Beyond the Reilly settlement - Page 2

Beyond the Reilly settlement: What does the deal really mean for the Bay Area's news media?
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I'm sure there's an element of survival sometimes, but I think a lot of it is just trying to get profit margins up."

The US Justice Department never made a serious effort to stop the deal. The Guardian recently confirmed that the state Attorney General's Office under the newly elected Jerry Brown has dropped its probe into the transactions. Spokesperson David Kravets refused to explain why.

The state's treasurer and former AG, Bill Lockyer, began the investigation, and when we asked for a comment on Brown's decision, he declined, saying he had "moved on."

Gina Talamona, spokesperson for the federal Justice Department, said its examination of Hearst's substantial investment in MediaNews continues. But MediaNews CEO Dean Singleton told us that he expects it will not only close soon but will also clear the companies to move ahead.

Singleton said his meetings with Reilly, a Bay Area native and former mayoral candidate, were civil and there were no terms of the settlement he was displeased with. But he still doesn't believe Reilly had grounds to bring the suit.

"A lot of wild statements have been thrown out that are simply not true," Singleton said. "There's no evidence whatsoever that we had any discussions with Hearst about doing anything with the Chronicle that would have been improper. In fact, we've had few discussions about anything with the Chronicle."

Perhaps there was nothing "improper" as far as justice officials were concerned. But a March 2006 letter from Hearst vice president James Asher to MediaNews president Joseph Lodovic that surfaced during the case shows Hearst required an agreement on consolidated distribution networks with MediaNews before the company would proceed with its side of the transaction.

So let's go back to Hurd's question: why should anyone care about newspaper mergers in an era when there are so many other sources of information?

John McManus is a part-time journalism professor at San Jose State University and director of GradeTheNews.org, a consumer Web site on Bay Area news quality. He was hired as a consultant by Clint Reilly's legal team to provide analysis of how consolidated or noncompetitive media outlets might fail to provide the best, most valuable news stories possible to local consumers.

His answer is simple. "Everyone is affected by the quality of newspapers because they form the bottom of the food chain for news," McManus told us. "Probably about 85 percent of the original news reporting in the Bay Area comes from newspapers, because they have much larger staffs than television stations or radio stations or Web-only operations."

McManus did his Stanford PhD dissertation in 1987 on four television news stations scattered around California, spending a month at each of them. At one of the stations, he said, what appeared in the local newspaper was so important, a station producer would clip stories directly from it and attach them to the assignments reporters were expected to have prepared by that evening's newscast.

"The situation has gotten worse since then," McManus told us, "because local TV news staffs have shrunk."

The settlement also did not include an agreement on what would happen to the mountain of records produced in the case leading up to the trial.

Hundreds of pages previously sealed by the newspaper companies were opened to the public after the Guardian and the East Bay nonprofit Media Alliance intervened in the case. Reilly's lawyer, Joe Alioto, recently insisted that he would petition the judge to unveil more documents, such as full depositions of company executives and additional memos and e-mails.

The settlement comes with some caveats for critics of consolidation.

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