New 'Examiner' Owners: Expect Seismic Shift in Bay Area

By: Mark Fitzgerald With the $66 million purchase subsidy from the Hearst Corp. long ago tapped out, it figured that the Fang family might want to sell the San Francisco Examiner. What just about nobody in the newspaper industry figured was that they would find an enthusiastic buyer.

"Well, we fooled them, didn't we?" Scott McKibben said with a laugh in a telephone interview after the formal announcement Thursday that Philip Anschutz, the billionaire investor who founded Qwest Communications, was buying the Examiner plus the Independent semi-weekly newspapers; the newspaper and commercial printing business Grant Printing Co.; and the Examiner's "Bay to Breakers" long-distance running event.

McKibben had been CEO of the Fang Family newspapers since moving from William Dean Singleton' s Oakland, Calif.-based ANG Newspapers across the Bay. In Anschutz's new publishing group, SF Newspaper Co., he will be president and publisher of the Examiner and Independent papers.

Another top executive took a certain delight in how the deal took the industry by surprise. "We are here to announce a seismic shift in Bay Area journalism," Robert Starzel said at the beginning of the press conference announcing the purchase. Starzel, a long-time associate of the reclusive Anschutz who did not attend the announcement, will be chairman of SF Newspaper Co.

The key to understanding the deal, McKibben argued in the interview, is to look beyond the storied Examiner name -- and the chaos that has dogged it in the three years the Fangs have owned it.

"While the sound-bites are going to be all about the Examiner, this is a large publishing company buy that has four components to it," he said.

McKibben scoffed at the report by Ron Harris of The Associated Press, which cites an anonymous source close to the deal, that "Anschutz is paying $20 million for the daily that Florence Fang and her family bought from the Hearst Corp. in 2000 for a dollar."

"I wouldn't believe that. I would refute that," he said. "You know how expensive newspapers are." McKibben declined, however, to disclose or comment on the value of the transaction.

The biggest newspaper piece is the Independent, which distributes some 360,000 copies of editions in San Francisco and San Mateo County. "It is just a gorilla. It's the largest non-daily newspaper -- newspaper, not shopper or Pennysaver -- in the United States, audited by VAC (Verified Audit Circulation)," he said. The papers are 95% home-delivered and cover 91% of households in their ZIP Codes, McKibben said.

Combining the suburban reach of the Independent papers, which publish two or three times a week depending on zone, with the city-focused Examiner makes a marketing vehicle that can stay competitive with Hearst's San Francisco Chronicle, McKibben said.

"This is an opportunity to come into a really great market, the fifth-largest in the United States ... that has one newspaper, that, while it's a good newspaper, quite candidly (its) household penetrations are such that the advertisers cannot achieve the penetrations they need to achieve," he said.

Another big piece of the deal, McKibben said, are the two facilities in Grant Printing, which house automated packaging equipment, a "most modern" computer-to-plate system and two lines with 31 units of Goss Community presses. "We have plenty of firepower," he said. About half of Grant's printing business is outside commercial work, including a number of newspapers, McKibben said.

The "Bay to Breakers" event, which attracts huge crowds of participants and spectators for a typically San Franciscan un-serious "race," will provide opportunities for sponsorships and relationships with big corporations such as Nike and Home Depot, McKibben added.

Still, much industry attention will focus on the Examiner, which has been a business soap opera for some time. McKibben said it is still too early to say exactly what business model the Anschutz group will settle on.

Under the Fangs, much of the newsroom staff was jettisoned, and McKibben suggested that the skeletal crews would not be permanent. "We intend to get bigger and better and bulkier," he said, "and most of the time, when you do those things you're going to need additional staff."

The Examiner and Independents will share content, and the combined ad sells will be similar to strategies pursued in Chicago by the Sun-Times and its Hollinger International sibling weeklies or the Boston Herald with its weeklies, McKibben said.

Anschutz will not put pressure on the papers, McKibben said: "The two biggest things he brings are patience -- and money. He is a builder of businesses, he has a vision. This is not one of those deals where he walks in and says, 'In 12 months, I want the rate of return to be this or that.'"

This is a first newspaper purchase for Anschutz, whom Forbes magazine ranked as the 33rd richest individual in the U.S. "He has an absolute passion for news and newspapers," McKibben said.

The Examiner -- home at various times to writers ranging from Jack London to Hunter S. Thomson -- can excite passion, but may also prove a trying love interest. Under the Fangs' ownership, the reputation of the storied Examiner suffered one blow after another.

"The perception that I have of the Examiner is that (the Fangs) tried to suck all, I mean all, the profits out of it -- even worse than our usually rapacious newspaper companies," said J.T. "Tom" Johnson, a journalism professor at San Francisco State University. Though he lives in the city and passes Examiner boxes every day, Johnson said he rarely picked up the paper more than once a week. "Whoever this (new owner) is and whatever he does with the Examiner, it can only improve," he said.

Even improved, the Examiner would face an uphill fight, Johnson added, because of the revitalized presence of the San Francisco Chronicle under Hearst. "One of the great turnarounds in American journalism is what the Chronicle has done with its paper," he said. "Many, many days there are breaking stories that we were not used to seeing in the Chronicle before. They're doing a much better job than the average newspaper in America."

Anschutz is only the fourth owner of the Examiner in its 139-year history -- yet he'll also be the third proprietor in just the last four years. The Examiner's present era began in the summer of 1999 when Hearst, then publishing the newspaper in the afternoon in a joint operating agreement with the Chronicle, bought the Chronicle and sought a buyer for the Examiner. In 2000, Hearst in effect paid the politically active Fang family, which published the semiweekly free-distribution Independent newspapers, to take the Examiner off its hands. Hearst agreed to pay a $66 million operating subsidy over the next three years. The subsidy ran out last July.

The Fang ownership was tumultuous from the start. At one point, family matriarch Florence Fang fired her own son, Ted Fang, and took his place as publisher. Paid circulation drifted from 96,000 copies daily at the time of the transaction with Hearst to what management said was 40,000 to 50,000. In February 2003, the paper fired 40 journalists, about two-thirds of the newsroom, and announced the paper, recently redesigned as a tabloid, would be published Mondays through Fridays and distributed for free.

Last summer, the paper, which many report can be hard to find in the city, launched four new editions in the suburbs of the San Mateo Peninsula. In its story on the Examiner sale Thursday, the paper said the Verified Audit Circulation (VAC) reported that a "six-month sample period" from April to September, 2003, showed its distribution had increased from 53,390 to 66,834. The paper added that the circulation "has reached 73,000 daily" but did not attribute the figure directly to VAC. Meanwhile, for the six-month period ended Sept. 30, 2003, the Chronicle reported to the Audit Bureau of Circulations that its paid circulation was 512,640 daily and 561,118 on Sundays.

The Examiner reported that negotiations for its purchase began last December and that a letter of intent was signed on Dec. 23.

Anschutz is a Denver-based billionaire who founded Qwest Communications and grown his Anschutz Co. on an eclectic collection of investments that range from railroads and agriculture to movie theatres and the Staples Center arena in Los Angeles. He is part-owner of several sports teams, including the Los Angeles Lakers, the Los Angeles Kings hockey team and the San Jose Earthquakes of Major League Soccer.

The Examiner reported that Anschutz has run in the newspaper's "Bay to Breakers" race a dozen times since the 1980s.