Corporate annual meetings are generally drowsy affairs—a pep talk by management, some PowerPoint graphics, a little predetermined voting, all topped off by a parade of cranks to the microphones to excoriate management about their pet causes. April’s annual gathering of shareholders in The New York Times Company certainly featured all of those ingredients, down to the codger who shuffled in late, grabbed the seat next to mine, and promptly dozed off.

But beneath the surface routine there was an undercurrent of tension. Shareholders in the Times Company have been taking it on the chin recently, to say the least. In the five years between 2003 and the end of 2007, the Times’s stock lost about two-thirds of its value before rebounding slightly this year. As with most newspapers, daily circulation has been steadily eroding for years, dropping about 4 percent in the six months before the meeting. Sunday circulation has done even worse, declining almost 10 percent in those same six months.

The company’s “challenging” (to use CEO Janet Robinson’s word) first quarter of 2008 pointed to an even bumpier road ahead as the economy softens. Some bright spots poke through the gloom, but company-wide revenue was down about 9 percent year-over-year, with newspaper classifieds free-falling almost 23 percent compared to the first quarter of 2007. Despite the steep decline in the Times’s stock, an April report by media analyst Paul Ginocchio at Deutsche Bank concluded it was still overpriced: “We believe NYT’s valuation has been inflated well above fundamental levels, and continue to see a near-term selling opportunity,” his report said.

As a result of these difficulties the company has taken some aggressive steps, notably cutting the newsroom head count at the flagship paper, a move that Arthur Sulzberger Jr., publisher and chairman, had long sought to avoid. Management has also pledged to make $230 million in spending cuts across the company by the end of 2009, partly by moving more business operations offshore. Despite these measures, in late April, Standard & Poor’s lowered the company’s debt rating to BBB-, one notch above junk-bond status. A week after that downgrade, Bill Keller, executive editor of The New York Times, circulated a memo noting that, because the company had failed to get enough voluntary buyouts, it would have to resort to layoffs. “We hope that the worst is now behind us,” Keller wrote to his staff. When I asked Sulzberger whether Keller’s hope was justified, he said, “The memo speaks for itself. We have no reason to anticipate more cuts, but we cannot predict what the future holds.”

The company’s financial problems are hardly unique in the print world; no one has yet solved the challenge to newspapers posed by the digital revolution. Still, the pall hanging over the annual meeting seemed especially striking given the setting, the sleek new TimesCenter, a 378-seat auditorium appended to the company’s new fifty-two-story Renzo Piano-designed headquarters, a building that cost the company about $600 million. The Times Building is just one of several big outlays the company undertook in recent years, even as its financial fortunes worsened. From 2003 through 2006, the company spent hundreds of millions buying back its own stock only to see its value steeply depreciate. Last year, it chose to substantially raise its cash dividend to shareholders, a principal source of income for members of the Ochs-Sulzberger family that controls the company.

Despite pressure from large shareholders, Times management has also been reluctant to shed some of its under-performing assets, such as The Boston Globe, which the company acquired in 1993 for $1.1 billion, a price that many critics called absurdly high even at the time. That judgment was vindicated last year when the company had to absorb a painful $814 million write-down on the Globe deal and a later acquisition of the Worcester Telegram & Gazette.

The assorted financial difficulties and declining stock price have increased shareholder agitation about Times management, particularly about Sulzberger, still referred to as “young” Arthur by some though he is fifty-six and has been chairman of the company for more than a decade. Sulzberger’s youthful qualities—notably his zeal—have been something of a double-edged sword. Though admired for his passion in defending the cause of journalism, that same fervor has at times been seen as pushing him to damage the very institution he sought to defend. In some precincts, it has fueled his reputation as a mercurial man not quite up to leading the country’s most esteemed news organization. Sulzberger has demonstrated an admirable capacity to stick by reporters and editors in tough times, but has also shown he can quickly change course and turn his back on them.

As an early adapter to new technology, Sulzberger is given credit for understanding before most the implications of the Internet for journalism and for correctly charting the fundamental course the Times must take, which is no small matter. He gets less credit for execution, and is seen by some as slow to reposition the Times to respond to the kinds of changes that he himself predicted. He’s also shown a tendency to loudly tout new ventures, such as the online subscription service TimesSelect and the Discovery Times cable television channel, only to drop them quietly when they failed to meet the outsized expectations that he helped to create.

