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The Case For One Daily 

The Joint Operating Agreement deprives the Chronicle of the resources it needs to produce a great newspaper; it also prevents the afternoon Examiner from connecting with the readers it needs to survive. Since the JOA makes it inevitable that only one wil

Wednesday, Mar 1 1995

Page 4 of 7

During the same period, the Agency incurred total expenses of $5.5 million.
The weekly net, $1.5 million, was divided equally between the two newspapers.

Because the regional economy has improved dramatically since October 1993 without production costs rising appreciably (except the recent run-up in newsprint), the agency source estimates current weekly nets at $2.25 million, or about $58.5 million annually each for the Examiner and the Chronicle.

From that must come salaries for each newspaper's editorial staff --340 people at the Chronicle, 210 at the Examiner. Estimates for the Examiner put its non-payroll editorial budget at about $8 million annually, the Chronicle's at about $12 million.

The simple arithmetic reveals that before depreciation, the Hearst Corp. collects about $20 million a year and the Chronicle Publishing Co. receives just $10 million. But out of these operating cash flows (revenues minus costs plus depreciation), each company must service its debt, pay taxes and make new capital equipment purchases.

Since both companies are privately held and no one involved with the Examiner, Chronicle or the San Francisco Newspaper Agency will reveal the precise figures, we're left to speculate on how much each company is making -- or losing. The Examiner is said to be earning a few dollars, but Forbes magazine reported last April that the Chronicle "has barely been able to squeak a nickel" of profit from its revenues. This has not elicited smiles from the approximately 26 not-exactly-kissing cousins of the de Young-Thieriot family who own Chronicle Co. stock. Forbes also reported that the company put its cable TV systems up for sale last year to reduce the staggering debt of $400 million (against total revenues of $500 million) and create "liquidity" -- cold cash in the parlance of civilians -- for the shareholders.

The Hearst Corp. is reportedly happy with its net take, and why not? The Examiner generates just 15 percent of the business, but gets 50 percent of the income. The Chronicle, for exactly the same reasons, is unhappy.

Both newspapers would love to eliminate the other and find a way to make real profit from those revenues. Though the Chronicle has the beefy morning circulation and the more widely known nameplate, the Examiner has far deeper corporate pockets and, thanks to the exigencies of the JOA, less reason to sell out.

Knowing the de Young-Thieriot cousins who own the Chronicle are cash-hungry, the Hearst Corp. offered $800 million for Chronicle Publishing in 1993. After some debate, the offer was rejected, partly because the $800 million was deemed insufficient and partly because a few of the senior family members, putting principle above capital, aligned with septuagenarian Chronicle Publishing Board Chairman Nan McEvoy's remark that the Hearsts would own the Chronicle "over my dead body."

A junior de Young-Thieriot cousin recently told me: "That may be what it takes."

(Hearst's offer to buy the Chronicle did little to soothe Examiner employees' job worries: The last time the company bought a competing, larger, paper -- the San Antonio Express -- it fired its own staff at the San Antonio Light.)

During the strike that shut both papers for 12 days last November, Chronicle Publishing reportedly offered the Hearst Corp. a slice of Chronicle revenue to fold the Examiner. A similar offer by the morning Miami Herald, which promised to share profits with former JOA partner Miami News for the next 32 years, was sufficient to shut the afternoon News in 1988. It is not known whether the Chronicle offered the Hearst Corp. a limited or perpetual percentage of its revenues to close the Examiner; in any event, the offer was rejected.

There's no grand plan now unfolding in either camp to break the stalemate. Despite many analysts' assumptions, William Randolph Hearst III's January departure as editor and publisher of the Examiner is no automatic harbinger of the paper's demise. He was simply bored with his job.

Even so, spirits at the Examiner were not raised when Lee J. Guittar was named Hearst's replacement: Guittar has presided over the liquidation of three Hearst newspapers, earning the newsroom nickname "Hearst's Dr. Kevorkian." Essentially a businessman, Guittar insists he's just a transitional leader, but his reassurances don't help Examiner workers get much sleep.

It's lonely being right early. My view that now is the best time to convert San Francisco to a one-newspaper town is shared by few dispensers of Conventional Wisdom.

"The existence of two newspapers in a town keeps everyone on their toes," says Ben Bagdikian, former dean of UC Berkeley's Graduate School of Journalism. "With two newspapers, managers never delay stories, they keep on top of developments and they're more open -- someone can always sell a good story across the street."

Not surprisingly, Examiner Executive Editor Phil Bronstein concurs with Bagdikian: "A one-newspaper town would be horrible. Competition makes for better journalists, editors and photographers. There'd be a strong inclination to be complacent. Look how complacent the Chronicle is now and imagine if we weren't here to goad them."

Replies Chronicle Executive Editor Matt Wilson: "'Goad' us? The Examiner doesn't goad us. The Chronicle stands alone. Certainly from the Examiner's point of view, we are the Great Satan used to motivate their staff. I'd use the Chronicle to motivate my staff if I worked at another local paper. But we don't look at the Examiner as our main competition.

"We're a regional paper competing with local papers that include the Hayward Daily Review, the [Livermore] Tri-Valley Herald and the Oakland Tribune in addition to the Examiner. As for the merits or demerits of a one-newspaper town, more newspapers in general are a good thing, because they provide more information. But I certainly don't buy into the complacency theory. There are a lot of streets for people to cross with their stories if we don't use them."

Wilson's analysis notwithstanding, it was the Chronicle's complacency, perhaps induced by the lulling security of the JOA, that originally allowed competitors to ring San Francisco with the newspapers that now gnaw Wilson's flanks. Sensing weakness and inattention at the Chronicle, other companies successfully colonized the suburban frontiers of the Chronicle's natural territory.

About The Author

Bill Mandel


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