Hearst Lays Down Gauntlet For San Francisco Chronicle, Threatens Sale Or Closure Without Significant Cuts And Union Concessions.

Posted by: Jon Fine on February 24, 2009

My half-bright idea from the early summer of 2007 was that Hearst should shutter the San Francisco Chronicle’s print edition and go all digital, at some point in the next 18 to 24 months.

Today—around 18 months later—Hearst just announced that, absent major concessions from its staff and unions, it will sell or shutter the paper. (Well, this tactic helped shake loose concessions for the Newhouses in New Jersey recently!) Messages left with a spokesman asking if the company is considering going all-digital with the Chronicle—which the company has said it might do with its Seattle Post-Intelligencer—were not immediately returned. (UPDATE: Spokesman emails back and says “If we can’t publish the paper, we will seek a buyer or close it. There is no discussion about digital only.”)

In its statement, Hearst said the Chronicle’s losses exceeded $50 million last year, and that this year they will be worse. In previously-disclosed court documents, a Hearst executive said the Chronicle had racked up $330 million in losses between mid-2000 and September 2006. (Or, uhm, around $1 million a week, and thus over $50 million a year.)

That such a hammer is being held over a paper as large as the Chronicle—the nation’s twelfth-largest by circulation—makes this a very big deal. But it’s an even bigger deal in terms of institutional capitulation. San Francisco is where Hearst patriarch William Randolph Hearst built his empire. (Okay, okay, he did it with the San Francisco Examiner, not the Chronicle. But still. The city is his company’s ancestral home.)

Interesting side note: those fancy new presses that Hearst brags about in the release? They don’t own ‘em. Meaning they’d be not-that-hard to walk away from.

STATEMENT ON SAN FRANCISCO CHRONICLE COST-SAVING INITIATIVES

NEW YORK, February 24, 2009 - Hearst Corporation announced today that its San Francisco Chronicle newspaper is undertaking critical cost-saving measures including a significant reduction in the number of its unionized and nonunion employees. If these savings cannot be accomplished within weeks, Hearst said, the Company will be forced to sell or close the newspaper.

Hearst said that the Chronicle lost more than $50 million last year and that this year’s losses to date are worse. The Chronicle has had major losses each year since 2001.

“Because of the sea change newspapers everywhere are undergoing and these dire economic times, it is essential that our management and the local union leadership work together to implement the changes necessary to bring the cost of producing the Chronicle into line with available revenue,” said Frank A. Bennack, Jr., vice chairman and chief executive officer, Hearst Corporation, and Steven R. Swartz, president of Hearst Newspapers. They added, “Given the losses the Chronicle continues to sustain, the time to implement these changes cannot be long. These changes are designed to give the Chronicle the best possible chance to survive and continue to serve the people of the Bay Area with distinction, as it has since 1865. Survival is the outcome we all want to achieve. But 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.”

Hearst noted that these cost reductions are part of a broad effort to restore the Chronicle to financial health. The Chronicle has been asking its readers to pay more for the product through home delivery and single-copy price increases. In June, the Chronicle expects to begin printing on new presses owned and operated by Transcontinental Inc., which will give the Chronicle industry-leading color reproduction capabilities.

Reader Comments

The Mad Hedge Fund Trader

March 3, 2009 10:54 AM

Looks like the San Francisco Chronicle may be about to join the dustbin of history. The industry rag, Editor and Publisher, says that the privately owned Hearst Corporation has given the venerable paper an ultimatum to cut costs or close. The 150 year old Chronicle lost $50 million last year. Of course, this may all be a ploy just to beat up one of the last surviving unions, but they have made a similar threat to their paper in Seattle. Ironically, Hearst acquired the Chronicle and dumped the San Francisco Examiner in 2,000, which was then put on a crash diet and made profitable by its new owners. If the Chronicle goes it will join the Philadelphia Enquirer which went under last week, and the soon to be shut Christian Science Monitor. Google has been eating their lunch for years, and classified ads have migrated to Craig's List. It is tough to chop down a forest to make paper, get a union to print it, and manually distribute your product, and then compete against a one man email blast on costs. If the Chronicle goes it will be survived by a much smaller SFGate.com, one of the most successful web based newspaper portals out there. There could be a ninth earning save by a surprise buyer. But moguls willing to hemorrhage






money just to promote a political view are a dying breed. Rupert Murdoch has been the only recent buyer of newspapers, and something tells me that a match with the Chronicle would not exactly be one made in Heaven. In five years there will probably be only two mass circulation papers left, The New York Times and the Wall Street Journal, with the Washington Post as an outlyer. Thousands of small, local, niche publications will take up the slack. As a long time print journalist dating back to the typewriter days myself, I am sad to see newspapers go. But you can’t exactly sit like Denmark’s old King Canute and order the tide to stop rising. Journalism is degrading into an army of guys banging away at the computers at 3:00 AM in their boxer shorts. Trust, accuracy, objectivity, style, and taste will be the victims.

The Mad Hedge Fund Trader, San Francisco, CA

March 6, 2009 11:17 PM

Looks like the San Francisco Chronicle may be about to join the dustbin of history. The industry rag, Editor and Publisher, says that the privately owned Hearst Corporation has given the venerable paper an ultimatum to cut costs or close. The 150 year old Chronicle lost $50 million last year. Of course, this may all be a ploy just to beat up one of the last surviving unions, but they have made a similar threat to their paper in Seattle. Ironically, Hearst acquired the Chronicle and dumped the San Francisco Examiner in 2,000, which was then put on a crash diet and made profitable by its new owners. If the Chronicle goes it will join the Philadelphia Enquirer which went under last week, and the soon to be shut Christian Science Monitor. Google has been eating their lunch for years, and classified ads have migrated to Craig's List. It is tough to chop down a forest to make paper, get a union to print it, and manually distribute your product, and then compete against a one man email blast on costs. If the Chronicle goes it will be survived by a much smaller SFGate.com, one of the most successful web based newspaper portals out there. There could be a ninth earning save by a surprise buyer. But moguls willing to hemorrhage






money just to promote a political view are a dying breed. Rupert Murdoch has been the only recent buyer of newspapers, and something tells me that a match with the Chronicle would not exactly be one made in Heaven. In five years there will probably be only two mass circulation papers left, The New York Times and the Wall Street Journal, with the Washington Post as an outlyer. Thousands of small, local, niche publications will take up the slack. As a long time print journalist dating back to the typewriter days myself, I am sad to see newspapers go. But you can’t exactly sit like Denmark’s old King Canute and order the tide to stop rising. Journalism is degrading into an army of guys banging away at the computers at 3:00 AM in their boxer shorts. Trust, accuracy, objectivity, style, and taste will be the victims.

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