This perception of zigzagging has helped fuel an argument by some large shareholders that Sulzberger should be forced out as the titular leader of the Times Company and replaced by a more “professional” executive. That was certainly the view of a large block of dissident shareholders who, in 2006 and again in 2007, withheld support for management’s nominees to the Times board to protest what they viewed as mulish resistance by Sulzberger to taking steps necessary to boost profitability. Led by Hassan Elmasry, a fund manager for Morgan Stanley, the dissidents waged a spirited campaign to do away with the dual-class stock structure that has helped preserve family control of the Times Company since 1957. As owners of A shares, outside investors (like Elmasry) have the right to vote on 30 percent of the directors on the board, but the real power at the company is wielded through a small number of B shares, almost all of which are held by a trust controlled by members of the Ochs-Sulzberger clan. After two years of beating his head against a brick wall, Elmasry gave up, liquidating his holdings in the Times Company in late 2007.

But just as Elmasry exited, a new group of heavy hitters appeared: Philip Falcone of Harbinger Capital Partners and Scott Galloway of Firebrand Partners, two hedge-fund managers who specialize in targeting troubled companies (a type of investment vehicle sometimes called a “vulture fund” due to its affinity for circling over wounded prey). With the Times’s stock trading near historic lows, Falcone and Galloway began building a large stake in the company in December of last year. In late January, when their holdings approached 5 percent—the threshold for making a mandatory disclosure to the Securities and Exchange Commission—Galloway wrote a letter to Sulzberger and Janet Robinson outlining the group’s intention to seek four spots on the Times Company’s thirteen-person board. In his letter, Galloway, Firebrand’s founder and chief investment officer, argued that “the current Board, while impressive in stature, has not been effective in inspiring the requisite bold action this media environment demands.” Galloway indicated his intention was to serve as an “honest broker” between the company and shareholders and to explore “a path for transforming The New York Times from a low growth company to a robust one that is both the newspaper of record and the most trusted starting point on the Internet.”

Sulzberger’s reaction to the overture was notably cool, but Galloway and his partners continued accumulating stock until they owned more than 28 million shares, just under 20 percent of the Times. When the newcomers threatened a proxy fight to get their nominees on the board, Sulzberger relented, negotiating a compromise that added two extra seats to the board to accommodate Galloway and a fellow nominee, James Kohlberg. It was the first time in the 112 years the Ochs-Sulzberger family has controlled the Times that outside directors not put forward by the family have elbowed their way on to the board. Perhaps the key factor was that Galloway, unlike Elmasry, promised not to challenge family control. In an e-mail, Galloway declined to elaborate on his plans for the Times Company (“I’m ducking the press right now,” he wrote), but longtime media analyst John Morton doubts Galloway’s influence will be much more substantial on the board than off it. “The board meetings may be a little more of a pain in the ass than they used to be,” says Morton. “But it’s not necessarily bad to listen to outsiders who don’t share their culture and background.”

Still, the company’s ongoing tussles with large shareholders combined with its sinking stock have fueled persistent speculation in the press (including some from Howell Raines, the former Times executive editor) that the Times Company might be on the market. Potential buyers bandied about have ranged from Google to New York mayor/billionaire Michael Bloomberg to a coalition of elite universities. Such speculation reached sufficient pitch that it caused Sulzberger to reiterate that the company his family controls is not for sale. “There have been a number of recent newspaper and magazine articles that have suggested otherwise,” Sulzberger told shareholders in April. “They are ill-informed.”

In fact, despite the company’s recent struggles, Sulzberger remains aggressively upbeat. While he calls the current period “the most disruptive transition in the history of mass communications,” he maintains that in some ways the Times brand has never been stronger. And while he concedes that overall print circulation is falling, he notes that circulation revenue has actually ticked up recently due to price increases, which “speaks to the willingness of people to pay for this medium.” Sulzberger also points out that the number of two-year subscribers to the paper is at an all-time high, a measure of the “brand loyalty” of readers and “the remarkable strength of our print base.” As for newsroom layoffs, Sulzberger notes they came from the largest newsroom in the paper’s history, 1,300 strong, and he characterized them more as an ongoing reallocation of personnel away from print and toward the Internet, where the company continues to expand.

