CHAPTER ONE

Citizen Newhouse

Portrait of a Media Merchant



By CAROL FELSENTHAL



Seven Stories Press

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The Self-Made Man

S. I. NEWHOUSE SR. WOULD HAVE BEEN horrified by the utter extravagance of it. The elder of his two sons and his namesake had purchased the New Yorker in 1985, six years after the father's death, and by so doing had garnered reams of negative publicity--both for himself personally and for the billion-dollar media company that he and his younger brother Donald had inherited from Sam, as S. I. Sr. was known to friends and family. The founding father had always considered publicity an evil to be avoided at all costs. His vast and byzantine empire was his business and no one else's, not his competitors', certainly not the government's.

Si, as his son was known, was flying home in 1992 on a private plane from a New Yorker sales meeting in Florida. Aboard was Si's second wife, Victoria Carrington Benedict de Ramel Newhouse. A fancily educated Episcopalian--by then a devout convert to Catholicism--her extensive surname reflected her failed marriage to a French count. Sam Newhouse had married only once. And he had adored Mitzi Epstein from the day he met her in 1923 until their marriage ended with Sam's death in 1979. When the elder son left his first wife, Jane Franke, after eight years of marriage and three children, the patriarch was deeply disappointed, as was his wife. Divorce, Mitzi always said, was not part of the Newhouse family. Sam believed in lifelong marriages. He was a man of simple indulgences; to buy still another newspaper--always one that had the potential to operate unequivocally in the black--and to acquire for his Mitzi a still bigger diamond or a more lavish fur. The elder son's indulgences were more munificent; to pay $17 million for a Jasper Johns painting, or to lay out a few million for Details, a downtown men's magazine filled with homoerotic stories and photos that his father would have found incomprehensible.

Also on board the plane carrying the Newhouses back to New York was Tina Brown, the British editor whom Si had imported to save Vanity Fair, a respected old magazine that had its heyday in the 1920s and that the son had resurrected in 1983. He had lost some $75 million on it until Tina seemed to staunch the flow, and he had since moved Tina to the New Yorker to work her magic there. But none of the tricks had clicked yet, and the magazine continued to post annual losses of as much as $15 million. Before the Newhouse purchase, it had run solidly in the black for more than fifty years.

Another passenger was the magazine's longtime art editor and cartoonist, Lee Lorenz. He and Tina Brown--the most celebrated magazine editor since Vogue's Diana Vreeland--had been recruited to speak to and spark up the advertising sales force.

There was still another passenger on board--a nanny, though there were no children on the flight; Si and Victoria had none together. The nanny was there to tend to the needs of Nero, the black pug upon which the couple lavished the sort of attention usually reserved for a cherished only child.

Four years later, in 1996, the results of such excess were there for the business and media worlds to see as they awakened to a front-page Wall Street Journal story reporting that nine of the fourteen magazines comprising Si Newhouse's Conde Nast were losing money. (The New Yorker, which itself might have been losing as much as all the Conde Nast titles combined, was not included in the article because it was then not yet officially part of Conde Nast.) The article was filled with the sort of delicious detail usually hidden inside this most private of companies: salaries in the half-million-dollar range, luxury automobiles, low or no-interest loans. Graydon Carter, Tina Brown's successor at Vanity Fair, which once again was said to be losing money, had received two loans totaling $450,000 to buy a country home in Connecticut and an apartment on Central Park West. Arthur Cooper, the top editor at GQ, also said to be losing money, had borrowed a million dollars for a country home in Connecticut.

Sam Newhouse, the founder, would not have been amused by a letter to the Wall Street Journal some weeks later, signed by a woman in Bellevue, Washington, and, although not naming the magazines, referring to two other Conde Nast titles, Architectural Digest and Vogue: "Conde Nast encourages its editors to live like pashas. No wonder they use their magazines to gush about million-dollar homes and absurd, ugly `fashions' that are of no practical, aesthetic or affordable interest to mere mortals of the middle class."

