From: Editor & Publisher, Online
By: Mark Fitzgerald
November 29, 2006
The Hearst/MediaNews Letter: No Big Deal -- Or Deal-Breaker in the Bay Area?
Joe Alioto is never at a loss for words, but he sounded particularly ebullient on the other end of the line Tuesday night.
"What we discovered after going through 70 or 80 boxes ... isn't just a smoking gun -- it's the bullet coming out of the gun," Alioto said.
A U.S. District Court judge in San Francisco had just granted his client, local businessman Clint Reilly, a temporary restraining order (TRO) barring any sales or distribution collaboration between Hearst Corp., the publisher of the San Francisco Chronicle, and MediaNews Group Inc., publisher of the San Jose Mercury News, the Contra Costa Times, and 42 other newspapers around the Bay Area.
Judge Susan Illston denied Reilly's request for a TRO to stop MediaNews's ongoing consolidation of production and editing operations among its area papers -- but that didn't stop Alioto from crowing that the controversial and complex Hearst/MediaNews deal is going to fall apart.
Alioto and other local critics of the deal say the TRO hearing and order have found the quid pro quo behind what they characterize as Hearst's otherwise mysterious offer last summer to help a Bay Area competitor, MediaNews get even stronger. The alternative weekly Bay Guardian, which has been outspoken about the deal in print and in owner Bruce B. Brugmann's blog headlined its coverage of the TRO this way:
"Those lying newspaper barons -- Hearst, Singleton -- are nailed trying to wipe out competition."
In a series of transactions this summer triggered by Knight Ridder's decision to put itself up for sale, MediaNews bought outright the Mercury News and Contra Costa Times, while Hearst put up $263.2 million to buy the Monterey Herald in the Bay Area, and the St. Paul Pioneer Press in Minnesota. Hearst then transferred ownership to William Dean Singleton's MediaNews in exchange for a then-undisclosed equity stake -- revealed Tuesday by Illston to be 30% -- in MediaNews properties outside the Bay Area.
"This document was the knot that tied the whole transaction together, and when we cut this one, like the Gordian knot, the whole thing collapses like the house of cards," Alioto said. "It unravels the deal."
The document that Alioto and other local critics of the Hearst/MediaNews deal have seized upon is an April 26 letter from Hearst Senior Vice President James Asher to MediaNews President Jody Lodovic. Parts of the previously sealed letter were included in Illston's TRO ruling.
"The Hearst Corporation and MediaNews Group, Inc. agree that they shall negotiate in good faith agreements to offer national advertising and Internet advertising sales for their San Francisco Bay area newspapers on a joint basis, and to consolidate the San Francisco Bay area distribution networks of such newspapers," it reads in part. The letter goes on to detail an intention to use CareerBuilder.com as the Bay Area papers' Internet jobs site and Classified Ventures, with the two companies joining the networks on the same financial terms.
In her strongly worded opinion, Illston -- who in July rejected Reilly's previous attempt to get a TRO on the deal -- suggested she had been fooled by Hearst's and MediaNews's representations that Hearst entered the transaction simply because it wanted to a passive equity investor in MediaNews.
"Though defendants offered no explanation why Hearst was willing to help finance an acquisition that would only make its competition stronger, the Court did not understand that Hearst expected, or would later receive, any quid pro quo," Illston wrote. "However, the April 26 letter suggests, at the very least, that Hearst's investment was specifically tied to an agreement by MediaNews to limit its competition with Hearst in certain ways."
These kinds of agreements, she added," increase the likelihood that the transactions at issue here were anticompetitive, and illegal."
Alioto puts it even more strongly: "It's just a clandestine, secret price-fixing agreement, the effect of which is a straight-out monopoly on the Bay Area."
More important, he said, is that if Hearst cannot get its quid pro quo, it will pull out of the agreement -- taking its $263.2 million with it, and forcing MediaNews to come up with the money. Under the deal, MediaNews will get the Herald and Pioneer Press in any event, and will fold it into its California Newspaper Partnership with Gannett Inc. and Stephens Media.
"I mean, that's the story here: MediaNews has got a $260 million hole all of a sudden," said one local media observer, who insisted on anonymity.
Hearst, through a spokesman, said it would not comment on the ruling or transaction.
But MediaNews' Lodovic, in an interview Wednesday, said critics are reading way too much into the letter.
"If it truly was a quid pro quo for your investment, wouldn't you want more than a letter saying that you're willing to talk about (collaborating)?," he said.