Indeed, Times Company revenue from digital operations was up 22 percent last year and continues to grow rapidly. Much of that increase comes from About.com, the online research service the company acquired in 2005 for $410 million. Though the deal was panned by critics, Martin Nisenholtz, who heads digital operations for the Times Company, says that About is easily worth two or three times what the company paid for it. “People didn’t understand it,” says Nisenholtz. “Search wasn’t at the forefront, Google wasn’t public yet, and people thought it was Web 1.0 technology. We’ve proven them wrong to date.” Last year, About’s revenue topped $100 million for the first time. In total, digital operations brought in $330 million last year, about 10 percent of the Times Company’s total revenue, up from 8 percent in 2006.

Still, overall revenue dropped, leading to a basic question: When will gains online realistically make up for losses on the print side? “We don’t know when digital revenues will offset the decline in print,” Sulzberger wrote in an e-mail, adding that “this is a question we often ask ourselves.”

Others do, too. Investors seem to have a split opinion on how the company is coping with rapid changes in the industry. “It’s actually doing a better job than most,” says Edward Atorino, a media analyst with The Benchmark Company. “It’s going after luxury goods with T magazine; its Internet revenues are growing; its circulation remains fairly strong.” Some analysts and large investors don’t see things in such a rosy light, and though they prefer to do their sniping off the record to avoid publicly antagonizing Sulzberger, it’s safe to say they have serious qualms about his management competence. Rank-and-file shareholders , meanwhile, were not shy at the Times Company annual meeting, where they pressed Sulzberger on alleged blunders. For example, one shareholder raised the issue of the deal the company made on its former Times Square headquarters. In 2004, the Times sold its longtime home at 229 West 43rd Street to Tishman Speyer, a real-estate firm, for $175 million. Tishman then flipped the fifteen-story building less than three years later, selling it for $525 million before the Times had even finished moving out. That $300-million-plus gain for Tishman exceeded what the Times cleared by selling nine television stations the same year. When queried about the property sale at the annual the meeting, Michael Golden, the company’s vice chairman and Arthur Sulzberger’s cousin, admitted that the company had “missed” on the building sale, but contended that no one could have predicted the heat of the New York real-estate market, an assertion that might come as a surprise to anyone who had shopped for real estate in Manhattan in the last decade or so.

When another shareholder rose to complain about the lack of accountability of management to shareholders for such decisions and whether family control of The New York Times Company was good for shareholders, Sulzberger readily conceded: “That’s a core question.”

Indeed, it is a core question—and has been for most of the 112 years following Adolph Ochs’s acquisition of the Times in 1896 as a long-shot bidder from Chattanooga. Since Ochs’s death in 1935, the paper has been controlled by a handful of family members whose principal objective has never been to maximize financial returns. Perhaps as a result, and contrary to common perception, the paper has a long history of financial struggles that it has pulled through.

As detailed in The Trust, an authoritative history of the company written by Susan Tifft and Alex Jones, one of the reasons Adolph Ochs was able to acquire the Times in the first place was that it was headed for bankruptcy. And though Ochs greatly expanded circulation and advertising, it was still a touch-and-go proposition for much of his tenure. The paper was loaded with debt, and for years stock certificates representing a controlling interest in the paper sat in the safe of a creditor, pledged as security for loans (a fact Ochs concealed even from family members). During the Great Depression the paper’s net income fell more than 75 percent, from $5.6 million in 1929 to $894,000 in 1936. Even in prosperous times, the paper’s profit margins hovered below 5 percent. Money was seen as so potentially corrupting to the paper’s mission that for a time the family trust invested exclusively in Treasury bills to avoid any extraneous business entanglements.

The Times’s attitude toward profitability didn’t really become a critical issue until the late 1960s, when rising labor costs and declining circulation forced the paper to alter course. The company began an effort to diversify its holdings, buying a firm that sold teaching aids; a small publishing outfit; and later Cowles, a magazine publisher. But the biggest change—in fact, perhaps the most significant cultural shift in the company’s history—came in 1969 when the decision was made to go public. The matter was presented as one of basic survival. “At the time the company had no financial stability,” says James Goodale, who was general counsel for the Times Company. “The unions were a constant threat and if they struck, you really weren’t sure you’d come out alive.” There was a hitch, though. In order for the stock to be listed on an exchange, the A shares would have be given some voting rights (from the start,Wall Street was uneasy with the dual-stock structure of the paper). The problem was resolved by giving A shareholders the right to elect three directors (now four).

