the two classes of common stock that he alone held, as opposed to the preferred stock held by his wife, his sons, and two brothers. If these issues are not resolved by a settlement, the case goes to trial. There, the IRS conceivably could argue that the taxable estate was even larger than the $962 million it originally claimed. Recent court filings, however, suggest that a settlement may be near. A wish to get one on the books before this article was published may well be the reason that Si Newhouse asked FORTUNE to wait.
SAM NEWHOUSE, the man whose skill at making money brought on this estate fight, was the oldest of eight children born to poor Jewish immigrants from Eastern Europe. At 13, Sammy hit the streets of hometown Bayonne, New Jersey, to support his ailing father and family. A local lawyer-businessman gave him a tryout at no wages and promptly discovered he had hired the prototypical Horatio Alger kid.
In 1911, at age 16, pint-size Sam (then edging up to his adult height of 5 feet 2 inches) was put in charge of a struggling Bayonne newspaper that the lawyer had taken over in satisfaction of a bad debt. Startlingly, Sam made the paper a success and himself an early-day yuppie, beginning at age 21 to earn some $30,000 a year (around $300,000 in today's dollars). In the process, he grew obsessed with the newspaper business and uninterested in using the law degree he had somehow found time to get. By 1924, then 29, he had control of his own paper, the Staten Island Advance, a Newhouse property to this day.
That same year Sam married Mitzi Epstein, a tiny, vivacious Manhattan girl, and their two sons grew up on Staten Island. They did not have a chum of a father who played baseball with them or took them fishing. Sam Newhouse made a half-apology for that in a privately published autobiography, A Memo for the Children, which a Newhouse editor wrote from Sam's reminiscences. ''I did not have the time,'' Sam said in the book, ''to do the things conventional fathers - conventionally did.'' His style instead was to introduce his boys to their future by taking them along, from about the time they turned 5, on visits to the Advance and the other newspapers he began buying as his profits piled up.
During their boyhood, into college, and even into marriage, Si and Don Newhouse led remarkably parallel lives. They went to prep school at Horace Mann, in a leafy section of the Bronx near the Hudson River. Si was assistant editor of the newspaper; Don was on the library committee, played soccer, boxed. A school yearbook mentions a teacher's habit of giving their surname a French twist: ''Nouvelle Maison.'' They were not standouts at the school and have not retained close ties to it.
BOTH WENT on to Syracuse University, neighbor of two Newhouse newspapers, the Syracuse Herald-Journal and the Post-Standard. Neither graduated. But Si met the woman he would marry. His wedding to Jane Franke of New York took place in 1951, and they had two boys and a girl. Don married Sue Marley of Syracuse in 1955, and they had two boys and a girl. But Don's marriage has lasted, while Si's ended in divorce in 1962. He was a swinging bachelor for several years and then was remarried, to Victoria Benedict de Ramel of New York. Operating from an office in Conde Nast's Manhattan headquarters, and sometimes bringing a little black dog to work with her, she runs a small foundation that publishes architectural histories.
By the early 1950s both Si and Don were serving apprenticeships at Newhouse papers and prepping for bigger jobs. Ray Josephs, a New York public relations man who worked many years for the family, remembers that Sam thought the boys should get better known. Josephs set up a series of visits for them to Washington, where they met various officials and members of Congress. They all made the trips by train because the Newhouse heirs were not allowed to fly together. At no time during these formative years do the sons seem to have been indoctrinated with the idea of large-scale philanthropy, as for example the Rockefeller brothers were. Before he died, their father set up the S.I. Newhouse Foundation and made a few significant gifts: enough to put his name on the communications school at Syracuse University and his wife's name on a theater at New York's Lincoln Center. But he had his mind on dynasties when he sat down to write his will, and he left nothing to charitable causes. Today the foundation is his sons' main vehicle for giving. On assets of around $60 million, it made widely dispersed gifts of $3.7 million last year. Don and Sue Newhouse are personally active in working for the New York Public Library and the National Dance Institute, which makes performers out of inner-city children.
DON AND SUE, an attractive, perky brunette, live in the same Park Avenue apartment building as his mother, Mitzi, 85. Two blocks away is Si and Victoria's home, a double-size townhouse that is now going through a renovation so extensive that they have temporarily moved out. When finished, the house is expected to supply a museum-like setting for Si's collection of modern art, his main interest outside the business and one that does flash his wealth. A recent purchase, for $3.6 million, was Jasper Johns's Out the Window. Si's wife shares his interest in art and their friends include many artists.
