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American Journalism Review
Subsidizing the Enemy  | American Journalism Review
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From AJR,   May 2000

Subsidizing the Enemy   

By Susan Paterno
Susan Paterno (paterno@chapman.edu) is an AJR senior contributing writer.     


The most entertaining American newspaper war so far this century will surely take place between the Chronicle and the Examiner in San Francisco. If only the lawyers would get out of the way.

For Hearst, owner of the Examiner, acquiring the 465,000-circulation Chronicle will be like getting Park Place and Boardwalk: San Francisco is "the queen city of the Pacific Rim," says the ever-controversial San Francisco Independent columnist Warren Hinckle.

But nothing is ever that simple.

Because the Examiner and the Chronicle are partners in a joint operating agreement, the U.S. government, which sanctions and monitors JOAs, required Hearst to sell the Examiner before it bought the Chronicle to preserve competing editorial voices in the city. Since Hearst needed the U.S. Justice Department's approval to acquire the Chronicle, it was no surprise that a buyer for the Examiner was found: Pan Asia Venture Capital Corp., a family company run by Ted Fang, which owns the alternative San Francisco Independent, AsianWeek, Chinese TV Guide and nine free weeklies in the Bay Area.

In the Examiner deal, Hearst agreed to subsidize Pan Asia's investment reportedly up to $66 million over three years, effectively ending the joint operating agreement and allowing the paper to convert from afternoon to morning delivery. (Hearst wouldn't confirm or deny that dollar amount, and Fang refused comment.) Hearst will also merge the existing Chronicle and Examiner staffs, guaranteeing all newsroom employees jobs. In late March, the Justice Department approved the deal.

Enter the lawyers.

Attorneys working for San Francisco politico Clint Reilly filed an antitrust lawsuit to stop Hearst from buying the Chronicle. If allowed to go through, the attorneys argued, the deal would let the Chronicle run the 109,000-circulation Examiner out of business, giving Hearst an illegal monopoly.

During a March 30 hearing, U.S. District Judge Vaughn Walker was "amused" by the notion that Hearst would pay a competitor, observed reporter Dan Reed in the San Jose Mercury News. Reed described an exchange between the judge and an attorney representing Hearst: " 'Is this some sort of (charitable) operation?' Walker asked [the] Hearst attorney...who responded that the subsidies were given 'to be on good terms with the community and because of politics.'

"In other words," Reed wrote, "pressures to show the deal was no sham."

The deal to sell the Examiner hinges upon the outcome of a May trial, which has led the Pan Asia contingent to rally the foot soldiers in a manner akin to Henry V assembling his vastly outnumbered troops against the French at Agincourt. With the passion of the St. Crispin's Day speech, Hinckle, who says he'll be a high-ranking editor at the new Examiner, delivered a ringing endorsement of the Fang family's ability to survive against the Hearst-owned Chronicle in an online interview with Suck.

The new Examiner will combine an "ass-kicking and wild and fun" daily with the "freedom and swiftness and expansive opinions of the Net," a sensibility "not reflected in any American newspaper," he says.

Hinckle has a long history as a counterculture journalist, starting in the early '60s when he edited the lefty magazine Ramparts. He also has written for or done editing stints at the Chronicle and the Examiner, and says his unofficial job title at the new Examiner will be "Director of Hijinks and Surprises."

Nowhere is this war more needed than San Francisco, where the Chronicle and the Examiner "are the objects of national ridicule," he continues. "These papers are piss-poor examples of what can happen to corporate journalism in this country. And when you look at the anomaly of the newspapers themselves being so poor in such a swinging, multiethnic, Pacific Rim, new media, dot-com city as San Francisco, you've got to ask yourself, 'How did these sorry bastards get themselves into this situation?' And now they're going to take the staffs of these two boring papers and merge them into one bigger boring paper. It's a joke."

Well, responds Chronicle Managing Editor Jerry Roberts, "I try never to get in a pissing match with a skunk."

And, adds Examiner Executive Editor Phil Bronstein, "We wish Warren well in his new venture, and genuinely hope he feels better soon."

Stephen Barnett, a law professor at the University of California at Berkeley with expertise in joint operating agreements, says of the new Examiner's ability to survive: "I'm skeptical. But I'm hopeful." He calls the experiment in San Francisco "revolutionary."

"You're restoring the competition that existed before the joint operating agreement. As long as it lasts, it's revolutionary," Barnett says. And how long is that? "Well," he says, "at least three years."

Hinckle concedes theirs is "an uphill battle." But, he adds, "If anybody wants a job or has a good idea for a story, get in there. We're open for business. Too bad more people in journalism don't see that as good news. They can't, because their entire existence is a protected, cautionary environment where they think that they're processing news, and most of what they're processing is just caution and drivel."

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