The Times Company’s lack of emphasis on profitability caused the stock to drop swiftly, from an initial price of $42 a share to $16, within the first few years it was publicly traded. The paper was producing some of its best journalism during this time, including its courageous stand in the Pentagon Papers case, for which it won a Pulitzer Prize. But Wall Street was unimpressed. Things didn’t get much better as New York slid into a financial crisis and the nation fell into a recession in the mid-1970s, cutting Help Wanted ad revenue in half.

Two things helped turn the tide in the late 1970s. First, the paper gained greater control of its labor costs, getting its unions to agree to begin automation of printing and production methods in exchange for job security. Second, the paper overhauled its layout, ditching its traditional two-section format in favor of a four-section paper, adding a weekend section, and expanding its business section. The makeover gave the paper much of its modern footprint, with additions like Science Times as well as sections devoted to lifestyle and home decorating. The combination of tighter cost controls and the addition of ad-friendly content dramatically enhanced the paper’s financial fortunes. For the next quarter-century, with some setbacks, the paper enjoyed strong profits and a healthy stock price. In 1993, the Times Company used some of its enhanced financial clout to make its deal for The Boston Globe. By that time, critics were already questioning whether newspapers were a forward-looking investment, and whether media companies should instead look at more aggressive diversification to offset erosion in circulation, ad pressures presented by the expansion of cable television, and the rise of a newfangled thing called the Internet.

The early 1990s also marked the emergence of Arthur Ochs Sulzberger Jr. at the company. After stints with The Associated Press in London and on the staff of The Raleigh Times in North Carolina, the younger Sulzberger joined The New York Times in the fall of 1978 as a twenty-seven-year-old reporter in the Washington bureau. Sulzberger became the first member of the family to methodically work his way up the ladder, both on the editorial and business sides. Though there was some question whether he would be the one to emerge among the thirteen members of the so-called “cousins” generation (the offspring of the four grandchildren of Adolph Ochs), in retrospect his coronation seems predestined. “Here is to Arthur—long may he reign!” read the opening line of a poem penned in his honor by his grandfather on the day he was born, and for much of his life, Arthur was seen as the crown prince in the family.

That was not always a good thing. His quirky style (as a young man he favored a hat and cane or sometimes hippy headbands) and rambunctious demeanor (he was the family prankster) led many to dismiss him as a lightweight, in much the same way that many had done with his father, Arthur “Punch” Sulzberger, a generation earlier. When Punch sought to promote his son to publisher in 1992, some members of the board initially balked, seeing the younger Sulzberger as immature. They argued that, as a publicly traded company, the Times should move toward more professional management. But they underestimated both the family’s intent to maintain control and Arthur Jr.’s determination. More so than any of his family before him, Arthur Jr. had a clear ambition to run the Times. “I have the Times; that’s my religion; that’s what I believe in,” he is quoted as saying once. When I asked him about the quote, he couldn’t recall it exactly, but said it nevertheless captured his feelings about the paper. “This is a calling for members of my family,” he said.

In 1997, the year Arthur Jr. became chairman, the family enacted a new agreement that placed all the controlling B shares into a single family trust, doing away with the four separate trusts for each branch of the family. Today, the trust holds about 88 percent of the B shares, and the agreement states that the “primary purpose” of the trust (and thus the company) was to “maintain the editorial independence of The New York Times and perpetuate it as an independent newspaper.” The best way to do that, the trust document states, is to maintain “control of The New York Times in the hands of a relatively small number of the descendants of Adolph S. Ochs acting as trustees of a single trust for the benefit of all such descendants.” The original document designated five trustees to control the trust, which was later expanded to eight. To alter the terms of the trust, six of the eight trustees must agree. The trustees are currently divided into two classes: two (Sulzberger and Michael Golden) are permanent trustees so long as they remain in their current positions as chairman and vice chairman; the other six are elected to set terms. Four of the trustees—Sulzberger, Golden, Lynn Dolnick, and Daniel Cohen—also serve on the company’s board of directors. The unusual decision to place all of the controlling B shares into a single trust—in essence to treat the increasingly far-flung family as one entity—is the rock upon which the Ochs-Sulzberger dynasty rests, and the chief difference between the clan and other newspaper families that have succumbed either to internal squabbling (such as the Binghams of the Louisville Courier-Journal) or to outside pressure (like the Bancrofts of Dow Jones).