While similar in the broad strokes, the brothers have clear differences in character. Friends of Don's tend to describe him as uncomplicated and ''sweet.'' A top businessman who once had breakfast with him recalls Don as ''polite and deferential.'' The counterpoint to this picture of blandness is the opinion of a man who knows both brothers and thinks Don more decisive and outspoken than Si. A biography of Sam Newhouse, Newspaperman, by Richard H. Meeker (on which the Newhouses did not cooperate), depicts Don as plainly his father's favorite. Nothing suggests, however, that the father ever saw either son as close to his equal in ability.
The adjectives that friends apply to Si run toward ''complex'' and ''idiosyncratic.'' A lawyer who's faced him says he is ''odd.'' Si is the more introverted of the brothers, and that was true even when they were schoolboys at Horace Mann. He is remembered by people who knew him then as short on friends. But he had two of note -- intellectual opposites both headed for fame.
One was Allard Lowenstein, a charismatic liberal politician who served as a New York Congressman for one term, attracted a national following, and was murdered in 1980 by a crazed young man who had worked with him in the civil rights movement. The other was Roy Cohn, who gained notoriety as chief counsel at the McCarthy hearings, later practiced law in New York in controversial ways that eventually got him disbarred, and died last year of AIDS.
LOWENSTEIN was a compulsive saver of letters written to him, and after his death his family donated a large collection to his alma mater, the University of North Carolina. It includes several from Si Newhouse, written during the summers between Horace Mann terms and later when he was at Syracuse. These reveal a young man who wrote well, was excited about a summer job as a cub reporter for a Newhouse paper, yet also argued frequently with his father. He owns up in the letters to periods of deep unhappiness. But at Syracuse, he began to enjoy himself as he worked for the Daily Orange and turned into something of a renegade, going so far as to renounce the liberal beliefs that he and Lowenstein had shared.
One letter listed the changes in the ''old Si,'' saying: ''I have turned very rightist in spite of myself. I have withdrawn from the fraternity. I have gotten drunk. I have had the entire faculty and half the student body ready to lynch me because of an editorial I wrote in a moment of madness. (It did nothing more than advocate a show of strength against Russia, but everyone seemed to feel that I was talking about war.) I have matured in a great many ways.''
Over the years Newhouse's friendship with Lowenstein waned. Not so the one between Newhouse and Cohn. A man who knew them both says that right up to Cohn's death, he and Newhouse talked or saw each other almost daily. When reports later circulated that Cohn's bequests included a piece of sculpture for Newhouse, he was quoted in the New York Post as saying, ''I don't know the piece, but anything Roy had will be meaningful to me.''
There is no evidence that Si Newhouse ever warmed to the newspaper business. But in 1959 Sam bought Conde Nast. The company, he said, was an anniversary gift for his wife, who loved the fashion and decorating articles in which its magazines specialized. It also turned out to be a present for Si, who moved in to learn the business and found the world of slick magazines entirely to his taste.
PETER DIAMANDIS, president of CBS Magazines and a veteran of three stints at Conde Nast, describes Newhouse today as a sharp and incisive businessman. But the Si of the early 1960s, he says, was ''terminally shy.'' Another publishing executive who knew Si then says he was also ''scared to death of his father.'' Si got known around the shop for being negative on ideas. But as publisher of Vogue, a job he took in 1964, he began to make some excellent moves. It was his idea, for example, to make the magazine's September issue a showcase for the collections of New York designers. The issue has since grown into an annual blockbuster: at least 830 pages this year. . Sam Newhouse seems never to have cared deeply about Conde Nast; it is barely mentioned in his book. So the operation was Si's to run with. In time he gained a reputation as an executive who knew all the facts about the business, left his star managers alone, but hustled in new publishers and editors when the facts went sour.
People working for him have learned to abide meetings that sometimes begin at 6:30 A.M. or even earlier. Hours later, Si holds working lunches at the Four Seasons. Regulars at the restaurant say he typically arrives there carrying a cloth tote stuffed with papers. Around 3 P.M. Newhouse customarily goes home to exercise, read, and get ready for whatever the evening might hold. That's not likely to be a lot of socializing. Still shy, he has no talent or tolerance for small talk.
IN RECENT years, however, he has twice mustered the courage to speak before Magazine Publishers Association audiences, once when he was named 1985's Publisher of the Year. He was lauded then for his accomplishments since he succeeded his father as chairman of Advance Publications in 1979: the launching of Self and the rebirth of Vanity Fair, the acquisition of Gentleman's Quarterly and Gourmet, the ''upscaling'' of those two magazines and House & Garden, the acquisition of Random House -- and, yes, the acquisition of The New Yorker.
