CHRONICLE CEO PEPPERED WITH MONOPOLY QUESTIONS

By: Joel Davis Sias Says Hearst Made Best Offer



SAN FRANCISCO - While the top executive of the San Francisco
Examiner may end up losing his job over testimony in the antitrust
case brought by Clint Reilly, the top man at the San Francisco
Chronicle was also in the hot seat Tuesday. He was cornered
repeatedly on the witness stand about the paper's business plans.



Trying to prove that the Chronicle is laying the foundation for
a monopoly, aggressive Reilly lead attorney Joseph M. Alioto peppered
Chronicle CEO John Sias with one tough question after another.



Sias' testimony followed that of Examiner Publisher and Editor
Tim White, who was suspended by Hearst Newspapers Tuesday after he
indicated under oath that he made a 'horse trade' of favorable news
coverage to San Francisco Mayor Willie Brown in exchange for the
mayor's support of Hearst purchasing the Examiner.



The Hearst-owned Examiner is in a joint operating agreement
(JOA) with the Chronicle, which Hearst is buying. Reilly claims
Hearst's proposed sale of the Examiner to San Francisco's Fang
family is a sham, and that Hearst officials know the Examiner
will fold, leaving San Francisco with one major daily.



Alternately befuddled and defiant under Alioto's intense questioning,
Sias outlined the sale of the Chronicle to Hearst. He said other
bidders were offering $450 million to $500 million for the newspaper -
figures Sias said were unacceptable to the family that owns the
Chronicle. Sias added that the 24 family members who own the
paper were anxious to sell because most of their wealth was tied up in
the property. The family agreed to sell in the spring of 1999, he said.



Hearst bought the Chronicle last August for $660 million - at
least $150 million more than it could fetch from other buyers,
according to Sias. Alioto implied that the price disparity was to make
up for lost profits - estimated at more than $20 million a year - that
the Chronicle ownership would make during the remainder of its
JOA with the Hearst-owned Examiner.



Alioto asked Sias if Hearst was positioning itself for a monopoly if it
bought the Chronicle and shut down the Examiner prior to
the expiration of the JOA in September 2005. 'Is there a monopoly in
San Francisco?' Alioto asked.



'Those are your words, not mine,' Sias said.



Alioto continued on the monopoly theme, asking Sias why, for instance,
the Chronicle charges 25 cents for single-copy sales in Silicon
Valley - where the paper competes with the San Jose Mercury News
- but charges 50 cents in San Francisco. 'Are you selling the
Chronicle for 50 cents here because there is no competition?'
Alioto asked.



Sias, obviously uncomfortable with the question, paused. 'That's a
simplistic answer ... but yes,' he replied.



Alioto also asked Sias if the Chronicle, with the
Examiner out of the way, planned to target San Francisco's many
free weekly and semi-weekly publications, to which Sias replied,
'Absolutely not.'



To illustrate Reilly's contention that the Chronicle wanted to
curtail any real competition between the two newspapers, Alioto asked
Sias why he abruptly ended a cross-promotion in which Chronicle
subscribers would get the Examiner for free and vice versa.
Examiner Publisher White testified Monday that the promotion was
of great help to the smaller Examiner, which has only a quarter
of the Chronicle's circulation.



Sias said he ended the promotion because it was launched without his
knowledge. Rather than try to hurt the Examiner, he said he
simply felt the promotion was not in the Chronicle's best
interest. 'I was not a happy camper because we suffer circulation
losses at the Chronicle,' Sias noted. 'I said, 'Stop this
immediately.''



Alioto also grilled Sias for details about a confidential report the
Chronicle owners commissioned in 1999 from its investment
bankers, Donaldson, Lufkin and Jenrette. The report outlines two
contrasting scenarios of what might happen when the JOA expires in
2005. The first scenario shows a prosperous Chronicle as the
lone daily paper in San Francisco with a 20% increase in advertising
rates. The second scenario outlines a 'war' between the two papers with
a decline of ad rates up to 15%.



Despite the fact that the very-detailed report was presented to the
Chronicle owners, Sias dismissed it as inaccurate. 'I'm
confident that whoever came up with those figures is incompetent and
doesn't know squat,' Sias said defiantly.



The trial continues Wednesday in federal court in San Francisco.



Related stories:



HEARST SUSPENDS EXAMINER PUBLISHER (05/03/00)



HEARST TRIED TO BLUFF CHRONICLE OWNERS (05/02/00)



JUDGE BEGINS HEARING IN ANTITRUST SUIT (05/01/00)