Long before the Knight Ridder papers came up for sale, Lodovic notes, the Chronicle asked MediaNews if it might be interested in jointly printing the paper. "The fact of the matter is the Chronicle loses money, and they want to reduce their costs," he said. "It's only natural that they might look at that as one way to do it, but we told them, after looking into it, that we couldn't do it. That's a perfect example of the dialogue we have had or could have about (the Bay Area) papers."
The judge may be understandably suspicious of the publishers now, Lodovic added, but the fact is that the letter had previously been disclosed to the Antitrust Division of the U.S. Justice Department, "and they weren't troubled by it."
Since the time of the letter, MediaNews and Hearst have not discussed any collaboration, nor scheduled any meetings on it, Lodovic said. The TRO could become permanent after a hearing scheduled for Wednesday Dec. 6. But Lodovic indicated that if MediaNews formally opposes making it permanent, it would be for legal reasons to keep a clear record.
"But on the other hand, we don't care" if the companies are restrained from collaborating now, he added. "This won't impact our operations or strategic planning. It won't slow us down from anything we are doing."
And any suggestion that a restraint on collaboration will drive Hearst out of its investment deal, Lodovic says, is "grand-standing and speculating" that's not based on reality.
In an odd way, Reilly's attorney Alioto also believes it almost makes no difference whether the TRO becomes permanent. Because, he says, the deal will unravel in any case.
"And maybe now," he added, "we'll get somebody who will come in to this market to compete, so we have three or four competitors, and not this monopoly."
The SF Board of Supervisor passed November 21 a resolution urging NBC’s Telemundo to reconsider eliminating its local news programming in the Bay Area. The resolution also calls on the FCC to investigate the impact of consolidation on ethnic and immigrant communities.
Here’s the full language of the resolution, introduced by Supervisor Sandoval:
Resolution urging NBC-Universal to reconsider its decision to eliminate local Spanish news newscasts at KSTS-48 Telemundo.
WHEREAS, The Spanish speaking population in the US is large enough to warrant having television channels and local news coverage in Spanish; and,
WHEREAS, English language television stations in this country have broadcast in Spanish on Saturdays since 1958; and,
WHEREAS, Full time Spanish speaking television stations began operating in 1960; and,
WHEREAS, The public, including Spanish speaking viewers, own the airwaves; and,
WHEREAS, The broadcasters, who lease airwaves, must meet requirements and obtain a license to operate from the Federal Communications Commission (FCC); and,
WHEREAS, Section 307 of the Communications Act of 1934 includes a provision that requires broadcasters to be responsive to the needs of the local community and contribute to the common good in order to obtain a license; and,
WHEREAS, KSTS-48 Telemundo has been serving the Spanish speaking community in the San Francisco Bay Area since November 1st. 1987; and,
WHEREAS, NBC-Universal, which owns Telemundo, announced on October 19th, 2006, that it will eliminate local newscasts at six Telemundo stations –including KSTS-48 and replace them with a regional newscast out of Fort Worth, Texas; and;
WHEREAS, This structural change means that the estimated 1.4 million Latinos living in the San Francisco Bay Area will loose access to information and to a platform for voicing their concerns and struggles; and,
WHEREAS, This would also negatively impact viewers from surrounding counties, most of which are highly populated by farmworkers and immigrants who heavily rely upon “Noticiero 48” on its 6pm and 11pm editions for news and information; and,
WHEREAS, “Noticiero 48” on its 6pm and 11pm editions serves 9 counties, regularly covers the State’s Capitol, and its news coverage is instrumental for families to learn about health, education, civic participation, human and immigrant rights, and many other issues; and,
WHEREAS, “Noticiero 48” on its 6pm and 11pm editions has preserved the Hispanic Cultural Heritage through special coverage of The Day of the Dead, Our Lady of Guadalupe Day, and Cinco de Mayo festivities; and,
WHEREAS, “Noticiero 48” on its 6pm and 11pm editions was instrumental in disseminating information during key struggles for equality such as the Driver’s License Bill, the December 12, 2003 boycott, and the May 1, 2006 marches organized by immigrant families and their supporters; and,
WHEREAS, The quantity of local information would be reduced from two 30 minutes “Noticiero 48” editions to sporadic news segments that would last only a few minutes; and,
WHEREAS, The relationship between KSTS-48 Telemundo and under-served, under-represented families would be minimal if not lost, because there would not be enough reporters and news-photographers to cover their struggles and causes; and,