Sam was not opposed to the concept of interest-free loans to employees. He and his brothers, Theodore and Norman, regularly gave such loans to employees of his newspapers on Staten Island and Long Island and later in Newark, New Jersey; Syracuse, New York; Harrisburg, Pennsylvania; and Springfield, Massachusetts. These were modest sums to replace an ailing automobile or furnace or water heater, to pay for the care of a sick wife, or to send a son to parochial school or college. These were loans that Sam made in part out of benevolence, but also to discourage employees from joining unions. Because at many of his papers he offered no insurance or benefits, he understood that sometimes a working man's paycheck could not cover all necessities, much less the unexpected.





Sam Newhouse cared above all for his family. His sisters and brothers had helped him buy his first newspaper, and he later gave them and their children and their grandchildren jobs and opportunities.

Born in 1895, in a tenement at 53 Orchard Street on the Lower East Side of New York City, Solomon Isadore Newhouse was the eldest of eight children of Jewish immigrants. In the family he was called Sammy or Sam. In business he was called S. I. His father, Meier Neuhaus--he later Americanized his name to Meyer Newhouse--was an immigrant from Vitebsk, near the border of eastern Russia, and his mother, Rose Arenfeldt, was from Austria.

In better times in New York, Meyer Newhouse, who had studied to become a rabbi but had brought no practical trade with him from Vitebsk, operated the machine that made the leather ends of suspenders, and in worse times he was an invalid. He was not only weak bodied--suffering from severe asthma--but also weak willed. By the time Sam was twelve, his father was, in most every way, an invalid. It would later be written of Meyer that "he failed dismally at everything except procreation."

The burden of feeding her four daughters and four sons fell to Rose, who far outclassed her husband in determination. The family had moved across the river to Bayonne, New Jersey, in vain hopes of Meyer's finding business success. Rose awakened early every morning and headed to Manhattan, where she bought sheets, towels, pillowcases, napkins. Carrying her load over her shoulders, she walked the streets of Bayonne, peddling her wares door-to-door. "My father was a reflective man," Sam would later observe, "happier with words and ideas than with action. My mother, an unschooled farm girl, was the opposite. Impatient with too much talk, she was practical, energetic and clear of mind, concentrating always on the way to survive."

Sam, age thirteen, under five feet tall, his chubby cheeks giving him the look of a boy half that age, was filled with a determination even stronger than his mother's. He became, by default, the head of the household. For that year, 1908, his father moved out of the house to stay with his sister in Hartford, Connecticut, supposedly as a means of relieving his asthma. "Nothing had to be said when I became head of the family at so young an age," Sam later wrote. "Someone had to assume the leadership and provide the money; someone had to make the decisions, and it was obviously up to me, the firstborn." He vowed that he would make enough to support the family and to relieve his mother of her burdens.

Although an excellent student, he quit school after the eighth grade, and that summer he enrolled in a six-week course in typing, shorthand, and bookkeeping at the Gaffrey School in Manhattan. (To save the three-cent fare for the ferry across the Hudson, he carried bundles of newspapers with him in both directions.) He soon found work as an office boy with a Bayonne lawyer, police court judge, and machine politician named Hyman Lazarus whose law office was situated above the offices of a weekly newspaper called the Bayonne Times. Sam landed the job by proposing that he work without pay until he proved himself worthy. After four weeks, he was making $2 a week for duties that included keeping the office books. He proved so adept a bookkeeper that two years later, when he was sixteen, Judge Lazarus promoted Sam to office manager of the law firm.

Lazarus also owned a 51 percent interest in the failing Bayonne Times. He had acquired the controlling share from a client who had no other means of paying a legal fee, but, to the judge, the paper seemed more trouble than it was worth. Lazarus, whom one relative described as a "big, popular political hack," had wider vistas in mind. He had close ties to political boss Frank ("I am the law") Hague, then mayor of Jersey City and a colossal power in Democratic politics, who was said to have promised to make Lazarus the next governor of New Jersey. With growing confidence in the boy, Lazarus instructed Sam, "Go down and take care of the paper until we get rid of it." He also told the sixteen-year-old that he would receive no increase in salary for adding management of the paper to his other duties, but he could keep half the newspaper's profits in the unlikely event that there were any. Lazarus fully expected that Sam would see no more success than any of the other managers who had failed to lift the paper into profitability.

At the time Sam had no particular interest in newspapers, but the challenge of making money was irresistible. If Lazarus had owned a chain of shoe stores and offered Sam the same incentive, the boy would have attacked the problem with equal zeal.

