A year ago after leaving my city hall editor job at The San Francisco Chronicle, I had a whole bunch of the usual paperwork to contend with–converting a 401k to an IRA, transferring health insurance coverage and shifting cell phone service onto a personal family account.
One item peculiar to my circumstance was the telephone conversation with The Chronicle circulation sales rep to change my subscription from the “friends and family rate” given to the newspaper’s employees.
I was told that if I wanted to continue seven-day-a-week delivery I would have to pay an obscenely high price–something approaching $200 a year. When I laughed and said papers of the quality of the New York Times and Wall Street Journal don’t even ask that much, I was advised that if I would agree to limited Tuesday-through-Sunday delivery, I would qualify for a steep discount, something like $70 for the year.
I took the deal, resigning myself on Monday and Tuesday mornings to reading The Chron online and finding ways to distract the family dog, a five-year-old Newfoundland named Twinkletoes, who lives to retrieve the paper from the bottom of our driveway on a wooded hillside in Kentfield, Marin County.
I’ve wondered ever since what Chronicle’s management and its owner, the Hearst Corporation, were thinking. Why price a newspaper to reduce circulation? I’d heard Publisher Frank Vega was trying to save money by shaving off circulation in outlying areas where it is too costly to deliver. But I live 15 minutes north of the Golden Gate Bridge in a zip code with some of the most appealing advertising metrics in the country. What gives?
Well, early last week, I got my answer–and I got it while reading The Chronicle, online no less, on a Tuesday.
Speaker of the House Nancy Pelosi, a San Francisco Democrat, had sent a letter to new Attorney General Eric Holder urging the Justice Department to consider giving owners of financially struggling newspapers, like The San Francisco Chronicle, a break on antitrust laws so they can stay in business and keep journalism as we know it alive.
In fact, Pelosi sent the (PDF) letter, The Chronicle reported, after being paid a visit by two representatives of the Hearst Corp., its general counsel, Eve Burton, and its Editor at Large at The Chron, Phil Bronstein.
The next day, Attorney General Holder sounded willing to comply, saying preserving a healthy newspaper industry is important and he is open to adjusting antitrust law if it will help.
So, what does pricing newspapers to cut circulation 15 minutes north of the Golden Gate Bridge have to do with all this? Everything, actually.
Hook Up with Singleton
Here is my take on what is going on down at Fifth and Mission streets: The company that brought us the last Washington-sanctioned newspaper monopoly in San Francisco–the Joint Operating Agreement between the then- Hearst-owned San Francisco Examiner and the then- family-owned San Francisco Chronicle that ran for 35 years until 2000–wants another break on antitrust enforcement allowing for another anti-competitive arrangement. This time, Hearst, now owner of The Chronicle, hooks up to Dean Singleton’s Bay Area News Group, owner of the suburban Marin Independent-Journal, Contra Cost Times, Oakland Tribune and San Jose Mercury News.
To secure Justice Department and congressional approval, Hearst and Singleton would have to demonstrate a couple of things. They’d have to show that their Bay Area newspapers are failing, which should not be difficult since both reportedly are losing money hand over fist. Secondly, they’d have to establish that they don’t really compete for Bay Area readers and advertisers. One relevant data point would be Chronicle circulation in Marin, Contra Costa, Alameda, and San Mateo and Santa Clara counties. Which is in the tank, due in part to Chronicle pricing strategies.
Singleton certainly sounded game last week. “If you look at the economics of the Bay Area News Group and The Chronicle,” he was quoted in the San Jose Mercury News, “it would seem that would be a smart thing to do, to do more consolidation.”
If you accept that Hearst has its eye on a combine of sorts with Singleton–sharing printing, distribution, ad sales–a lot of the other moves the company is making begin to make sense. Currently, Hearst, claiming annual losses of more than $50 million a year, is in the process of cutting the jobs of 150 members of the Newspaper Guild and securing other concessions from the newspaper’s biggest union. As many as 90 of those union jobs are expected to come out of the newsroom. Of course, you don’t need as many journalists if you are sharing the job of covering the region with a chain of suburban newspapers.