WHEREAS, When NBC-Universal purchased Telemundo in October 2001, they promised the viewers and the FCC that they would provide better local coverage and more resources for local communities; and,
WHEREAS, Breaking that promise shows that NBC-Universal has no commitment to Latinos and that NBC-Universal does not care if its actions are a great disservice to the Spanish speaking community; and,
WHEREAS, NBC-Universal has double standards as none of NBC-Universal’s English stations have had their newscasts cut off while 6 Spanish stations have; and,
WHEREAS, NBC-Universal is, in fact, undermining the Latino community as a whole and its decision to cut off Spanish local newscasts could even further be considered as an act of racism, discrimination and xenophobia towards Spanish speaking Latinos; and,
WHEREAS, There has not been a process to address the viewers’ concerns about losing “Noticiero 48” on its 6pm and 11pm editions; and,
WHEREAS, NBC-Universal’s decision to eliminate “Noticiero 48” on its 6pm and 11 pm editions is an example of the negative impact of media consolidation on localism; and,
WHEREAS, The Federal Communications Commission is conducting a comprehensive review of rules governing media ownership and consolidation so that localism can be protected; therefore, be it,
RESOLVED, That the Board of Supervisors of the City and County of San Francisco urges NBC-Universal to reconsider eliminating KSTS-48 Telemundo “Noticiero 48” at 6pm and 11pm as a demonstration of good faith and commitment to Latinos in the San Francisco Bay Area and surrounding counties.
FURTHER RESOLVED, That the Board of Supervisors of the City and County of San Francisco urges the FCC to investigate the impact of consolidation on ethnic and immigrant communities.
The radio giant's hometown paper muses on the subject.
Your thoughts?
The WashingtonPost today posted information confirming the recent rumors that public discontent with Clear Channel's practices has impacted the mega-corporation's bottom line:
'Clear Channel Communications Inc. has agreed to sell the company to a consortium of private-equity firms and plans to shear off more than one-third of its 1,150 radio stations, dismantling a giant that dominated the industry and became the bogyman of media consolidation for the past half-decade.'
An interview with Henry Weinstein, Legal Affairs reporter at L.A. Times
November 16, 2006
Democracy Now!
In an effort to cut costs, the owners of many of the nation's newspapers are slashing the amount of money spent on reporting and laying off staff. The impact of these mass layoffs is expected to be widely felt.
Howard Kurtz of the Washington Post recently wrote "If this erosion continues, it would be bad news for serious journalism, and good news for corrupt politicians."
Kurtz points out that journalists played key roles in exposing recent Washington scandals including those involving Jack Abramoff and Mark Foley.
On an almost daily basis reports have emerged about more newspaper layoffs. On Tuesday the executive editor of the Washington Post, Leonard Downie, Jr., announced plans to shrink the newsroom staff as part of a major transformation of the paper.
On Monday the St. Paul Pioneer Press in Minnesota said it would cut 40 full-time positions at the paper. Last week the new owners of the Philadelphia Inquirer forced out the paper's editor Amanda Bennett. Employees at the Inquirer fear the paper's new owners will layoff as much as much as a third of its newsroom staff.
In California, the owners of Los Angeles Daily News recently laid off the paper's publisher and 20 other employees. 101 jobs are being eliminated at the San Jose Mercury News. Another 111 at the Dallas Morning News. The Cleveland Plain Dealer plans to cut 17 percent of its staff.
But the most turmoil might be at the Los Angeles Times - the nation's fourth largest newspaper. Two months ago the paper's publisher Jeffrey Johnson and its top editor Dean Baquet publicly defied calls by executives at Tribune Company to eliminate more newsroom positions. Johnson was ousted in October. Baquet was forced out last week. A columnist for the trade magazine Editor & Publisher said about Baquet's firing "It is a sign that no editor who makes news first and big profits second is safe."
One of the most outspoken critics of the changes at the Los Angeles Times has been Henry Weinstein, the paper's legal affairs reporter. He has worked for the paper for 28 years. He was recently awarded the John Chancellor Award for Excellence by Columbia University's School of Journalism. He joins us in our firehouse studio.
RUSH TRANSCRIPT
AMY GOODMAN: One of the most outspoken critics of the changes at the Los Angeles Times has been Henry Weinstein, the paper's legal affairs reporter. He has worked for the paper for 28 years. He, this week, came to New York to be awarded the John Chancellor Award for Excellence by Columbia University's School of Journalism. Henry Weinstein joins us in our firehouse studio today. Welcome.