Sam quickly figured out that the paper was losing money because too few ads were being sold, so he began to sell ads himself and to devise ways to help merchants plan store sales and other merchandising schemes that they could then advertise in the paper. Within a year, Sam had made the paper profitable. Lazarus gave him a 20 percent interest in the Bayonne Times, which later grew to 50 percent. His salary was then $75 a week, and he had met his first goal of supporting his parents and his younger siblings.

And so Sam became the breadwinner of his family. When decisions had to be made about the younger children, it was Sam, not Meyer, who sat across the kitchen table from Rose to make them. Sam had started life sharing a bed with his brothers--one person who later worked for Sam says he slept on a board in the bathtub--but now he was given his own room. He had become almost literally the father of the household, sometimes referring to his brother Norman, eleven years his junior, as "son." Once, when Norman referred to their absent father as "the old man," the barely five-footer slapped Norman across the face. But Norman also became the first family member to go on Sam's payroll. That was 1911, and the five-year-old boy would stand on the street corner to hawk papers for a penny apiece. Sam would later say that his brother realized he could sell more papers if he held up a lone paper from his pile and pleaded, "Mister, please buy my last paper."

On becoming overseer of the Bayonne paper, Sam decided to go to law school at night. (In those years neither a high school nor a college degree was a prerequisite.) By the time he turned twenty-one in 1916, he had graduated from the New Jersey Law School, later part of the Rutgers Law School in Newark, and had been admitted to the bar. That same year, with newspaper profits growing, his annual salary was $30,000, huge for its time.

His law career was brief. He tried one case, which he lost, and the defeat left him so embarrassed that he gave the client the $80 in damages he had sought in court. That was it for Sam, who never let go of his belief that the jury had been rigged. Anyway, he had found his home in the newspaper business, and he never looked back.

In 1922 Sam was ready to grow. He used his own savings, borrowed what little he could from his siblings, and persuaded Judge Lazarus to join him in a new venture. For $98,000, Judge Lazarus and Sam bought 51 percent of a much larger newspaper--the Staten Island Advance. It had been losing money in a community of 160,000, but Sam could see its potential. He applied what he had learned in Bayonne, and the numbers almost instantly grew healthier.

Later Sam's sister Naomi became the inside "man" at the Advance, sort of the general manager, although the Newhouses were never much for titles. Brother Norman, with money flowing into the family from Sam, graduated from New York University and later became the Advance's political reporter, city editor, and then managing editor.

Eventually, with economic times much better for Rose's family, Meyer returned home. And he too was given a job on the Advance. Although Meyer was still sickly--one Staten Island native, who as a boy delivered the Advance, recalls Meyer looking as if he couldn't blow out a match--he was installed by his son in a chair by the conveyor belt. Meyer, no taller than a schoolboy, sat watch attired in a jacket and tie, perhaps to lend dignity to what was inherently an undignified task--making certain that the delivery boys didn't steal papers. The boys, twelve and thirteen years old, would trick Meyer into turning his head, "so," one recalls, "we could grab a paper or two."

Meyer Newhouse, who would never understand where his son was headed or why, was a socialist, as were two of his brothers and a sister. But Meyers radical politics did not touch Sam. "My father and his socialistic brothers and sister," Sam later remarked, "looked outward, away from themselves towards some kind of collective salvation and state control to meet their needs. I have always looked inward, toward individual responsibility and the potentials of the free marketplace." Meyer clung to his beliefs. When he was hospitalized with asthma in 1945--he would die later that year--one visitor was his son, who was so excited about his imminent deal to acquire a big newspaper, the Jersey Journal, that he rushed to his father's bedside to report the news: "Papa, Papa, I did it."

"Sammy, what did you do?"

"Papa, Papa, I bought it. I bought it."

"Sammy, what did you buy?"

"Papa, I bought the Jersey Journal. I bought the Jersey Journal."

"Sammy, what do you need it for? You've already got a paper."