To date, there are twenty-seven members in the so-called Fifth Generation of the Ochs-Sulzberger family, at least three of whom are already active in the company: James Dryfoos works as a systems analyst; Michael Greenspon works in strategic planning; Rachel Golden works on digital media. (Sulzberger’s son, Arthur Gregg Sulzberger, is also in journalism, reporting for The Oregonian.) In addition, Carolyn Greenspon serves as the only trustee from the Fifth Generation. The family works to cement its bond to the Times, including holding one-day orientation sessions with family members at age eighteen or twenty-one or when they marry into the family; convening an annual family business meeting with executives from the paper and additional meetings on media-industry developments; and holding annual family reunions, where reportedly they sing songs like Sister Sledge’s “We Are Family.” Though the trust is designed to guard against infighting by giving the family the right to buy out dissenters, and though Arthur Sulzberger has publicly assured that “the center will hold” in the next generation, there is no absolute defense against a disgruntled family, particularly if the engine that drives its wealth begins to sputter. At one time or another, the Chandlers, the Bancrofts, the Ridders, and the Binghams all seemed like dedicated newspaper families committed to defending their heritage. All happy newspaper families are alike; each unhappy newspaper family grows unhappy in its own way. In an e-mail, Sulzberger stated that passing the unique culture of the Times Company on to the next generation is his “final and greatest business challenge.”

Whether he will be able to meet that challenge may depend on Sulzberger’s leadership during the next few years. To date in his tenure as publisher and chairman, he has at times displayed the immaturity that made some think him unsuitable to run the company and at other junctures been prescient in his vision of both the paper and the industry.

In assessing his job performance, it is useful to separate Sulzberger’s two roles at the Times Company. As publisher of the Times, the two most prominent blowups during Sulzberger’s tenure involved Jayson Blair, the young reporter found to have fabricated stories in 2003, and Judy Miller, a veteran reporter who was judged to be too cozy with government sources in the run-up to the Iraq war, and who later ran afoul of special prosecutor Patrick Fitzgerald in the Valerie Plame leak investigation. The details of both cases have been well hashed out (including in these pages), but as they pertain to Sulzberger’s leadership style, both are instructive. The defining moment for Sulzberger in the Blair case came when he convened a townhall-style meeting for the staff and walked onto the stage with a stuffed toy moose, a symbol, he thought, that one should not ignore uncomfortable facts. But the impression it left was that he was tone deaf to the gravity of the situation and out of touch with the newsroom, particularly with the deep staff dissatisfaction with Sulzberger’s handpicked executive editor, Howell Raines. Though Sulzberger initially supported Raines, as the scandal dragged on, he did a swift about-face, dumping Raines as well as managing editor Gerald Boyd.

In the case of Judy Miller and Plamegate, several outside sources involved in the case, including Norman Pearlstine, now at Bloomberg News, then head of Time Inc. (whose reporter Matt Cooper had also been cited for contempt in the case), and Robert Bennett, Miller’s criminal-defense lawyer, have criticized Sulzberger for treating the case as a free-press crusade. Indeed, when I interviewed Sulzberger about Miller in late 2004, he compared her situation to the fight over the Pentagon Papers case that his father had led more than thirty years earlier. Sulzberger’s zeal was in sharp contrast to the view of many First Amendment lawyers and reporters I talked to at the time, who saw the case as a stone-cold loser, likely to set a bad precedent on the reporter’s privilege. It was even in contrast to the attitude of Sulzberger’s own executive editor, Bill Keller, who projected a somewhat rueful outlook about the whole episode. (Keller later admitted he lost faith in Miller’s cause as the case proceeded.) In reviewing a history of the Pentagon Papers for this story, I was struck by a fact I’d never seen. When the Justice Department named twenty-two Times employees in a federal complaint, the paper had buttons printed up that read FREE THE TIMES XXII. In the Plame case, Sulzberger similarly proposed printing up ten thousand buttons reading FREE MATT. FREE JUDY. FREE PRESS. and distributing them to Times staff members. Even so, despite his ardent defense of Miller, after she struck a deal to testify before a grand jury and after criticism mounted of her reporting on Saddam Hussein’s nonexistent arsenal of wmd before the Iraq war, Sulzberger was not averse to showing her the door. Miller went from touting Sulzberger as her savior to saying she’d been betrayed. In a 2005 interview on PBS with Charlie Rose, Sulzberger distinguished between Miller’s role reporting on WMD and the issues involved in the Plame case. An executive with a more practical bent might have realized it was impossible to separate the two. But when the institution you guide is also your religion, practicality sometimes has little do with your decision-making. Both the Blair and Miller episodes contributed to a picture of Sulzberger’s leadership style as somewhat chaotic, one that veered sharply from an all-out defense of his staffers to their swift excommunication when things got tough. When I asked about both episodes, Sulzberger gave them a New Age spin: “As with all of life, both were opportunities for growth and learning. We, as a newspaper, and I, as an individual, did both.”

