JUDGE ORDERS DELAY IN SALE OF CHRONICLE

By: Joel Davis

Temporary Restraining Order Stands Until April 13



from this week’s Editor & Publisher magazine:



After a dramatic eight-month roller-coaster ride, it figures that the
sale of the Chronicle to the Hearst Corp. and the Examiner to the Fang
family will have a cliffhanger ending.



Shortly after the U.S. Justice Department on March 30 approved the
Hearst Corp.’s $660-million purchase of the Chronicle, a federal judge
halted the sale until at least April 13.



U.S. District Judge Vaughn R. Walker issued a temporary restraining
order blocking the deal. Walker pointed to concerns about Hearst’s plan
to sell the Examiner to the Fang family, owners of the thrice-weekly
Independent.



The judge halted the purchase in response to a suit filed by San
Francisco political consultant/developer Clint Reilly, a former mayoral
candidate who made an unsuccessful bid to buy the Examiner. ‘There are
serious questions raised about the viability of the present
transaction,’ Walker said in court. The deal, he said, does not ensure
the Examiner ‘will be a competing newspaper in the long pull.’



Ted Fang, the young maverick publisher of The Independent, has told E&P
that his family has a history of making money-losing newspapers
profitable. He said the family can make money with the Examiner, even
without being part of the Chronicle and Examiner’s existing joint
operating agreement, and after an annual subsidy worth a reported $66
million over three years runs out. Fang plans to compete directly with
the Chronicle by switching the 120-year-old afternoon Examiner to a
morning paper with paid circulation.



‘We believe that San Francisco is a market that is looking for a
special kind of newspaper, and we want to be that,’ Fang said.
‘Certainly, the same people who are saying that the Examiner will never
succeed long term are the same folks who said the Examiner could never
be saved in the first place.’



Chronicle attorneys contend the newspaper will lose about $100,000 in
interest income every day the sale is delayed. The judge ordered Reilly
to put up $100,000 as a bond, and his attorney, Joseph Alioto, plans at
the April 13 hearing to call up to 15 witnesses who will argue that the
Examiner will not survive with the existing Hearst subsidy. Alioto at
last Thursday’s hearing cited declarations from newspaper business
observers who said it would take a subsidy of $250 million over five
years for the Examiner to survive.



Media experts contacted by E&P have little doubt that Reilly, who ran
for mayor against Willie Brown – whom the Fang family fiercely supports
– has political motivations in blocking the deal.



‘I think it’s clear Clint Reilly has a political vendetta against the
Hearst Corp.,’ said David Cole, whose company, NewsInc., covers media
trends.



Bay Area-based media critic Ben H. Bagdikian, author of ‘The Media
Monopoly,’ agrees, although he calls the Hearst Corp.’s subsidy of the
Fang-owned Examiner ‘very awkward’ – a first of its kind in the history
of American journalism. ‘I’ve never seen a case in which a buyer of a
monopoly newspaper in a two-newspaper city has agreed to subsidize the
buyer of the second newspaper to compete with it.’ Hearst, subsidizing
the Fangs to run a paper, Bagdikian said, ‘has earmarks of paying
ransom to get the antitrust investigators and the Department of Justice
off Hearst’s backs.’



Bagdikian added that in previous deals involving competing newspapers
in large cities – most of them involving one newspaper paying its
jointly operated competitor to shut down – the government has usually
declined to launch antitrust investigations and has stayed out of the
deals. ‘This is different,’ he said.



If Reilly’s lawsuit evolves into a drawn-out trial, it could jeopardize
the deals, Bagdikian noted, because it could cost ‘a lot more money’
and may ultimately be more trouble than it’s worth. ‘The $660 million
Hearst paid for the Chronicle is a lot of money just to be sitting out
there,’ he said.



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~



Joel Davis (winston2@reachme.net)
is West Coast editor for Editor & Publisher magazine.



For full details of the Fang family’s purchase of the Examiner, see
‘Moving Heaven and Hearst’ in this week’s print version of Editor &
Publisher.









(c) Copyright 2000, Editor & Publisher

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