Next, The Chronicle is less than three months away from switching on a new $1 billion printing press, which isn’t the kind of investment you normally make when the only thing you’re losing faster than money is circulation. Unlike the situation in Seattle, where Hearst ended print publication of its Post-Intelligencer and is experimenting with an only online format, Hearst intends to be in the newspaper printing business here in the Bay Area, one way or the other.
A friend of mine at The Chronicle told me recently that Hearst newspaper execs aren’t collectively devious, conniving or forward-thinking enough to plot the demise of their own paper to establish a new Bay Area newspaper monopoly. But, this person added, if a monopoly is what is needed to save journalism as we know it, so be it.
Monopolies Bad for Journalism
But here is the problem with that logic. Newspaper monopolies are bad for journalism because they retard investment and innovation–not to mention the higher costs foisted on advertisers and print readers.
Tom Rosenstiel, director of the Pew Research Center’s Project for Excellence in Journalism, made the point a few weeks ago during an appearance on KQED’s Forum with Michael Krasny.
“The Chronicle for years was an underachieving newspaper financially because of the JOA, said Rosenstiel, referring to the arrangement under which the morning Chronicle and afternoon Examiner shared all non-newsroom functions and split profits 50-50. “It didn’t have the same kind of penetration rates in outlying communities. Stronger daily competitors grew up in the surrounding towns because it didn’t invest enough in developing the paper in good years–the 80s and 90s. It was financially and journalistically an underachieving newspaper, so that when the problems of the internet hit, it was less well equipped to cope with them.”
Not only was the monopoly bad for The Chronicle, there are alternatives to repeating the mistake again that have yet to be fully explored. San Francisco business leaders, in cooperation with the Newspaper Guild, have approached Hearst Corp., offering to take over The Chronicle as a nonprofit enterprise, but thus far have been rebuffed.
“We should not rush to relax antitrust rules,” said Carl Hall, a negotiator and spokesman for The Guild and a proponent of the nonprofit buyout. “We want to preserve independent ownership and multiple editorial voices.”
Another thing my friend at The Chronicle told me is that there is no way Hearst will again agree to give away a newspaper and subsidize a new owner–as the company did back in 2000 to gain federal approval of its purchase of The Chronicle. Under that arrangement, Hearst gave the Examiner to the Fang family and paid a $66 million operating subsidy over three years, which the new owners misspent before unloading the paper themselves.
Leverage to be Had
I’m not so sure of that either. As in 2000, Hearst isn’t holding all the cards, politically speaking. Not only does the company need Justice Department approval for a deal with Singleton–one San Francisco officials ought to oppose–it also intends to develop the four acres of land it owns beneath the Chronicle and running along the west side of Fifth Street, between Mission and Howard streets.
The company has been in discussions with developers of a potential hotel or condominium project for more than a year. Because any such project would require land-use permits from the city Planning Commission, it could be made clear to Hearst that the commission, members of the Board of Supervisors and Mayor Gavin Newsom would look more favorably on such a development, if everything possible had been done to preserve an independent, robust San Francisco Chronicle newsroom.
Thus far, word out of the Newsom administration is noncommittal, at least based on what has been said to The Appeal.
“We don’t want to lose the Chronicle,” Nathan Ballard, the mayor’s chief spokesman, wrote. “It’s an important part of our civic life and a major employer. To lose the paper would be a black eye for the City. The mayor is working with the Speaker and others to keep the Chronicle alive.”
Maybe it’s time we heard from the supervisor from District Six, which includes The Chronicle and adjacent Hearst property.
Wouldn’t that be ironic. The politician with perhaps the longest “don’t-speak-to” list of Chronicle journalists using his leverage to save San Francisco journalism as we know it.