In his role as chairman of The New York Times Company for the last decade, Sulzberger gets high marks for being a consistent champion of technology and for recognizing early that the future of the company was not on paper but in information. Though he did not go to business school, Sulzberger is fluent in the patois of management and speaks often of the need for a team-building approach to business, reminiscent of the lessons in wilderness survival he learned as a teenager with Outward Bound, an experience that left a deep impression on him. His favorite book on management is The Leadership Moment, by Michael Useem, a professor at the University of Pennsylvania’s Wharton School of Business. Useem uses real-life case studies, including an ill-fated Himalayan expedition and the Civil War battle of Little Round Top, to illustrate leadership principles. Useem’s focus on adventure is not just theoretical. In 2005, he invited Sulzberger and his son to go on a trek in Antarctica with a group of business-school students, where Sulzberger memorably led a group discussion on leadership in an abandoned Russian warming hut.

But in some respects, Sulzberger has limited use for the conventional mores of business culture. In The Trust, Tifft and Jones recount how he loathed a program on advanced management he attended at Harvard in the mid 1980s. “I wouldn’t want to work for the company they wanted me to run,” he is quoted as saying in the book. “They were interested in building wealth. I was interested in building value.” When I asked about the program, Sulzberger didn’t comment on it directly but said, “In a nutshell, I believe that value brings wealth. You can’t sacrifice the institution to achieve short-term aims.”

Critics of sulzberger’s management of the Times Company sometimes argue that while he may be a champion of online growth, his push to move the company in that direction has been too slow and full of missteps. They cite the failed experiment of TimesSelect. Announced with fanfare in 2005, the online service placed op-ed and some other content behind a subscription wall. It was a move to try to monetize Web traffic to the site. Sulzberger touted it as a model for the years ahead, but less than two years later, TimesSelect was gone and with it, the idea of a steady, newspaper-like subscription revenue stream from online publications.

Jon Landman, the Times deputy managing editor who oversees digital journalism for the paper, says the notion that TimesSelect was a total failure is wrong. The service had almost 200,000 independent subscribers, he says, and was on pace to bring in about $10 million when it was terminated. “The problem was that as the Web developed, search took over everything,” Landman says. With TimesSelect, a big block of content was invisible to search engines like Google. Dropping the subscription wall, Landsman said, helped pump up the number of unique visitors to NYTimes.com from twelve million to twenty million, “a serious increase.” Some of the content formerly behind the wall of TimesSelect, like columns by Maureen Dowd and Thomas Friedman, are now among the biggest traffic drivers to the site, and key to making it the most popular newspaper site on the Web.

Openness and user interaction are an important part of NYTimes.com’s future, says Landman, as it pushes to become more of a social networking destination, hopefully creating a powerful interactive community from the paper’s affluent readership. Already, he notes, the Web site is exerting significant influence over news decisions. “Just two or three years ago, people used to worry about the paper scooping itself on the Web site,” he says. “That’s all gone. It’s over. If anything, the default position is now the other way around.” Landman says the site has about twenty professional videojournalists, more than fifty blogs, and is increasing its Webcasting and podcasting. “Our Web producers are becoming very influential in the newsroom,” Landman says. On the flip side, he notes that with reporters doing more and more on the Web, “resource tension” is a fact of life. “You have to face that squarely. You don’t want to burn people out.”