HENRY WEINSTEIN: It's great to be here for the first time. As a regular listener to the show in Los Angeles and a longtime supporter of Pacifica, I’m very -- it’s very good to be here. One of the first things I did when I moved to Los Angeles was to help put on a big fundraiser for Pacifica at the Los Angeles train station, where we honored the great journalist Carey McWilliams. So it's particularly nice to be here today, particularly at a time when, as you were talking about, the situation for -- a lot of dark clouds over the media these days. A lot of dark clouds.
JUAN GONZALEZ: Especially over newspapers, daily newspapers.
HENRY WEINSTEIN: Right.
JUAN GONZALEZ: Could you talk a little bit about what is the mood right now at the Times’s staff?
HENRY WEINSTEIN: Well, I think that people were very angry about the fact that both our publisher and then, just last week, our editor, Dean Baquet, were shown the door. You know, sometimes when an executive gets fired, it's because he’s failed to perform a good job, or there’s been some ethical lapse. Here, it was just the opposite of that. Dean Baquet has done a great job as an editor of the paper. You know, he was the managing editor or the editor over the past six years, a period where the Times, despite cutting 250 editorial staffers and having its marketing budget slashed, the paper won 13 Pulitzer Prizes.
Basically what he was shown the door for was drawing a line in the sand about staff cutbacks. And the reason he was drawing a line in the sand was because he's concerned that if the size of our staff is reduced, it's not going to be just a matter of job reduction, but it’s going to mean that we are going to reduce the number of stories we're doing, and that’s going to be a detriment to the community end and the people that read us online around the world and around the country. So, it's a serious issue at our paper. And if you look at all these other papers, reducing staff is going to mean reducing coverage and that's going to create a news vacuum that's important to citizens of this country.
JUAN GONZALEZ: And the amazing thing is that in most of these -- virtually all of these newspapers, it's not a question that they're not making money. I think, for instance, the Knight Ridder chain, before it went under, was making about a 15-or-more percent return. It’s not they're not making enough money for the demands of the -- especially the institutional shareholders and others, right?
HENRY WEINSTEIN: That's absolutely right, Juan. Our paper made about a 20% rate of return last year. Clearly, a lot of corporations in this country would be very happy to make a 20% rate of return. But Wall Street, you know, considers newspapers to be a, quote/unquote, "mature industry.” A mature industry is one that they consider do not have a lot of near-term growth prospects, so they demand even higher rates of return. They like -- some of them would like us to have 25% or 30% profit. Well, I suppose we could probably make that rate of profit if we reduced the size substantially again. But, I mean, I understand that we operate in a capitalist society and that newspapers have to make some money to grow and prosper.
On the other hand, newspapers have another role. They have a vital role in informing people in this country. That’s -- you know, we have protection under the First Amendment, because it's considered to have a vital role. And I think -- and this paper's already had cuts, you know, and the question is -- I think Dean was trying to send an important message -- is, where do you stop? Where do you stop?
And just to crystallize this issue in another way, on Dean’s last day, you know -- it's fairly typical in newsrooms when somebody leaves, they put out a mock front page sort of celebrating some of the person’s achievements and some humor. And there was a lot of that. But one thing was really -- our sports columnist, Bill Plaschke, tried to cast this with an analogy by saying it was as if Baquet was being asked to cut his shortstop, his right fielder and his first baseman, and to play with six guys. And the question is, just where do you stop?
AMY GOODMAN: So the announcement came on the eve of the midterm election coverage at the Los Angeles Times, and he’s out right after.
HENRY WEINSTEIN: That's correct. That is correct, yes. That was a very incredible day. I walked back from the cafeteria just after lunch. There was a bulletin moved on Dow Jones that he was out. A bunch of us walked down to his office, and we said, “Is this true?” And he said, “Yes, it's true,” and he then put out an announcement to the staff. We had a staff meeting, and then people carried on and put out a very good election edition.
AMY GOODMAN: The Chicago Tribune has taken over your paper, the Tribune Company that owns the Chicago Tribune?
HENRY WEINSTEIN: Well, I mean, when you say -- the Tribune bought the Los Angeles Times in 2000 in the aftermath of the Staples scandal, the Staples ethics scandal.
JUAN GONZALEZ: No, but not just the Times. The whole Times Mirror Company.
HENRY WEINSTEIN: No, no. They bought -- Times Mirror owned a number of newspapers: Newsday, the Baltimore Sun, the Hartford Courant, Allentown's paper, and then some other papers, and then the Tribune. Now, it's very large. There’s a bunch of television stations. And so, now the whole company is on the block. You know, we've got bids from equity investors in various places. Gannett’s got an offer. There's three billionaires in Los Angeles who have expressed interest in buying the newspaper.
