The murder of New York Newday: how Wall Street's obsession with the bottom line killed one good newspaper - and threatens others.

• Author: Schanberg, Sydney H.

The Baltimore air was muggy on the night of July 20, 1995 as Mark Hinckley Willes returned to his hotel suite overlooking the harbor. The newly chosen chief executive of the Times Mirror Co., one of the country's leading newspaper companies, had just come from meetings where he had directed the executives of The Baltimore Sun to make drastic cuts in their work force. Six days earlier in Manhattan, he had issued an edict even more draconian: the killing of New York Newsday. The 10-year-old New York City daily had been a bold experiment in urban newspapering. It had cost roughly $100 million to build it into a journalistic success. As the ax fell, the paper was about to turn a profit.

I had come to the Harbor Court Hotel on that sticky night in Baltimore to ask Willes, after a mere two months in the newspaper business, how he came to his decision. I had been part of New York Newsday almost from its start and in newspapers for 36 years. I wanted Willes to justify his act.

The 54-year-old chief executive nudged his shoes onto the hotel carpet and eased his lean jogger's frame into an easy chair for the interview. "Would it surprise you to know," he began, "that I have a romantic feeling about newspapers?"

"Yes, it would," I replied. My next thought was that if his "romance" with newspapers was a sample of what was to come, this conversation was going to be a landmark moment in surrealism.

There had been nothing surreal about the announcement of New York Newsday's death just six days before. It was very real and very grim. The well-suited men in the Manhattan boardroom embodied all the plot lines in this tale of corporate homicide. The handful who had created the paper a decade ago - men who loved the gritty, messy world of journalism - had seen their influence slowly ebb away. The moment was a stark affirmation that power had passed to those who saw the world through ledgers and dividend checks, for whom pleasing the quick-return boys on Wall Street was paramount. Willes spoke for them.

The picture window behind him twinkling with Baltimore's soft night lights, Mark Willes, born and raised in Salt Lake City, pleasant of mien, well-educated, and articulate, wanted to talk about his life and his business philosophy. He had taught at the university level, served the public at the Federal Reserve Board, and then turned to "the mission of business," spending 15 years with General Mills.

He spoke in lofty terms of bringing quality to his company's newspapers. "I believe deeply and passionately in what newspapers are and what they do," he insisted. His intention was to achieve an "exquisite balance," he said, between the push for profits and the need for journalistic quality. Newspapers are a business, he said, but "a very, very special business."

New York Newsday wasn't killed because Willes worried it would run forever at a loss. It was killed because a paper of its quality was not going to earn the massive profits that would make him a hero on Wall Street. Willes hardly sought to disguise this truth. At a Times Mirror "leadership" gathering in Pasadena last September, Willes said that the closing of New York Newsday "had nothing to do with the quality of the people who were there. It had nothing to do with the quality of the effort. The journalistic product was absolutely superb. It had to do with the fact that in that market we were never going to make any money of significance."

Earning a decent and consistent rate of return wasn't enough; it had to be "money of significance" - a phrase crafted to satisfy the Wall Street traders. Indeed, Wall Street fairly burst its buttons when Willes shut down New York Newsday. ("Wall Street danced on New York Newsday's grave yesterday," wrote the New York Daily, News.) The "buy" recommendations on Times Mirror stock went out instantly, and the share price leapt upward. The winners were the majority stockholders - namely, the Chandler family of Los Angeles - who control the board of directors and who had hired Willes to increase their fortune. He did so handsomely. At this writing, the share price, which had dipped below 20 before Willes' arrival, is up around 33 - having added about a billion dollars to the Chandlers' worth.

There's nothing sinful about making money. Neither "profit" nor "capitalism" are dirty words. Businesses must earn to survive, and without entrepreneurs there would be no job growth.

The problem is, this healthy process has taken an unwholesome turn. Increasingly, the story of the modern economy is one of the corporations that make huge profits their sole raison d'etre, devaluing their ties to their employees and to the communities.

In our conversation, Willes argued that the only way a large corporation can succeed is to insist that each of its divisions produces the same level of profit - one that is equal to or beyond the industry average. But wherein lies his "exquisite balance" between quality and profits if every newspaper in the company has to earn the identical rate of return, regardless of varying market conditions in different cities and regions? In fact, his exquisite balance was nothing more than a straight line, no deviations allowed.

Surely he must have been aware that no newspaper in New York City, not even The New York Times, earns anything close to the level of operating profit (i.e. the industry average for big newspaper companies) that he is demanding. At the moment, the average is 16 to 17 percent. The Times makes less than 8 percent but is financially sound nonetheless.

And yet suddenly, pressures for greater profits are surfacing even at the Times. Discontent is being openly expressed by bottom-line, outside businessmen recently named to the board of directors, and also by some of the Ochs/Sulzbergers themselves - the family that has owned and run the Times for 100 years. The dissenters are targeting the paper's traditionally high spending on its news product and urging entry into the entertainment business. It's almost as if the moves by Times Mirror, also a prestigious newspaper company, have conferred respectability on the cutting and slashing - increasing profits at the expense of editorial quality - that such big chains as Gannett and Knight-Ridder have long been famous for. It's open season on newsroom spending. How far from there to sunset for good newspapers in America?

The Times Mirror papers - in Baltimore, Long Island, Hartford, and Los Angeles - have already seen a decline in quality. In the short run, they may show higher profit margins. But I would wager that neither their circulation nor their advertising income will increase significantly. With so many options for entertainment and information, readers may react to the decline in quality by spending their time and money elsewhere. Willes's shortsighted economic doctrine - a doctrine that seems on its way to becoming the American CEO manifesto - is not just harsh to workers and communities. It is also bad business.

Writing Their Own Obituaries

In jobs lost and lives interrupted, New York Newsday's death is no more or less important than the shuttering of an auto factory or massive layoffs at a telephone company. Still, newspapers have played a special role in American life. From the beginning, whether in frontier towns or teeming cities, newspapers have been an essential vehicle for passing on the customs and lore and standards of the nation. Today, as newspapers are killed, dumbed down, and homogenized, fewer and fewer expose the abuses of the powerful or illuminate the lives of the powerless, a handful of exceptional papers notwithstanding. New York Newsday was one of those exceptions.

Over the past decade, nearly 150 papers have shut their doors. Last year alone, besides New York Newsday, obits ran for The Baltimore Evening Sun, The Houston Post, and the News Tribune of New Jersey. One of the two Detroit papers could be next. Most of our large cities have been reduced to but one newspaper - which means only one voice, one opinion, one view of the world. Meanwhile...