Responding, Newhouse paid tribute to three men who he said had significantly affected his life. The first was his father, whom he called ''a giant . . . of colossal intelligence, drive, and achievement.'' The second was Alexander Liberman, editorial director of Conde Nast and a noted artist, who had not only schooled Si professionally but had fired his interest in modern art. The last was famed New Yorker editor William Shawn, ''a recent acquaintance'' whom Newhouse described as ''precise, eloquent . . . and what The New Yorker is all about.'' One year later almost to the day, Newhouse nudged the 79-year-old Shawn out of his job and put in his own man, Random House editor Robert Gottlieb.
The accolades of the Magazine Publishers Association reflect the industry's general feeling that Si has brought significant prestige and luster to a Conde Nast name that was once not taken seriously. It has sometimes seemed as if he views his magazines as a kind of art collection, to be filled out and perfected. Free of pressures from public shareholders, and rich, he has also shown a willingness to invest for the long term.
Vanity Fair, relaunched in 1983 and now into its third editor, appears to have his steadfast backing. So does The New Yorker, a limping magazine with an unclear vision of what it needs to be. For that uncertainty, the Newhouses paid a mint: $168 million. Never mind, says a competitor who is a Si Newhouse admirer: ''So he paid a lot. He did it for his kids, for the prestige, for the franchise. His father tried to buy that magazine too. We all have wants and needs. Si wanted this magazine. So he bought it.''
In the predawn hours of a typical Manhattan day, another Newhouse on the streets is Donald, heading for his office 15 miles away at the Newark Star- Ledger. He used to go by the PATH subway, a practice that one former Newhouse editor ascribes to the family's deeply ingrained habit of pinching pennies. (Said Sam: ''I am never offhanded about money.'') Or Don may simply have thought the subway the most efficient means of getting to Newark. These days, in any case, he has upgraded to a rented limousine.
In Newark, he works in an unassuming office and usually eats lunch at his desk if he's there. But he is often on the road, visiting Newhouse newspapers or Newhouse Broadcasting, located in Syracuse. Though their properties are spotted all over the map, the Newhouses do not own a corporate plane. Don does the equivalent of taking the subway, flying commercial and using the time to read one Newhouse paper after another.
THAT WAY he can count on getting just about every political viewpoint: Sam Newhouse believed in local autonomy for his papers (partly, no doubt, because that helped him acquire properties), and they continue to be editorially on their own. The Newhouses themselves do not go around trumpeting their politics. But a friend says Don is ''very much a liberal Democrat,'' holding a strong admiration for New Jersey Senator Bill Bradley. Roy Cohn's 1985 description of Si: ''A conservative with a high tolerance for ultraliberals.''
Don's part of the empire has not had the looks of an art collection undergoing expansion. A few minor masterpieces have in fact been disposed of: five Newhouse television stations, which were sold to the Times Mirror Co. in a deal negotiated in 1978, when Sam Newhouse was still alive, and completed in 1980. The $82 million that Times Mirror paid was considered low when it was announced. Today, considering how TV station prices have soared, it seems downright bargain-basement.
THE NEWHOUSE newspaper group has in recent years expanded to include only one new property: the Trenton Times, which is not only small (circulation 65,000) but a non-monopoly paper. The splashy prices that have been paid lately by others for big monopoly newspapers, among them the Louisville Courier-Journal and the Baltimore Sun, may have deterred the Newhouses. In particular, they may have thought such prices folly to pay while they were trying to convince the IRS that its valuations in the estate-tax case were too high.
The most important change in the newspaper operations has been the emergence of the Cleveland Plain Dealer as a monopoly paper. Its old competitor, the Cleveland Press, folded in 1982 amid charges that the Newhouses had induced its closing by agreeing to pay its owners $22.5 million for assets that were essentially worthless. That proposition got some support from a federal judge in Cleveland who later heard a case brought against the two newspapers by ex- employees of the Press. The lawsuit charged a conspiracy with intent to create a monopoly. The judge thought the charge might be on target, but she did not believe the employees were the right plaintiffs and dismissed the case.
The Department of Justice conducted a lengthy antitrust investigation that one of its lawyers -- after being fired -- publicly claimed was halfhearted. Early in June, Si Newhouse, whose role in this affair was greater than Don's, appeared for a second time before a Cleveland grand jury. But in mid-June, just as the statute of limitations was set to expire, the grand jury disbanded without issuing indictments. Said a Department of Justice spokesman: ''Insufficient evidence.''
