Friday, November 12, 1999

Star-Bulletin closing after 117 years

Bulletin case
big news in
San Francisco

The fate of the Examiner may
rest on a pending appellate court
decision regarding the

Associated Press


SAN FRANCISCO -- Media companies, newspaper readers and the U.S. Justice Department are watching closely for a decision on a Honolulu newspaper lawsuit that may signal whether the government will try to block the demise of the San Francisco Examiner.

Justice Department antitrust lawyers are probing newspaper deals in both cities.

Hearst Corp., owner of the Examiner, has bought the morning San Francisco Chronicle. Gannett Pacific Corp., owner of the morning Honolulu Advertiser, wants to pay the Honolulu Star-Bulletin's Florida-based owners, Liberty Newspapers LP, $26.5 million to end their joint operating agreement. The Star-Bulletin, Hawaii's second-largest paper, would close.

Both cases have clear similarities: The companies involved want to end their JOAs, close the afternoon paper and publish a morning daily without significant competition. JOAs allow for two newspapers' business functions, such as circulation and advertising, to be combined while maintaining separate newsrooms.

A Justice Department decision in the San Francisco case may depend on what the 9th Circuit Court of Appeals says about the state of Hawaii's efforts to save the Star-Bulletin.

The Hawaii newspapers' owners told the 9th Circuit in San Francisco that the $26.5 million payment simply fulfills the financial obligations of their JOA. The companies had planned for the Oct. 30 shutdown of the Star-Bulletin, but an injunction by U.S. District Court Judge Alan C. Kay in Honolulu blocked the deal. The newspaper companies' appeal of the injunction is now in the hands of the San Francisco court, and a decision is expected this month.

The state of Hawaii claims the payment is a buyout of the competition to gain a monopoly. It wants the court to force the Star-Bulletin to keep publishing while it considers the antitrust claims.

Other media companies criticized the order to publish this week in court briefs as a violation of the First Amendment.

But Assistant U.S. Attorney General Joel Klein told the appeals court that serious antitrust questions would go unanswered if the Star-Bulletin is allowed to close now.

Historically, the government has allowed many JOAs to end after newspaper owners proved their afternoon papers were such failures that no qualified buyers could be found.

Hearst hasn't said whether the Examiner is failing, and no one outside the privately held company knows its numbers.

Knight Ridder Inc. CEO Tony Ridder said he is still more than willing to get a foothold in San Francisco by buying into the JOA, which is set to expire in 2005.

"If we could step into Hearst's shoes and have the Examiner and their position in the JOA, then we would be interested. But that's not the way they're selling it," said Ridder, whose other papers in Northern California all but encircle the city.

"What they're selling now is a circulation list, the name and their newspaper racks. But they're not selling the Hearst share of the business, so there's no revenue stream, there's no printing equipment, no production equipment, no trucks," Ridder said. "Based on the way they're selling it, I don't think anybody's interested in buying it -- certainly not Knight Ridder."

Other media companies have made bids for parts of the Examiner, but none have been accepted to date. New Times CEO Jim Larkin, who owns SF Weekly, says he bid "a significant amount" for the news racks and kiosks but was turned down. "What they want to do is make everybody go away and consolidate the circulation assets into the Chronicle," Larkin said. "This is a wired game."

The Star-Bulletin's owners have made no attempt to sell the paper.

The Chronicle and Examiner's fate could rest on the appellate decision.

Boalt Law School professor Stephen Barnett, an expert on the Newspaper Preservation Act, predicts the justices will order the Star-Bulletin to stay open, at least until its owner makes a good-faith effort to find a qualified buyer.

"Whether they go further and say it has to be offered for sale with its interest in the JOA is another question, and if they say that, it would certainly have an impact on San Francisco," he said.

"The crucial question for Justice will be whether the Chronicle sale should be redone. And I think Justice might require that," Barnett said.

Ben Bagdikian, author of "The Media Monopoly," says politicians in San Francisco should follow Hawaii's example.

"I think Hawaii has energized a lot of people who thought there was nothing that could be done," he said.

Bagdikian also sees Ridder's offer, which he first made in August, as reason for optimism that Hearst can't make a failing-newspaper argument.

But Cynthia Gorney, a Berkeley journalism professor, said the idea of a hostile Chronicle competitor joining the JOA and then dividing up the assets after Dec. 31, 2005, was impractical at best.

"In Tony Ridder's view, what would be an equitable way to do this? Run a buzz saw through the printing presses?" said Gorney, who has read the fine print of their JOA. "It gives no advice as to how you split up jointly owned capital goods and things of that nature. I believe it is silent on this."

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