I expect my acquisition of the Chronicle to start a trend. "Negative purchasing" of media assets will sweep the country. It will end only after the pleasant homeless guy who sits against the front of Sam's Bodega at 20th and Valencia accepts $1 billion to take AOL Time Warner off AOL Time Warner's hands.
The insulting phony corruptive absurdity of the Hearst Corp.'s "sale" of the Examiner to the Fang family is impossible to overstate. But let me try; by aiming way up over the top, I might get somewhere near the awful truth of this monumental charade.
The fundamentals of the deal appear to stack up this way: On Friday, the Hearst Corp. agreed to pay the Fang family millions of dollars over three years to take the Examiner, and run it in competition against the Chronicle, which Hearst is acquiring.
This give-the-buyer-wads-of-cash "sale" may seem strange to you, even though you live in San Francisco, where denying the ordinary workings of commerce is a hallowed tradition. Because I have observed the intersections of politics and business for some 20 years now, this arrangement has a stronger effect on me. To me, it looks strange in the particular, San Francisco Democratic machine way that always raises the question: So how far are they pushing the unlubricated broomstick up inside us this time?
A couple of feet, I'd guess.
But I'd have to guess, because the most absurd component of this "sale" is the secrecy that surrounds it. Here, supposedly, we have the sale of a major daily newspaper, whose fate has been the subject of public controversy. The sale supposedly is a way to preserve San Francisco as a two-daily town, to obliterate antitrust concerns surrounding the pending acquisition of the morning Chronicle by Hearst, which also owned the afternoon Examiner. In other words, the rationale for the sale is supposed to be one of public interest -- protecting San Francisco from the evils that attend a one-daily monopoly. The sale involves two companies that publish newspapers, and that should, therefore, cherish the free flow of information.
So, of course, neither Hearst nor the Fangs were giving out the important details of the deal as it was announced last week.
A new Fang company called ExIn LLC apparently is to pay something to Hearst for the Examiner. How much? And who constitutes ExIn LLC? Well, Hearst wasn't saying. Ted Fang, the publisher of the Independent, didn't return my phone calls, and I haven't seen him quoted anywhere as to the amount, or the makeup, of the new Examiner owner-to-be. (A Chronicle story quoted anonymous sources to the effect that the amount was "nominal.")
The Hearst press release on the "sale" said the company would make a "significant financial commitment" to the new owners over some vague period of time. That time period was initially announced as three years, but a Hearst spokesman refused to say how much a "significant" financial commitment might be, or to confirm a time period, or to explain why the sellers of a newspaper were paying the buyers, rather than the other way around. The spokesman even declined to say why there was so much secrecy about the deal. "No one's asked that question," he said, before explaining that no one at Hearst was answering it, either. (A Chronicle story quoted anonymous sources as saying Hearst would provide the Fangs $25 million a year over as much as three years.)
Even though the players in this deal have provided little information, what has transpired here seems illogical, even idiotic, if looked at through a normal business prism. That's probably because this is not a normal business transaction.
The Hearst Corp. announced in August that it had agreed to buy the Chronicle, for a reported $660 million; the antitrust experts at the U.S. Justice Department needed to approve the purchase, because Hearst already owned the Examiner. In theory, Justice could have balked if Hearst had simply closed the shrinking, money-losing Examiner, ending the joint operating agreement under which the Ex and Chron had cooperatively published and creating a one-paper Chron monopoly. So Hearst put the Examiner up for sale, first in a farce of an offering that included few of the assets necessary for the Ex to continue publishing, and then a second time, in a more realistic sale package.
Supposedly, the Fangs won out in the bidding on this latter package. That is -- supposedly -- the Fangs made the best of all offers submitted for the Examiner.
But if we are to believe what has been reported about this transaction, the Fangs didn't buy the Examiner, in a normal sense -- they agreed to be paid a lot of money to take a portion of its assets that did not include real estate or printing presses. If this is the case, and if the Fangs' offer really were the best to be presented to Hearst, then there most likely would be no legal grounds requiring the deal to happen. Antitrust law might require Hearst to sell the Examiner to a legitimate bidder willing to pay a legitimate price, as a way of fostering continued competition in the San Francisco newspaper market; I can imagine no legal requirement that the Hearst Corp. subsidize -- to the tune of $75 million -- a newspaper with which its new Chronicle would compete.
So if this "sale" doesn't look like any kind of sale you've ever seen, and if it doesn't seem to be required by law, what kind of sleazy shadow-play is it that's being projected in front of us?
From the time Hearst announced it intended to buy the dominant morning Chronicle until very recently, the Fangs' Independent and its political allies have been engaged in a classic bullshit San Francisco mau-mau campaign. The Independent mau-maued Hearst in repeated "news" stories whose offenses against good journalism are so numerous and blatant as to be difficult to list, much less describe, in this short space. That is, the Independent did what it has done in the past, usually during election cycles -- pretend to be a newspaper, and actually act as a political bludgeon, swung against the enemies of Fang, and the enemies of the friends of Fang.
