As Nachman said, [Sullivan] lost because they changed the law. And, I think it’s fair to say that they changed the law because the Court — and in particular Justice Brennan — favored the role of the institutional press in American society and wanted to create a more favorable environment for that industry. I have speculated elsewhere (in my The Judiciary’s Class War) that the justices, being drawn from the same educated gentry class as the editors of leading newspapers and magazines, deliberately took their side. One can see this in subsequent decisions that expanded the “public official” exception to the far broader and more amorphous “public figure” exception. The effect of this expansion was essentially a subsidy for news media, allowing them to publish more sensationally and with less fact-checking, at the expense of their audiences who were less well informed, and of the people they covered, who were left without a realistic remedy for defamation.
This is exactly right, both about the badness of Sullivan and about the reasons for the badness. It is one of the classic cases of SCOTUS not interpreting but making law.