Claim: MediaNews cutting staff to prepare for Hearst deal (Dinosaur Media DeathWatch™)

Papers face new request Temporary halt to discussions sought in court - Carolyn Said, Chronicle Staff Writer Thursday, November 23, 2006

A federal judge is pondering a new request by San Francisco businessman Clint Reilly to temporarily put the brakes on a complex deal among the owners of almost all the daily newspapers in the Bay Area.

Reilly, a real-estate investor and former candidate for mayor, filed an antitrust suit in July against Hearst Corp., publisher of The Chronicle, and MediaNews Group, publisher of the San Jose Mercury News, Contra Costa Times, Oakland Tribune, Marin Independent Journal and several other Bay Area dailies, in an effort to stop a partnership between the two newspaper companies that he claims will harm newspaper competition and diminish choice for readers and advertisers. This spring, Hearst put up $263.2 million toward MediaNews' $1 billion acquisition of the San Jose and Contra Costa papers, plus two other papers.

Judge Susan Illston is expected to rule early next week on Reilly's request for a temporary restraining order to stop Hearst and MediaNews from discussing potential Bay Area collaboration and from possibly consolidating operations of The Chronicle, Mercury News and Contra Costa Times.

Reilly contends that the two publishers intend to combine all their Bay Area operations. Hearst and MediaNews say no such amalgamation is in the works, but they are interested in exploring lawful areas of collaboration. Before hearing arguments in U.S. District Court in San Francisco on Wednesday, Illston said she was leaning toward granting part of Reilly's request to temporarily bar the publishers from some discussions, but was not inclined to step in and temporarily stop the way they are operating the newspapers.

In July, she denied Reilly's previous request for a temporary order to block the sale of the San Jose and Contra Costa papers to MediaNews, saying the issue could be resolved in a trial at a later date.

Reilly's attorney, Joseph Alioto, claimed that an April 26 letter between Hearst and MediaNews, which discussed potential collaboration on national advertising, Internet advertising and newspaper distribution, showed the companies are engaged in price fixing.

But lawyers for Hearst and MediaNews said the letter simply agreed to explore "competitively innocuous" possible areas of collaboration that are commonplace among adjacent newspapers. They said the publishers have not discussed collaboration since the April 26 letter was signed.

The companies are considering selecting a single national advertising firm to jointly represent all their Bay Area newspapers to make them more attractive to national advertisers, a market where newspapers have less than 5 percent share, Hearst attorney Daniel Wall said. Creating "a Bay Area buy" to offer advertisers circulation of over a million readers combined is similar to existing newspaper ad affiliation networks, he said.

The publishers are also considering the possible creation of a new company to distribute their newspapers to homes and commercial outlets, including coin boxes, Wall said. But he scoffed at the idea that such an arrangement would be anti-competitive.

"Does anybody choose a newspaper based on whose truck it comes in?" he asked rhetorically.

Underlying Hearst and MediaNews' arguments is the increasing competitive pressures newspapers face from the Internet and other forms of media.

"These are tough times for the newspaper industry," Wall said, after saying that The Chronicle is losing $1 million a week, a situation that cannot continue. Unless the papers can act to cut costs and increase revenues, "everything Mr. Alioto and Mr. Reilly purport to be fighting about is going to go away," he said.

The Reilly lawsuit also is unfolding against a backdrop of shifting media alliances.

A deal announced Monday between Yahoo Inc. and seven newspaper publishers, including Hearst and MediaNews, to collaborate on Internet job listings was discussed in the hearing but is not part of Reilly's suit.

Since acquiring the San Jose and Contra Costa papers, MediaNews has announced a series of layoffs and cost-cutting moves, such as consolidating back-office functions. Outside court, Reilly claimed those cuts show MediaNews is gutting the newspapers so that eventually it and Hearst can consolidate all operations, at which point it would be too late to undo the deal.

Like many documents in the case, the April 26 letter was not made public. Illston had previously granted the newspaper companies' request to seal much of the evidence because they want to keep their internal business documents confidential.

Related...

Interview: David Carr
Journalist Q&A
PR Week USA Nov 27 2006 10:40

David Carr helmed alternative weeklies in Minneapolis and Washington and wrote for various magazines before joining The New York Times several years ago.