Accompanying the Independent mau-mau came the political sector mau-mau, as the San Francisco Democratic machine, led by Willie Brown, jumped up and down and waved its collective hands and bemoaned the loss of editorial voice that would follow if the Examiner were to close.
There is no way I can know, for certain, what effect this loud mau-mau campaign had on the Justice Department attorneys in charge of reviewing Hearst's acquisition of the Chronicle. I just know that the political players doing the mau-mau have connections high in the Clinton administration, that the mau-mauing went on for a long time, and that the Justice Department just couldn't seem to get around to finishing its review of the Chronicle deal for months and months.
If I don't know all the details about the mau-mau campaign, I do know what the proposed Examiner conveyance apparently brought on by the mega-mau-mau looks like: a shameful political payoff that serves the needs of the mau-mauers and the mau-maued, lets the Justice Department pretend it did its job, and screws the public.
If the Examiner is "conveyed" in this way, the Fangs' new firm will receive multimillion-dollar subsidies that serve no purpose I can see except to give the family control of a medium that can be used to spew, on a daily basis, the type of lopsided venom the Independent is known for.
If the Examiner is conveyed in this way, Willie Brown's Democratic machine, which is closely allied with the Independent, will have a house organ that will tend to print the machine's self-serving propaganda while masquerading as a metropolitan daily newspaper.
If the Examiner is allowed to be conveyed in this way, the Hearst Corp. will very likely end up with the daily monopoly it apparently is seeking -- once the subsidies it has agreed to cough up run out, and the Fang Examiner goes belly up.
And if the deal goes through, everyone else in San Francisco will be subjected, at least occasionally, to the type of slanted garbage Fang publications far too regularly publish.
But, one might argue, if Hearst is willing to throw millions of dollars out the window, and the Fang family is willing to catch them, what's the harm in that? If the Fangs want to try to revive a failing daily, isn't that a good thing? And even if what results is a bad paper that dies quickly, so what? Why is that worse, for the general public, than having the Examiner die immediately?
The answers to those questions are clear to me; let me try to make them clear to you.
First, as it now stands, the public has no way of knowing that the Fang bid for the Examiner was the best option for encouraging the long-term existence of San Francisco's second daily. If they expect the public to swallow this weird deal as the best that could be struck, the Hearst Corp. and the Fangs need to provide all its salient details -- including the price to be paid, the amount of the Hearst subsidy, and the names of any financial partners the Fangs might have. And then Hearst needs to say who else bid on the Examiner, and give enough details of the other bids to explain why they were inferior to an offer from a family that seems, from the outside, to have nowhere near the financial wherewithal to run a major daily newspaper.
The second reason the Fang acquisition of the Examiner ought to be viewed with an extremely jaundiced eye has to do with the government's role in this little charade.
When one news media organization appears to be gaining unfair control of a news market, it is just and right that the antitrust division of the U.S. Justice Department step in. Clearly, there was reason for Justice to review Hearst's intended purchase of the Chronicle, which could, at least in theory, have led to an unnatural Hearst monopoly over San Francisco's daily newspaper market.
But the Fang acquisition of the Examiner raises real questions about whether the deal has anything to do with antitrust concerns. From the limited information available to me, I have formed an opinion about the proposed Examiner sale, and this is what the deal looks like to me: The Independent and the Democratic machine jointly mau-maued Hearst and the Justice Department, creating enough public hubbub and/or private political pressure to freeze Justice in its tracks. With Justice frozen, Hearst couldn't get a sign-off for its plan to buy the Chronicle. Eventually, because Justice wouldn't move, Hearst gave in to the mau-mau, agreeing to subsidize the Fang purchase of the Examiner, because even if paying millions of dollars, for no real legal reason, to a friend of the mayor was an indignity, that payout would probably cost less, in the long run, than continued stalling, or an antitrust action (no matter how groundless), by the Justice Department.
In other words, in my opinion, the Fang-Hearst deal creates an appearance that the Justice Department's antitrust operation, either knowingly or ignorantly, allowed itself to be used to grind a whole lot of money out of the Hearst Corp., to the benefit of a family that just happens to be very close to Willie Brown, who just happens to have serious stroke with the Clinton administration. In fact, the Justice Department all but blessed the deal beforehand, agreeing to limit the review period for the Fang acquisition of the Examiner to just 10 days.
It is hard to feel sorry for Hearst, which has plenty of money and has, in my view, behaved shamefully (and shown it will cave when the stakes are high enough, thereby making itself vulnerable to repeated mau-mauing here in the home of the mau-mau). But it is easy to believe that there is something strange-looking about the role the antitrust section of the Justice Department played in this deal.
It's even easier to think that another part of the Justice Department -- perhaps its public integrity section -- needs to investigate this entire matter, to find out whether Justice has done justice, or just danced the San Francisco mau-mau, to a cockeyed tune played by political hacks.
