Hearst threatens to close SF Chronicle

by George Avalos, Contra Costa Times

The San Francisco Chronicle, a newspaper industry icon, is teetering on the brink of collapse unless it can find a buyer or wring painful concessions from its employee unions. If the Chronicle can't obtain the necessary cost reductions, the paper will be put up for sale or closed, Hearst Corp., the owner of the Chronicle, said Tuesday. The cost savings must occur "within weeks," according to a statement released by Hearst.

"Given the losses the Chronicle continues to sustain, the time to implement these changes cannot be long," Frank Bennack, Hearst's chief executive, and Steven Swartz, Hearst's president, said in a joint release. "These changes are designed to give the Chronicle the best possible chance to survive."

The newspaper lost $52 million during 2001, according to federal court records.

"The Chronicle has had major losses each year since 2001," the Hearst executives said.

During 2008, the Chronicle lost more than $50 million. The losses during 2009 are projected to be steeper, the executives said.

"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," Bennack and Swartz said.

The problems at the Chronicle are partly due to the dismal economy and wide-reaching industry changes unleashed by competition from the Internet. But the Chronicle also has been dogged by decisions Hearst made when it bought the newspaper in 2000.

At the time of that transaction, Hearst agreed to retain the newsroom staffs of both the Chronicle and the San Francisco Examiner.

"Right off the bat, the Chronicle was hugely overstaffed," said John Morton, a media analyst. "It was a gesture on Hearst's part to their loyal staffs. If Hearst had been more coldhearted when they took over, that would have been less of a problem. But they wound up with an overstaffed company."

William Dean Singleton, chief executive officer of Denver-based MediaNews Group, which owns this paper and most of the newspapers in the Bay Area, declined to comment Tuesday about the Chronicle situation.

Hearst paid $660 million to buy the Chronicle. But Hearst within a few years began to rue its purchase of what turned out to be a struggling newspaper, according to a Hearst executive's deposition in September 2006 for a federal court case.

"We are very dissatisfied with that investment," James Asher, Hearst's chief legal officer at that time, testified. "It is not going well."

The Chronicle is far from alone in facing a tough market complicated by a recession that has steadily worsened.

Some newspaper companies have lurched into bankruptcy. Those bankruptcy filings include the owners of papers such as the Los Angeles Times, Chicago Tribune, New Haven (Conn.) Register, the Minneapolis Star Tribune, and both major Philadelphia papers.

Other papers, including the Hearst-owned Seattle Post-Intelligencer and the E.W. Scripps-owned Rocky Mountain News, could close their doors if they can't find buyers.

Bay Area papers owned by MediaNews, including this one, have undergone staff reductions in recent years. The latest MediaNews cost-savings measures in this region include five days of unpaid furloughs for most employees.

The Chronicle has been losing at least $1 million a week in recent years.

"Despite all of our best efforts as an organization, the Chronicle continues to show staggering losses each week," Frank Vega, the Chronicle's chairman and publisher, said in a memo to the paper's staff. "Recent staff and expense reductions have not stemmed these losses."

The first of the immediate cost savings will be an across-the-board reduction in staff, Vega said. He wouldn't specify how many employees might be involved. The Chronicle has about 275 newsroom employees.

"Business as usual is no longer an option," Vega wrote.

Can a buyer be found for the Chronicle? Morton, the analyst, was skeptical.

"This is a terrible time to sell a newspaper," Morton said. "Hearst would be lucky to get the value of the physical assets if they found a buyer. Hearst has made it clear they intend to clean up their operations. They will probably shut down the Seattle Post-Intelligencer. The Chronicle is the second step Hearst is taking."

The paper also has been losing circulation. Over the 12 months that ended in September 2008, the Chronicle served an average of 354,887 daily readers. That was down 5.5 percent from the same period the previous year.

"This is all rather shocking and sudden," said George Powell, treasurer of the California Media Workers Guild. "We are in the process of digesting this."

article originally published at http://www.mercurynews.com/breakingnews/ci_11776040.

The media's job is to interest the public in the public interest. -John Dewey