Today, he reports and writes a weekly media column, in addition to the "Carpetbagger" blog, which covers the movie industry's awards season.

PRWeek: Why did you get into journalism?

David Carr: I thought it sounded cool. And I turned out to be right.

PRWeek: How is it working at the New York Times versus at an alt-weekly? Can you still express yourself as much?

Carr: I think I express myself far too much. I don't feel limited by the bandwidth of discourse at the New York Times. I think it's made me a better writer, a more serious writer. Between doing general assignments, culture writing, a business column and doing a blog, I get to write a bunch of different ways. My editor in culture is out of alt-weeklies—Sam Sifton, he's from the New York Press… there's been a rolling, sort of organic development of what constitutes a New York Times writer, and thankfully it's expanded enough to include the likes of me.

PRWeek: How well do you think the newspaper industry, and the Times in particular, is adapting to the current economic situation?

Carr: A couple years ago, [Times publisher Arthur] Sulzberger started talking about secular change in the industry, which is sort of ‘secular as opposed to cyclical.' That's the kind of stuff CEOs say, but as it turned out it's true in profound ways. I think print, because of its file size, was the first to be disrupted in a real basic way by digital media, with music following with the fatter file, and video with still fatter files. The only difference, at bottom, for most industries is the size of their files. [As far as] the overall [newspaper] industry, I was looking at Romenesko yesterday; I find those headlines frightening. It's different than covering other sorts of industries that are going through these tectonic changes, because I know a lot of these changes are landing on people that I know. And young journalists that I trained at the Washington City Paper confront the kind of career uncertainties that I never did. There was always one more job. And when these large media organizations, whether magazines or newspapers, start cutting from the bottom based on seniority, they're going to end up turning out a lot of the next generation of talent. And I find that frightening.

The newspapers operate with two pedals: one is consumer revenues, one is advertising revenues. And historically, newspapers, and especially the New York Times, have been able to push on those levers. When ad dollars were slow to get more out of the consumer on the circ side; or, leave circ alone and push the ad rates a little bit. Those pedals have lost compression, so there's far less operational stability.

What I've noticed in magazines is that the magazines that are in the middle—that deal in information that can be easily replicated and put online, or replaced by unbranded content—are in a lot of trouble. [But] if you look at, I don't know, Condé Nast, it's doing pretty well. I would hate for publishing to be a business built on a niche called ‘Rich people who read.' But there is a segment of the population that requires a corporeal artifact of branded journalism. And the Times—I guess on a stock level it hasn't performed well, but on the circ side, it's done pretty well, and maintained ads pretty well—and I'd like to think that if the leadership makes the right move, they'll figure out a niche business that just happens to number in the millions.

PRWeek: Do you think all the print jobs that are disappearing will get picked up on the web side, or do you think those jobs will disappear for good?

Carr: I can't tell. I would really like to know that, because I have a daughter at Madison, and she brought up journalism school the other day. And I thought, ‘what advice am I going to give here?' Obviously I want her to pick up all sorts of skills, and be able to report and create information in all sorts of different ways, but I just want to make sure that there's going to be a place for her to land. So I do not know the answer. As the industry reconfigures, I know that there'll be some significant frictional pain. Does that end up being a much smaller business? Probably, but I was talking to Floyd Norris, who's a business columnist, [and] his theory is that in order for us to have a robust, well-staffed Baghdad bureau, which is a very expensive thing, that the consumer has to participate on some level. And going forward, is that micropayments [on the website]? Who knows what it is? Others disagree, but I do think Floyd is onto something.

PRWeek: So they have to find a way to get money off the web that's comparable to the money they're losing from the web these days?

Carr: I guess so. To me, there are models out there. I think that iTunes was an example of a simple, easy user interface, combined with payments that people find easy to digest, and a device that makes that media easy to access. I lost any interest in stealing music the minute I could pretty much get what I wanted on the web, and pay what I viewed as a legitimate fee. So I do think that that's something worth looking at.

PRWeek: In terms of political reporting, do you think the rise of blogs and Fox News have changed the way the Times approaches it?

