Is MediaNews Deal Hearst’s Bay Area Exit Strategy?

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By: Mark Fitzgerald

Of all the questions that arise from William Dean Singleton’s $1 billion blockbuster deal for The San Jose Mercury News and three other orphaned Knight Ridder papers, the most confounding for industry observers is: What’s in it for Hearst?

Why, many are asking, would Hearst help Singleton?s MediaNews strengthen its already formidable northern California cluster — and potentially make life even more miserable for Hearst’s struggling San Francisco Chronicle?

Hearst is buying The Monterey Herald in northern California and the St. Paul Pioneer Press in Minneapolis, and then conveying them to Singleton’s MediaNews in exchange for an equity stake in certain MediaNews properties outside the San Francisco Bay area.

Hearst, of course, has a simple answer: It likes what MediaNews is doing longterm, and this is a rare opportunity to get a piece of its action.

But the complex deal for the four papers — which also involves the nation’s biggest newspaper operator, Gannett Co., and a nimble privately held publisher that has rapidly shed its reputation for sleepiness, Stephens Media Group–invites the kind of speculation that Singleton told the American Society of Newspaper Editors amuses him no end. “Never have I seen so many people write so many things they didn’t know,” he told the editors Tuesday–just 24 hours before the deal became official.

One of the most intriguing hypotheticals comes from Alan D. Mutter, a former Chronicle assistant managing editor and city editor at the Chicago Sun-Times. In his blog, Reflections of a Newsosaur, Mutter suggests that Hearst may see MediaNews as a way out of its troubles in the Bay.

?If you wonder why Hearst would enter into a transaction to help strengthen a direct competitor,? Mutter writes, ?the reason that comes to mind is this: Hearst hopes at some point to work with MediaNews to extricate itself from the costly problem posed by the San Francisco Chronicle, which is widely believed to be losing about $1 million per week.?

That way out: a JOA (joint operating agreement) between MediaNews and the Chronicle.

?The last six years have not been kind to the Chronicle, which has suffered a drop in advertising revenues, declining circulation, higher costs and increasing online competition,? Mutter writes. ?In short, the once-formidable Chronicle has turned into exactly the sort of troubled newspaper that JOAs were designed to save.?

In an interview Thursday, Mutter emphasizes that his musings on this topic are just that–a hypothetical, not a prediction. Mutter, who is now a managing partner of Tapit Partners, a new media venture, doesn?t pretend to have any inside information about Hearst?s intentions.

Still, it?s an intriguing possibility. Singleton, as Mutter notes, is one of the few publishers left who?s an unabashed fan of JOAs. He dominates the JOA begun in Denver when the rival Rocky Mountain News sued for peace after a hard-fought newspaper war. He jumped into the Detroit JOA last summer, and says he personally fine with the massive rewriting of the agreement giving Gannett a 90% stake in the operation. MediaNews is also partners in JOAs in Charleston, W.Va., and York, Pa.

And for Hearst, a San Francisco JOA would be deja vu all over again. For 35 years, until 2000, Hearst published its San Francisco Examiner in a JOA with the family-owned Chronicle. When it bought the Chronicle that year, it essentially paid a family that published local weeklies to take possession of the Examiner and end the JOA.

There are plenty of opportunities for MediaNews and Hearst to forge a JOA. They could combine the Chronicle with MediaNews? Oakland Tribune across the Bay. Or–and this might appeal to Singleton?s unconventional bent–they might try to craft a JOA with one or more of the Alameda Newspaper Group properties.

Either way, MediaNews would be a juggernaut in northern California.

Mutter, let?s repeat, doesn?t know if that?s where Hearst is headed, but he?s clearly an admirer of MediaNews deal even as it stands now.

?Regardless of whether the Chronicle ever joins the fold,? he writes, ?MediaNews already has put together the largest and smartest strategic rollup of newspaper properties since Guttenberg invented movable type.?

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