The joys of owning a monopoly newspaper are illustrated by some Plain Dealer statistics. Since 1982 its daily circulation has risen by nearly 50,000 to 455,000. Its rate for a page of local display advertising was $7,878 just before the Press closed, $10,504 a year later. After years of earning little or nothing, the Plain Dealer is quite probably now the second most profitable Newhouse paper. The top gun? Almost certainly the Newark Star-Ledger, whose circulation is 461,000 daily and an impressive 682,000 on Sunday. The Star-Ledger's Sunday edition is also physically huge, sometimes rivaling the New York Times. Many local citizens believe the editorial product has improved significantly since the Star-Ledger became a monopoly, following the demise in 1972 of the Newark News. But that is a vote of approval not uniformly extended to Newhouse papers, which are often pedestrian and sometimes worse. None have been accused of flagrant excellence and few have won impressive awards.
As in every dynasty, the reins will be picked up one day by the next generation. From time to time, veterans of the Newhouse organization speculate that an offspring of a secondary branch of the family -- say one of Norman's sons -- will rise to head the business. But nothing about Sam's will, or the history of this family, makes that seem logical. The choice instead will surely be one, or more, of the children of Si and Don.
SI'S DAUGHTER, Pamela, 31, and Don's daughter, Katherine, 24, do not work in the organization. Neither does Si's second son, Wynn, 32, though he used to. As an apprentice at the Staten Island Advance, in fact, he once suffered serious injury, catching his arm in a press. The arm was saved. Considered by family members a man who will do almost anything except what you want him to, Wynn lives today in Boston, where he works as a programmer for a computer software company.
The princeling hot spot of the moment is Jersey City, home of the Jersey Journal (circulation: 59,000, down from more than 100,000 in the 1960s) and workplace of the senior grandsons. S.I. III -- that is, Sam -- dropped out of Syracuse like his father and seems similarly complex. He has a taste for rented limousines. But in dress he leans to T-shirts,red suspenders, and hiking boots. He has been known in meetings to shout a bit about the need to hold down costs: ''We need the money.'' He is married, with two sons (one is S.I. IV), and his outside interests are broad. He builds model helicopters and flies them on the roof of a downtown Manhattan building that he owns and lives in. The roof also houses a large-scale model train. He has become a scuba dive-master, teaching others. He writes papers about these avocations. And all the while, he both works away as the Journal's publisher and fulfills various other Newhouse duties. HIS FIRST-COUSIN, Steve, the Journal 's editor, graduated from Yale and is described by a friend as ''down-to-earth,very hardworking, and close to a genius.'' The description would astound a Jersey City business leader who has talked to him about civic issues and does not find him impressive. By all accounts, Steve is quiet and introverted. Single, he has an apartment in Hoboken, New Jersey, and another in Manhattan, where he spends most nights. A true son of his father, he takes the subway to work early in the morning. When he goes to Newark airport, he sometimes hits the subway again and then a bus.
The dynastic drama in which these young men have prominent roles may not play out for a while. Their fathers are still relatively young and unlikely to step down soon. It may not even matter that much which members of the Newhouse family next rise to run the empire. When the business is itself the stronghold, the question of who heads it recedes somewhat in importance. Most other enterprises have a character that tends to thwart dynastic ambitions. In these, the founder can deed the enterprise to his heirs but cannot will them the companion essential: management ability. Retailing provides an apt illustration. As the world knows, you can derail a Montgomery Ward or a Sears or a Woolworth's. Maybe you can even over time derail a Wal-Mart. But it is almost impossible to wreck big monopoly newspapers. About all they will let you do is get richer and richer.
CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: THE NEWHOUSE FAMILY In this family tree, the names in color show Newhouses who have made their careers in Sam's empire -- though brother Theodore is ailing and inactive now. DESCRIPTION: See above.
Copyright 1987 Time Inc.
Carol J. Loomis REPORTER ASSOCIATE Rosalind Klein Berlin, DYNASTIES: THE BIGGEST PRIVATE FORTUNE Media magnates Si and Don Newhouse control a $7.5-billion empire. It's a tightly private show, but there's no hiding wealth this big.., Fortune, 08-17-1987, pp 60.