Carr: I gotta say, I think that stuff is good for our business. Because it's this endless sort of viral marketing, whether people are taking a stick to our reporters or defending them. Our political coverage is the subject of constant discussion, annotation, promotion. You see it everywhere out on the web. And our own political blogs [are] fairly robust. I just think that's a space we're going to continue to play in, and play well in. The web, when it comes to politics, is such a polarized place, that third-party information, information independently gathered and reported to a certain standard, I think has real and enduring value.

PRWeek: Do you think that journalism's economic hard times mean that the PR industry stands to gain more power in the media equation?

Carr: Journalism and advertising are a little more out of position than PR. PR is about being in the conversation, and as long as PR firms stay nimble enough to know where the conversation is occurring and where the touch points are for being part of that conversation, it's a little easier to adapt.

As, metabolically and functionally, [journalism] changes, the chances of either error or getting spun, I think, increase.

PRWeek: Do the new blogging and video tasks make your job harder, or are you enthusiastic about them?

Carr: I'm very enthusiastic about having a job. And I mean that. I'm really grateful to be working…in the union terms, they would say it constitutes a ‘hurry-up,' and in technical terms, I suppose it is. None of it cash-flows, none of it means more money. But when it comes to us, our newspaper being there for whatever the future ends up being, I'm totally into that. I'm happy to get in the boat and row. I don't feel like I'm getting duped. Everybody is having to work really hard, and think in remarkably different ways—on the marketing side, on the circ side. I'm not being asked to do anything different than anybody else in the organization. And the editors are really thinking about this stuff. I got a note from leadership this week about the videos, and I just thought, ‘Oh my god, they're actually looking at this stuff and worrying about this stuff.' So it doesn't feel marginal. And the thing is that, at a place like the New York Times, almost everybody works really hard all the time anyway. When I first went to work there, I asked the guy who hired me, ‘What are my hours going to be like?' And he started laughing! He said, ‘You're going to work a lot. That's what your hours are.' And he was right.

As a media columnist—and I was reluctant to take on a media column, just because I'd been writing about media for a long time, and was doing general assignment reporting and enjoying it a lot—as it turns out, no better time to cover media. And it's not because of deal flow, it's because of platform flow. You have networks coming up off of 15-year-old business models; radio's being challenged by non-broadcast alternatives; movies wondering if their files are going to be shrunk to downloadable size, and whether they should look at [different release models] as a result. These are incredibly dynamic times, and as a media columnist, it's not like ‘Oh, what am I going to write about?' There are targets of opportunity everywhere you look. Of course, I inhabit that industry, and I've got to try to hop from lily pad to lily pad until I'm done. There's a lot of pain and misery out there, and some of it's being felt by people I know. But the story itself—and as journalists we always go with the story—it's a great story. It's an epic story.

PRWeek: Any words of advice to PR people?

Carr: A fax is a very reliable technology. To call me and say, ‘Did you get my fax?' The answer is always yes. E-mail, same way. Very reliable technology. The PR people that do best with me are the ones who don't call about the misdemeanors. I understand that people are paid for the number of times and the number of contacts they make. But if I don't hear from somebody for a while, and they call me and say, ‘I've thought about this, and I think that this is something that will work for you,' I'm always going to listen to them, as opposed to the person who's calling me every time there's a new EVP at Schmeckler Inc.

I think, given the velocity of our business, moving on busy media people with some sort of strategic sense is all the more important. Everybody's hair is on fire. Don't put up a bunch of clutter there, just so you've got billable hours. Every industry that I've covered, I've always ended up having a couple of flacks that I come to rely on and trust. And they share the same characteristics: they never lie; they don't just call you when it's about them; they're interested in seeing their business covered in comprehensive ways. In other words, they'll call you about a story that may or may not intersect with their client's interests. And when a tough topic comes up—and it always will—they never duck. They go right at it. There's just as happy to hear from you when things ain't great as when it's a nice friendly story. They don't change. [Others], the minute they have some tough information to deal with they go fetal, and don't return your calls back.

You know, life is long. I'm still dealing with people I was dealing with 12 years ago. And so having transactions that have integrity on both ends makes a difference.

The same for reporters; if you're the type of person who does a story and is happy to throw a grenade over your shoulder, pretty soon, you're not going to have much room to work.

Name: David Carr

Title: Media columnist and reporter

Outlet: The New York Times

Preferred contact method: carr@nytimes.com

Web site: www.nytimes.com

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