In 1924, Judge Lazarus died suddenly after contracting poison ivy. And just as suddenly, opportunity opened to the judge's protege. Sam was eager to extricate himself from his share in the Bayonne paper; he wanted to devote himself to the Staten Island Advance. He paid Lazarus's widow for her husband's share in the Advance and soon bought out the remaining 49 percent that he and the judge had not owned. By 1932 Sam had enough capital to buy another paper, the Long Island Daily Press, for $750,000, and his incredible path to creating "the nation's richest family-owned publishing empire" had turned its first corner.

Sam may have reached five feet, two inches in his prime; that was his claim. Old-timers at the Staten Island Advance recall that their boss, who often wore a fedora, was not quite as high as a counter in the lobby, so that one might see What appeared to be a disembodied hat moving swiftly along the counter's length. Sam had gray-blue eyes, a squat nose, a smile on his round, rosy face, puffy cheeks that gave him something of a chipmunk look, and always a suit and tie on his pudgy, next-to-neckless body.

He could never be considered attractive, but he had money and energy, and now he wanted his own family, especially a son to carry on the business. Mitzi Epstein, at four feet, eight inches, seemed made to order for Sam (one acquaintance uses the word Lilliputian to describe them). Her first name reflected the Viennese origins of the maternal side of her family. She had grown up on the Upper West Side of New York in circumstances much more prosperous, cultured, and Americanized than Sam's, in a family that was decidedly upper middle class--so well fixed that a Hungarian woman was employed as the family cook.

Mitzi's grandfather, Emmanuel Fred, had emigrated from Austria, and with his first and second wives--the first died, and he then married his wife's cousin--had eight children. The home was a gathering place, but money was tight, and feeding, clothing, and housing eight children was a struggle.

Mitzi was the daughter of one of those children, Julia, a woman with a decided artistic and business sense, if not much education. When she married Samuel Epstein, she, he, and one of her brothers went into business together importing silk scarves and neckwear from France, some of it fine lace, through S. Epstein and Company on Eighteenth Street. The business opened in the early years of the century and ran prosperously until the crash of 1929. Besides being the owner/executive, Julia was also the designer. She had marvelous skills at knitting and needlepoint. She also loved foreign films and would go to the local movie house on Saturday afternoon, knitting in hand.

Julia and Samuel somewhat reluctantly accepted Sam Newhouse as the husband of their beloved and only daughter. When the two married on May 8, 1924--she was twenty-two and he almost twenty-nine--the Epstein neckwear business was still flourishing, and this diminutive proprietor of a paper on Staten Island seemed not quite so impressive to a couple who lived grandly in a big apartment on West End Avenue. But Mitzi, who had attended art school at the Parsons School of Design, loved Sam, and so they were married. They celebrated at Delmonicos, one of the most fashionable restaurants in New York. A younger cousin of Mitzi's, Ruth Spaet, eight years old at the time, still remembers the piece of wedding cake sent home to her in a miniature white satin trunk. The newlyweds took a traditional but abbreviated American honeymoon at Niagara Falls. Having just acquired full control of the Advance, Sam had to rush home to be on the job.

When the stock market and the Epstein neckwear business collapsed five years later, Ruth Spaet recalls, "My uncle Sam [Samuel Epstein] was so overcome ... that he had a stroke." Julia, undaunted, hired a round-the-clock nurse for her husband and went out to land a job as a designer of blouses and neckwear. According to her niece, Julia "commanded a marvelous salary for those years; she earned more than practically any man."

The 1929 calamity did not stop Sam Newhouse. His wealth continued to grow. Sam wanted to live near his newspaper on Staten Island, and their first home was a model that had been part of an Advance advertising promotion. Soon after, Sam built a much more impressive home for Mitzi, an English Tudor on Staten Island's Ward Hill with a dramatic view of New York Bay. The Hungarian woman who had cooked for Mitzi's mother was handed down to Mitzi and would remain the family cook for years after. Cooking was a skill that Mitzi never cared to learn.

On November 8, 1927, three and a half years after their marriage, Mitzi gave birth to Samuel I. Newhouse Jr., who was born by cesarean section. A second son, Donald Edward, followed two years later, also by cesarean. Her doctor advised Mitzi that subjecting herself to another cesarean delivery would endanger her health. She would have no more children.

