The last couple of months have seen the weaker papers in two-newspaper towns file for bankruptcy, fire their staffs & announce impending doom.  A lot of this can be written off as the natural consequences of a contracting ad market and an epically bad economy; the announcement today by Hearst that the San Francisco Chronicle is facing yet another massive & painful round of layoffs came as both a surprise and not. The gut-clencher came a little bit down in the story:

The Hearst Corp. today announced an effort to reverse the deepening
operating losses of its San Francisco Chronicle by seeking near-term
cost savings that would include “significant” cuts to both union and
non-union staff.

In a posted statement, Hearst said if the savings cannot be
accomplished “quickly” the company will seek a buyer, and if none comes
forward, it will close the Chronicle. The Chronicle lost more than $50
million in 2008 and is on a pace to lose more than that this year,
Hearst said.

Downer cow dragged off to slaughter

This has led to a flurry of stories assuming that the End is Nigh for the Chronicle. The Wall Street Journal weighed in:

Observers have been waiting to see which major U.S. city will be the
first to go without a major daily newspaper, and San Francisco is a
front-runner for the role.

Over at Content Bridges, Ken Doctor muses about the other struggling Bay Area newspapers, and wonders why a viable web-based alternative hasn’t sprung up yet, in an area that’s within a hurled semiconductor of Silicon Valley (hell, I can’t figure that one out either). However, he gets close to what I think is the underlying story here:

Could the Chronicle indeed go away? Well, don’t expect anyone to buy it. The newspaper market is, to use the kind word, illiquid. Frozen solid by two minor problems: 1) the credit meltdown, which will someday ease; 2) no one knows how to hell to value a newspaper company because no one has “visibility” in future revenue, which is a nice way to say no one likes what they see ahead.

Maybe, Hearst and MediaNews, once close, but now more distant partners, can figure out some new cost-sharing plans that will pass government review.  If not, we can now imagine the Chronicle indeed closing, if it doesn’t get the “significant” cost reductions it wants. My guess given our times, is that it will get reductions, and then reduce itself in product and people to some sense of immediate sustainability. It may keep publishing, though it may scrap days like Detroit or whole sections like many of its brethren. 

My read on the threat of folding the paper is that they have run up against a wall of union contracts, and want to get around them without having to resort to Chapter 11.  The “concessions” that Hearst wants are going to be ugly – over at Newsosaur, Mutter spitballs them at nearly 50%.

At that point, mere eliminations of staff positions will not hit that target.  To eliminate half of the staff would mean that the paper quite simply would not get out. There wouldn’t be enough people to run the presses, drive the trucks, or lay out the display ads from wackjob religious sects. Not to mention, report & edit news.  That means the survivors of the cuts would have to take massive pay cuts.  Maybe the newsroom staff would meekly submit to the replacement of a paycheck with a moldy roast-beef sandwich and a family pass to Hearst Castle, but those Teamsters, well, that’s another story.

The other unsettling prospect is that Hearst would either sell the Chronicle to MediaNews, the Dean Singleton empire that has been similarly troubled, or perhaps even demand back all the money that Singleton owes the Hearsts (which I’m guessing he does not have), which would mean that Hearst would wind up taking MediaNews titles like the Merc-News or Contra Costa as a barter-type payoff.  Both moves have significant anti-trust problems, not to mention less than rosy implications for journalism in the Bay Area.

Some interesting thinking from Daniel Singer at Huffington Post on this one – on why the solution to a revenue crisis at big newspapers IS NOT to get bigger.

The big record labels’ entire business was built around moving little plastic discs around the world, similar to how a newspaper’s business was built around moving paper through a printing plant and on to you. That’s about 60-70% of the cost of producing a newspaper: getting the ink on it and moving the damn thing around. Moving things from place to place–be it plastic discs or bundles of paper–is very difficult and expensive. It’s the kind of business that rewards economies of scale and, as a result, allows for huge concentrations of power and money. It’s the kind of business that creates five major record labels and a dozen or so major news companies (that’s a generous number, actually, once you get past the first five or six you’re down to small town paper chains). It’s the kind of business that comes crashing down the quickest once its central complication–moving things from here to there–disappears. With the efficiencies of digital distribution, the established order is not simply threatened, it is broken.

So if size is a disadvantage in the New Media world, the teetering newspaper empires’ reflex to merge and merge again is perhaps the exact wrong move at this time.  If the key to web success is that overused buzzword “community,” then an amorphous conglomeration that exists mainly to cater to efficiencies in distributing an ad sales platform that grows daily less relevant, is not a move in the right direction.

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