Hearst's threat to shutter the San Francisco Chronicle sends shockwaves through an industry in crisis
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Is San Francisco really the frontrunner in the race to become the first major U.S. city to go without a major daily? Or is it a victim of disaster capitalism, in which powerful corporations exploit economic meltdowns to exact otherwise unacceptable concessions from employees and/or antitrust legislators?
Media critics chewed on those questions last week, following Hearst Corporation's abrupt Feb. 24 announcement that it is undertaking "critical cost-saving measures including a significant reduction in the number of its unionized and non-unionized employees" at the San Francisco Chronicle, and will close or sell the paper, which has 1,500 employees, 275 in the newsroom, unless these changes occur within weeks.
Noting that the Chronicle lost more than $50 million in 2008 the worst in a string of nonstop losses the paper has suffered since Hearst bought it in 2000 Hearst vice chairman and chief executive officer Frank A. Bennack Jr. and Hearst Newspapers president Steven R. Swartz warned that "without the specific changes we are seeking across the entire Chronicle organization, we will have no choice but to quickly seek a buyer for the Chronicle or, should a buyer not be found, to shut the newspaper down."
Two days later, the California Media Workers Guild, which represents workers at the Chronicle, reported that Hearst is seeking "a combination of wide-ranging contractual concessions in addition to layoffs, the exact number of which the company said it did not yet have."
"For Guild-covered positions, the company did say the job cuts would at least number 50," read a Guild statement. "Other proposals include removal of some advertising sales people from Guild coverage and protection, the right to outsource specifically mentioning ad production voluntary buyouts, layoffs and wage freezes."
Guild representative Carl Hall said he doesn't see any reason to think Hearst's threats are a bluff.
"The Rocky Mountain News just closed in Denver," Hall told the Guardian. "The Seattle Post-Intelligencer, which is also owned by Hearst, is slated to close in March, if a buyer isn't found. We've seen bankruptcies and disaster scenarios all around the country, and the Chronicle has experienced some of the deepest operating losses in the nation."
Reached for comment March 2, Chronicle publisher Frank Vega told the Guardian, "We're still in the process," while Guild treasurer George Powell said that "proposals have been exchanged and each side is evaluating them."
Evaluating Hearst claims is hardly an easy task. A privately held corporation, Hearst doesn't open its books to the public. But one thing is clear, just from reading postings on the corporation's Web site: Hearst is midway through a squeeze in which it's trying to turn a profit on the 15 newspapers it owns throughout the country.
And that means more syndicated stories and possibly the end of free newspaper Web sites.
As Swartz outlined in a recent press release, all Hearst newspapers will be required to allow for "efficient production or common content sharing," use "outbound telemarketing and self-service ad platforms more effectively," increase their subscription rates, outsource printing, and charge for digital content.
"Exactly how much paid content to hold back from our free sites will be a judgment call made daily by our management," Swartz stated. "Our goal is a business model that seeks, by 2011, to get more than 50 percent of our revenue from circulation revenue and digital advertising sales."
And the same day that Chronicle workers learned that their newspaper might be facing the axe, Hearst cut 75 out of 135 newsroom positions at the San Antonio Express-News in Texas.
As San Antonio Express-News editor Robert Rivard told his staff, "Incremental staff and budget cuts, we are sorry to say, have proven inadequate amid changing social and market forces now compounded by this deepening recession."
"It's like death in here today," a source, who asked to remain anonymous, said. "Everyone who was laid off is still here, working 'til March 20."
And like the growing pool of newsroom refugees nationwide, the survivors of this San Antonio massacre have since met to brainstorm about other newsgathering business models.
"We all have kids, so we need salaries and insurance," our source confided, "but we're going to start researching some options, see what's working and not in other places. The time is ripe."
Meanwhile, sources within the Chronicle who asked to remain anonymous given the ongoing negotiations claim that there isn't much hope that Hearst will come up with innovative solutions, but that there is a chance the paper could be sold to Dean Singleton, the only other major Bay Area newspaper publisher.
Singleton's MediaNews Group owns the San Jose Mercury News and the Contra Costa Times, and has lost several antitrust cases in recent years. Any deal with the Chronicle would require Department of Justice approval and would give one owner control of nearly every daily newspaper in the Bay Area.
The media baron refuses to comment on whether he is considering buying the Chronicle.
"We'll just watch it play out," Singleton told Editor and Publisher's senior editor, Joe Strupp, last week. "I am not going to speculate on what could happen."
But, as Strupp noted, "MediaNews remains highly leveraged."
Hearst Corporation currently holds a substantial amount of MediaNews debt, owns 31 percent of MediaNews Group newspapers outside of the San Francisco Bay Area, and recently took control of four Connecticut papers that MediaNews was managing for Hearst.
Former Chronicle city editor Alan Mutter believes Singleton could still be in the running.
Observing on his Reflections of a Newsosaur blog that "To wipe out a $50 million loss, let alone make a profit, the [Chronicle] would have to eliminate 47 percent of its entire staff," Mutter later clarified that he believes it's "extremely unlikely" that the Chronicle will reduce its staff to that extent.
"But, it will try to do some serious cost cutting, and it could be sold, potentially, to MediaNews, because Singleton would not necessarily be expected to put up any money," wrote Mutter, noting that hundreds of people involved in the Chronicle's advertising operations could be eliminated if Singleton took over, since ads for MediaNews' papers are already assembled in India. Another motivation for Hearst to find someone to take over the Chronicle lies in the multimillion dollar printing plant that Hearst just built.
"But no one expects the business to break even now," Mutter said. "If you want to make $20<\d>$30 million profit over the long term, that's not a good outcome for a business that has lost $1 billion in recent years."
Michael Stoll, director of the Public Press project, which seeks to launch a nonprofit daily paper, told us he thinks it would be "a real tragedy" if Hearst followed through on any of its Chronicle threats.
"Most San Francisco journalism is generated by reporters at the Chronicle, and its few competitors would be ill-prepared to step in and immediately fill the void," Stoll said.
Concerned that Singleton's MediaNews could try to make the case that there is a crisis and that the Department of Justice should therefore waive antitrust prohibitions against monopoly ownership, Stoll warned that "the expansion of MediaNews ownership to nearly every other paper in the Bay Area in the last two years has proven to be an unmitigated disaster in terms of a less independent voice from Santa Cruz to Santa Rosa, and from San Mateo to Contra Costa."
The Society of Professional Journalists is calling for a public discussion of Hearst's threats.
Worried that additional cuts to the Chronicle "will only exacerbate what SPJ perceives as an already growing vacuum of credible reporting and will further limit scrutiny of our public institutions," Northern California SPJ board president Ricardo Sandoval observed that closing the Chronicle "would mean losing the largest source of news for hundreds of thousands of readers in the San Francisco Bay Area."
Asking Hearst to participate in "a high-profile conversation with its community based on the imperative of reinvention," Sandoval said, "We urge journalists, foundations, corporations, the public, and public officials to join us in finding solutions to this increasingly urgent civic challenge."
As University of California at Berkeley journalism professor Bill Drummond warns, "this is not just the decline of the industry. If the mainstream media, which is supposed to be balanced and fair, goes away, if that scrutiny is no longer there, everything will be more partisan and narrower.
"And in this atmosphere where everyone is begging the government to fund their industry, what about the fourth estate?" Drummond said. "Maybe we need the newspaper equivalent of public broadcasting, with pledge drives and bake sales."