Mitzi had plenty of help with her boys, and she grew bored on Staten Island. As her honeymoon had taught her, she could not depend on Sam for companionship. He had told her before their marriage that he would devote himself to her. But he also told her that he would have to devote himself at least equally to his work. She longed for the distractions of the more sophisticated life of Manhattan. While he probably would have stayed on Staten Island had she not pushed them out, he finally did make the move to Manhattan, partly for its anonymity. One night in 1934, workers at the Advance, who had threatened to organize and met stiff resistance from Sam, picketed his house. All night long they marched back and forth, shouting anti-Newhouse slogans into megaphones and continuously shining a spotlight into his front windows.

And so the family moved to an apartment at 730 Park Avenue at Seventy-first Street--and not just any apartment. The fourteen-room duplex occupied the seventh and eighth floors of a building that was--and is--in terms of social status, one of the top buildings in Manhattan. It was home to composer Richard Rodgers and his wife, Dorothy, and to members of the Farkas family, who owned Alexander's department stores. John D. Rockefeller had lived in the building just to the north, 740 Park, which remained home to other Rockefellers. For the Newhouses, it was some twenty blocks below the line that Jews were then beginning to cross. And those Jews were not of the Newhouse variety, but rather German Jews of education and cultivation whose families' arrival in New York antedated that of many of the board members who sat in such lofty judgment. Most buildings on Park and Fifth Avenues in the seventies and eighties did not want Jews of any origin, although the depression had forced some of their boards to hold their noses and accept them.

One thing was for certain. S. I. Newhouse could afford this luxury apartment, which his wife rendered even more luxurious by retaining a stable of society decorators to "do" the interiors to the hilt of glitter and gilt. Three years after buying the Long Island Daily Press in 1932, Sam bought the Newark Ledger. In 1939 he bought the Syracuse Herald and the Syracuse Journal, quickly merging them and turning their red ink to black. Two years later, he bought the Syracuse Post-Standard.

After the war ended, in 1945, Sam bought the Jersey Journal. In 1948 he bought his first paper in Harrisburg, the News. He would later buy the Harrisburg Patriot. In 1950 he bought the Portland Oregonian. (Eleven years later he acquired the competing Oregon Journal.) In 1955 he bought papers in Birmingham and Huntsville, Alabama (the News and Times respectively), as well as the Globe-Democrat in St. Louis. In 1962 he bought two papers in New Orleans, the Times-Picayune and the States-Item. In 1967 he bought the Cleveland Plain Dealer. The 1970s would bring him Booth, a highly profitable chain of eight dailies in Michigan. The deal also included the lucrative Sunday supplement Parade.

He kept his eye fixed on newspapers--he resisted the temptation, for example, to buy the New York Yankees when that deal was offered him--and fixed specifically on bargain-priced papers in growing communities. He had no interest in starting papers. Later, as he had more money to spend, he looked for money-makers whose profits he could boost even further.

The best tonic for Sam's bottom line was to acquire a city's first newspaper, then get his hands on its second, thereby allowing him to set advertising rates as high as he pleased. He would promise to keep both papers in business and in competition. But he would eventually move in for the kill by merging the two, which generally meant closing the afternoon paper and keeping the morning. He thus created a monopoly money machine of the sort billionaire investor Warren Buffett likened to an "unregulated toll-booth." Buffett, an investor in a profitable monopoly paper, the Washington Post, has often observed that there are few better ways to make money than in a monopoly paper.





With Sam's wealth growing daily, Mitzi pushed for a country home. In 1942, they bought Greenlands, a working farm on what would come to encompass some 143 acres in Harbourton, New Jersey, in Mercer County, near Princeton.

But Sam was not the gentleman farmer type. A friend, Elaine Reiner, whose husband, Hal Eaton, was a theater critic and gossip columnist for the Newark Star-Ledger, remembers it as "an actual working farm because that was a tax deduction." Another guest calls it a "playground for people for the weekend."

A favored guest was public relations man and premier showman Ben Sonnenberg, an immigrant from Russia who presumably had much less money than Sam, but lived as if he had much more. He would drive to the farm in his vintage Rolls Royce from his thirty-seven-room mansion on Gramercy Park, which had been built for Mrs. Stuyvesant Fish. As Sam continued to swallow up newspapers and began to face hostility from the citizenry in the cities he targeted, he retained Sonnenberg's firm to upgrade his public image.

