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Must-read, but not a must-have?

The attention-getting, money-losing New York Observer is still for sale after a deal with Tribeca and De Niro fails.

July 21, 2006|Josh Getlin | Times Staff Writer

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.

In 1994, the paper launched a column by an unknown writer named Candace Bushnell, who chronicled the sexual comedy of the city's young, moneyed singles; "Sex and the City" went on to become a bestselling book and a hit series for HBO (though the Observer never made a dime from the cable show). When De Niro and Miramax chief Harvey Weinstein attempted to lease the Brooklyn Navy Yards in 1999 and turn the rotting facility into a state-of-the-art movie studio, the Observer was all over the story, breaking news and chronicling the deal's eventual collapse.

The paper -- known for its cheeky headlines and oversized Page 1 cartoons of VIPs -- has a gift for spotting angles that others ignore. When a furor erupted in the book world over fabrications in James Frey's "A Million Little Pieces," the Observer got an interview with Doubleday editor Nan Talese, detailing her dismay over the way she was treated during an appearance with Frey on the "Oprah Winfrey Show."

Rumors about the Observer's sale began surfacing two months ago, and Peter Kaplan, the paper's editor, said that he and Carter had been openly hoping the deal with Tribeca would work out.

"I loved these people at Tribeca and would have loved to work with them. But we just didn't come to terms," Kaplan said.

The prospective owners spent weeks "kicking the tires," Kaplan said, trying to figure out whether the weekly could eventually turn a profit. Distributed mostly in New York City, the paper has had a flat circulation in recent years, and faces competition from a re-energized New York magazine and Internet rivals (such as Gawker.com and Defamer.com) that have elbowed in on its attitude and media obsessiveness. Earlier this year, the weekly shrunk from two sections to one.

There had been talk that Carter might play a continuing role at the paper, most likely on the editorial page. Neither side would disclose the price tag being discussed for the paper. But one source familiar with the negotiations said the Tribeca people were surprised that the deal fell through. The source suggested that Carter perhaps had "seller's remorse."

It's not the first time that the weekly seemed to be on the verge of a sale. Now-disgraced magazine mogul Conrad Black seemed assured of purchasing the Observer in 1999, and several New York publications reported it as a virtually done deal. But that deal also collapsed.

Kaplan, who began editing the paper in 1994, continues to believe that it will have a rosier future. He was formerly a New York Times television reporter, a producer on the "Charlie Rose" television show, and a co-founder of Manhattan, Inc., a highly praised but short-lived New York business magazine.

"I do think the Observer's best days are ahead of it," he said recently, as negotiations continued. But the paper, for much of its life, has been sustained by Carter, a wealthy New York financier who has invested millions of his own money to keep the publication afloat. Carter, nearing 75, has owned a series of New York-area based publications during the last 20 years, including the East Hampton Star and the Litchfield County Times. He also once owned the Nation.

"Many people have contacted us" about buying the paper, Kaplan said, "and they will continue to do so."

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