For 35 years, William Shawn has presided over his domain like a benevolent father. A shy man of gentle reason, he created a familial haven for some of the country's best writers to do their finest work in. Harold Ross founded The New Yorker in 1925, but it was Mr. Shawn, as he is invariably called, who turned the magazine into a forum for serious reportage and polished fiction while retaining its breezy urbanity. Both magazine and man became institutions of sorts: The New Yorker as an elite but powerful voice in the worlds of literature and journalism, Shawn as the primary force behind its tone and style. His control over editorial matters was absolute; nothing ever happened at the magazine without his benign approval. Something happened last week however. On Monday afternoon Samuel Newhouse, the head of a family-owned media empire that bought the magazine in 1985, visited Shawn in his sparely decorated office. Newhouse got right to the point: Robert Gottlieb, 55, president and editor in chief of the publishing house of Alfred Knopf, would succeed Shawn, 79, on March 1. Newhouse then handed Shawn a memo, dated the next day, that announced the editor's decision to retire. Shawn, taken aback, argued unsuccessfully that the next editor should come, as the magazine's staff had long expected, from within The New Yorker's ranks. The word, which spread quickly through the magazine's offices on Manhattan's West 43rd Street, ignited a revolt among staffers that is likely to reverberate for months. Never mind that Gottlieb is considered a brilliant editor, held in high esteem by authors as disparate as Joseph Heller and Doris Lessing, as well as by a number of New Yorker writers who are published by Knopf. The shabby manner in which Shawn was treated and the fact that an outsider was chosen over his objection infuriated staffers. ''There was an appearance of violence and crudity about what Newhouse did,'' complained a longtime New Yorker editor. On Tuesday more than a hundred staff members gathered in a lobby of The New Yorker's offices to protest the move. After several splenetic speeches against Newhouse, they decided to draft a letter to Gottlieb asking him to step aside in favor of an in-house candidate. The three-paragraph message was signed by 154 people, including Roger Angell, Ann Beattie, Calvin Trillin and even the hermitic J.D. Salinger, who has not published a short story in The New Yorker since 1965. ''It is our strange and powerfully held conviction,'' read the letter, ''that only an editor who has been a long-standing member of the staff will have a reasonable chance of assuring our continuity, cohesion, and independence.'' The argument did not sway Gottlieb, who lunched next day with Shawn at the Algonquin Hotel, the fabled watering hole of such bygone New Yorker wits as Robert Benchley and Dorothy Parker. The two men had never met. As they settled at Shawn's regular table, Gottlieb gave Shawn his reply to the petition, a three-sentence note that expressed sympathy but declared his intention ''to take up this new job.'' As Gottlieb toyed with his omelet and Shawn ate an English muffin, the two decided that Gottlieb should take over in mid- February, after a week spent working with Shawn. The staff member Shawn had picked to succeed him was Charles (''Chip'') McGrath, 39, managing editor of fiction. According to New Yorker staffers, McGrath had planned to move into the office next to Shawn's this month, with the idea of taking over sometime during the summer. Shawn, say sources close to him, had informed Newhouse of his choice and, as far as Shawn understood it, secured his approval. According to Newhouse, Shawn ''told me that he thought Chip was coming along very well, and I said I didn't see any reason why we should not go along with McGrath.'' But Newhouse insists, perhaps disingenuously, that he did not take Shawn's words as a recommendation to appoint McGrath. As for the timing of his own departure, Shawn acknowledges that in a talk with Newhouse he mentioned March 1, among other dates, but says he did not mean to suggest that he wished to leave then. ''Mr. Newhouse seems to have misunderstood me,'' Shawn says. Though Gottlieb's successor at Knopf, which is also owned by the Newhouse family, has not been announced, the job has been offered to Sonny Mehta, the editorial director of Pan Books, the British publisher. Newhouse may have felt that Gottlieb could bring an editorial zest to The New Yorker that might make it more appealing to advertisers and younger readers. After buying the magazine for $168 million, Newhouse installed an aggressive new publisher, Steven Florio, 37. Thanks partly to a TV ad campaign, the newly managed publication has increased its circulation from 480,000 to 575,000. But ad pages have dropped from 2,990 in 1985 to 2,644 last year, despite departures from custom, like foldout ads and the creation of special advertising sections. Gottlieb says he is acutely aware of the magazine's traditions: ''I accepted the position because The New Yorker is The New Yorker.'' If Gottlieb agrees with some critics who feel that the magazine has grown stolid, he does not say so. ''The people at The New Yorker have worked for one man for 35 years, and suddenly there is a barbarian at the gates,'' he says. ''But I am not a monster.'' For New Yorker staffers, the problem is that he is not another Shawn either. The sadness that filled the corridors on West 43rd Street last week would have been inevitable whenever Mr. Shawn left, no matter what the circumstances, but surely the rancor could have been avoided if he had been allowed to depart with greater dignity.
Copyright 1987 Time Inc.
James Kelly. Reported by Mary Cronin and David E. Thigpen/New York, PRESS: The Talk of the Town Amid tremors of staff protest, The New Yorker gets a new editor., TIME, 01-26-1987, pp 69.
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