Increasing Web traffic is one thing; making money off that traffic is another. The Times will never match the Web traffic of a site like Google. But that’s the wrong test, says Denise Warren, senior vice president of advertising for the New York Times Media Group. “Google plays in the search business. We play in the display-ad business,” Warren says. The key is to convince advertisers that the volume of traffic is not as important as the quality of the audience.

Another key to success is finding ways to push the Times out to a variety of new technology platforms. Solving that problem falls, in large part, to Michael Zimbalist, who runs the company’s fourteen-person research-and-development department. Zimbalist’s group is constantly monitoring how people use the Times. For example, he notes that while “smart” phones comprise only 6 percent of the cellular market, 33 percent of mobile readers of the Times use smart phones. “That tells us we can experiment more with stuff that works with smart phones,” Zimbalist says. In the future, he adds, the Times will have to be as much a media-technology company as it is a pure media company, rapidly developing new products to take advantage of emerging platforms. Already his team entered and won a design contest sponsored by Google, coming up with “ShifD,” which automatically links your phone to your computer, telling it what you were reading and shifting it over to the other device. “We really are a tech company,” says Zimbalist. “We have seventy-five developers at NYTimes.com with thirty more open positions to fill.”

Of course, all that technology doesn’t come cheap. In an era of fiscal austerity and higher borrowing costs, the logical way to fund the revolution is by selling assets that no longer fit. The Times started down that road in 2006 by unloading its joint venture with the Discovery Channel and its entire Broadcasting Group in 2007, as well as a radio station, for $715 million. That generated some needed cash, but also concentrated the company even more in the troubled newspaper segment, something Sulzberger doesn’t flinch at. In fact, when explaining why the stock of The Washington Post Company hasn’t been driven down as much as that of the Times, Sulzberger said it was partly because the Post is “no longer really a newspaper company,” a reference to the fact that it draws a majority of its revenue from Kaplan, Inc., an educational-publishing venture. Sulzberger, for better or worse, is intent on having the Times Company remain a newspaper-driven enterprise and by dumping broadcasting, he doubled down on his bet.

Whatever one thinks about the Times Company’s decision to get out of broadcasting, it was in keeping with the push by many large shareholders to sell off noncore assets. The pressure to sell more will likely only increase now that Harbinger and Firebrand have seats on the Times board. Among the candidates that remain to be shopped around are the Times Company’s fourteen regional newspapers, as well as the International Herald Tribune; its minority stake in the Boston Red Sox and the New England Sports Network; its 58 percent ownership of the new Times Building; its paper mill holdings; and, of course, The Boston Globe and related entities. (Asked whether any of those items was sporting a sales tag, CEO Janet Robinson would only say that “the company is always reviewing its portfolio.”) Money from these putative sales would then presumably be used to acquire digital assets, but exactly what those assets might be is also not clear. Though the Times has made some minor online acquisitions recently (Calorie-Count.com, anyone?), there doesn’t seem to be any About-level deals in the offing. And though on the one hand Sulzberger sees the changes the company faces as the most profound in the history of the business, on the other, he still believes in the Times’s basic model: quality journalism + quality readers = quality advertising. “It has been our formula for success for decades. We believe it will remain so in this digital era,” he told shareholders in April.

Maybe. Sulzberger clearly sees the challenges facing the paper as part of a long continuum. Just as the Times saved itself in years past by going from two to four to six sections, introducing color, and becoming a national newspaper, so too can the digital transformation resolve this generation’s problems. Still, those past changes were evolutionary, not revolutionary, and while the Times may be, as Sulzberger termed it, a “uniquely resilient” institution, its recent struggles have come during years of relative prosperity.

In part because of its commitment to quality journalism, for which so many are rightfully grateful, the Times Company’s profit margins have always been narrower than most of the industry, and consequently it has less of a margin to absorb declines. Yet it is on that foundation of quality that Sulzberger places his faith. “It is our belief that the reason why the Times has survived when so many of its competitors have faded, is because it maintained a strong value system that has always been an essential part of our tradition,” he wrote to me.

With the economy slowing, and critical retail, real estate, and auto ads evaporating, it seems inevitable that things must get worse before they can hope to get better. That means Sulzberger’s abiding faith in the Times is about to undergo its sternest test of all.

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Douglas McCollam is a contributing editor to CJR.