Must-read, but not a must-have?

NEW YORK — The story, as it was reported breathlessly in the New York media, seemed too good to be true: Robert De Niro and his business partners at Tribeca films were going to purchase the New York Observer, the smart, feisty but financially struggling weekly paper that is a must-read for the city's political, media and real estate elites. Under hip new owners with both Hollywood ties and deep roots in New York, the stories went, the Observer could become profitable for the first time in its 19-year history.

Both sides now say the deal is dead, and the Observer --which now loses a reported $2 million annually -- continues to look for a new owner. Craig Hatkoff, a former real estate investor who founded the Tribeca Film Festival along with his wife, producer Jane Rosenthal, and De Niro, said in a statement that the two sides "could not come to mutually acceptable terms." The Tribeca team -- none of whom has had any previous newspaper experience -- had initially been approached by Observer owner Arthur Carter. "We were very excited by the strategic possibilities and were hopeful to make a deal," Hatkoff said. The team's blueprints, according to insiders familiar with the negotiations, included plans to broaden the newspaper's advertising base, expand coverage of New York City's independent filmmaking community and its links to Hollywood, and heighten the paper's online visibility.

The salmon-colored weekly has long been a paradox in Manhattan's rough and tumble media world. Although it has a circulation of only 55,000, it is essential reading for city power brokers in the political, business and cultural worlds; the average annual income of its readers is $150,000. But the Observer itself is regularly outgunned and outspent by its richer rivals.

Nonetheless, it has broken major stories and launched trends that put competitors to shame, especially through its hard-hitting media coverage. It ran one of the first in-depth interviews with New York Times plagiarist Jayson Blair and offered juicy glimpses behind the scenes as the paper wrestled with former reporter Judith Miller's legal troubles. It has served up trenchant, gossipy takes on New York's political scene that, at one time or another, have offended Sen. Hillary Rodham Clinton (D-N.Y.), former Mayor Rudolph W. Giuliani and countless other players on the left and right.