For his weekends at "the farm" (the family always referred to it as such), the patriarch had a set routine. When not eating Sunday lunch on the screened porch with friends and relatives who had been invited to drive down for the day, and when not playing an after-lunch game of poker with his brothers, he simply absorbed himself in his work. (He did enjoy informing visitors that the father of the farm's previous owner had invented the flush toilet.)

The main house, with its six-foot-thick fieldstone walls, dated to the American Revolution. The late James Michener, who had been introduced to Sam and Mitzi by friends, and who would go there occasionally for lunch, recalled most vividly Greenlands' his-and-hers swimming pools. There was also a tennis court, a riding stable, a five-car garage, and a full complement of servants.

The elder son, Si, and his brother, Donald, grew up mostly in the Park Avenue apartment, with its series of decorators constantly redoing what already seemed done, its Louis XV and XVI furniture and decor tending to the overwrought; its doormen and elevator operators; its imposing two-story foyer that the visitor entered immediately on exiting the elevator; its curved, almost semicircular staircase; its wood-paneled, green-leather-furnished library that served as Sam's office. The hired help was expected to keep the whole show going and to make sure that these two boys--so tiny in stature that it was clear neither would much overtake their parents--were not lost in the shuffle.

It was a formal, rather lonely setting for childhood. There weren't many children in the building, and the few that were there did not appear in the Newhouse apartment for milk and cookies and an afternoon of play. The Newhouses did not socialize with their neighbors. Sam Newhouse once told an employee that he shared a elevator with a man for ten years before discovering it was Richard Rodgers.

Mitzi loved her boys, but didn't have much of a sense of what to do with them. Had her doctors not advised otherwise, Mitzi, who adored clothes and jewels and fancy hairdos, would have loved to have had a daughter. That gap was partially filled by her brother Walter's daughter, Sue, the only girl in that generation on her side of the family. She was a pretty child whose father worked all his life on the business side of his brother-in-law's newspapers, most of the time in St. Louis. Starting at age eight, Sue would often come to New York and stay with Mitzi. Later she spent a couple of summers at the farm. Often it was just Sue and Mitzi. They dined at the big table, and Sue wondered how the servants knew when to appear, not realizing that Mitzi was pressing the buzzer on the floor with her tiny foot. Mitzi helped Sue style her hair, "and she would go through my clothing and show me what would go with what."

In his privately published memoir, A Memo to my Children, Sam admitted that he had no time to do the conventional things that fathers do with sons. Anything outside his business life, he would later tell Calvin Trillin, then writing a cover story on him for Time, was Mitzi's domain. When Trillin asked Sam for a list of friends to interview, "He sort of told me that that was ... Mitzi's department."

Perhaps because Sam himself never had a childhood, he had little patience with his sons, especially his namesake, who was by nature more withdrawn than Donald. By one report, Sam was "dreadful to Si, even when he was a little boy."

The boys, especially Si, on whose narrow shoulders the future of the business rested, grew up in awe of and even fearful of their father. Children unerringly sense when a parent favors one over the other, and Sam's clear preference for his younger son added to Si's feelings of inadequacy. Donald, although also far from perfect in his father's eyes, was more open, optimistic, well-rounded, and outgoing. He seemed tougher, more aggressive, and less acutely sensitive than Si. Donnie's round and smiling face resembled Sam's. Si's brooding eyes, heavy lips, and weak chin did not, in Sam's view, hold much charm or promise.

Despite Sam's preference for Donald, starting in his sons' childhood, there was always a doubt in Sam's mind that either boy had what it took to carry on. One might argue that it is unfair for a parent to judge the future ability of such small boys. But Sam knew what he had accomplished while not yet a teenager and probably could not help but judge his boys by similar standards. "I have always had a great deal of self-confidence, even as a child," Sam would later remark. The desirability of working to pass this quality on was not something that would have occurred to the patriarch.

That Donald was lacking in any real creative or artistic sensibility made him easier for Sam to understand. Si, although he did not express his creativity in any obvious way, had an artistic bent, and for this ability he was Mitzi's favorite. Still, for most of his school years, Si Newhouse didn't feel that favorite was a word that anybody would think of applying to him.