AMY GOODMAN: David Geffen, among them?
HENRY WEINSTEIN: David Geffen has said that he’s interested. We don't know that he's made a formal bid, but two other guys have gotten together: Ron Burkle, a supermarket mogul, --
JUAN GONZALEZ: And personal friend of Bill Clinton.
HENRY WEINSTEIN: -- and Eli Broad -- and, yes, Burkle is a good friend of Bill Clinton and not a friend of one reporter, at least from the New York Post. So, the question is now, is, you know, what kind of owner will we have next? It seems like there will be a new owner. The paper could be -- I mean, the entire company could be broken up in several directions, and the main thing I think people on the staff are concerned about is that we want to have an owner that's interested in, you know, investing in the paper, trying to make the paper grow, improving our capacity on the internet, so we can better serve our readers.
AMY GOODMAN: Dean Baquet was one of the highest-ranking African Americans in the newspaper industry.
HENRY WEINSTEIN: He was the highest-ranking. I believe he was the -- well, he was certainly the first African American to be the top editor at a major American newspaper that I’m aware of.
JUAN GONZALEZ: Well, there's also a great more at the Denver Post.
HENRY WEINSTEIN: Right, right.
JUAN GONZALEZ: But, yeah, L.A. Times is a bigger city, yes.
HENRY WEINSTEIN: Right.
AMY GOODMAN: Juan, as former president of National Association of Hispanic Journalists, you have been really honing in on, really focusing on the effect of media consolidation on people of color in this country around ownership, around who's covered.
JUAN GONZALEZ: Well, I mean, clearly, we just -- we discussed last week the situation with NBC, where NBC, when its concentration announced that, since they own the Telemundo network, that they were eliminating local news programming in six cities -- not news programming, but locally originated news programming in six cities. And we’re not talking small cities. We’re talking San Jose, Phoenix, Dallas, San Antonio, Houston and Denver. So we're talking about huge cities, that they're just going to no longer have a locally originated news program. So this is an enormous problem that we're finding in terms of being able to get, at a time when the country's changing dramatically, the sufficient level of staffing to be able to really get into so many of the different communities that we're covering, whether it's in TV or newspapers.
HENRY WEINSTEIN: I mean, I totally agree with you. I mean, I think it's a very, very distressing development. It's bad for the people in those individual communities, and collectively it's bad for the nation. We need to have as many voices as we can. We need to have independent voices. That’s why I think this program plays such a vital role, particularly as the large television networks have way cut back on their coverage abroad. And anything that companies are doing that, you know, that is diminishing the amount of news is bad. And frankly, I think that, you know, perhaps the FCC ought to take a look at this.
AMY GOODMAN: You're here for a major award. You've also won the Pulitzer Prize. You have been focusing on issues, local, national, international. What do you think are the key issues that are not being covered today, in this last minute?
HENRY WEINSTEIN: Well, as I said, I think that one of the -- as you have diminished quality, I think -- I mean, diminished staffing, you have particularly a lot of cutback in the coverage of foreign news. I mean, CBS used to have a vast amount of foreign coverage. I think they're down to three or four bureaus. I’m very happy that our newspaper still has 22 foreign bureaus that I think provide just a vital service.
I mean, covering foreign news is very difficult. I have colleagues working in Baghdad and a lot of other war zones, places where I know you’ve been. It's very, very difficult to cover these stories. It’s very expensive. There are security issues, communications issues with sat phones.
So -- and you know, I always think that there's never enough stories about poor people in this country. And to the extent that news budgets tend to get squeezed, then stories that are more difficult, investigative stories, are the ones that tend to get squeezed more. So it's just a really bad development.
AMY GOODMAN: Death penalty, you’ve also covered --
HENRY WEINSTEIN: And then, I have written a lot on the death penalty, a subject that is not also nearly covered enough. So just in general, I think the less resources that you have, it tends to increase the tendency to cover the easier stories, and that's not good for an individual community or for the country or the world.
AMY GOODMAN: Well, Henry Weinstein, I want to thank you very much for being with us. And congratulations again for the John Chancellor Award. We won’t say “for Lifetime Achievement,” because we don’t want to suggest that in any way you are leaving journalism. Thank you for being here.
HENRY WEINSTEIN: Absolutely. Thank you very much.