Shifting tide for newspaper JOAs

SAN FRANCISCO — In the fall of 1987, Art Agnos' political career was getting nowhere.

Agnos, a liberal Democrat, was running for mayor of San Francisco. But he lacked the pedigree: He hadn't attended St. Ignatius High School or the University of California, Berkeley, and he didn't belong to the Bohemian Club or any other touchstone of the local establishment.

The San Francisco Chronicle, the city's largest and most conservative newspaper, ignored his 100-page campaign outline, grandly titled "Getting Things Done."

Agnos, now 64, recalls the tipping point came during a September morning meeting with the editors of this city's second paper, Hearst's San Francisco Examiner.

"I'm sitting in front of William Randolph Hearst III, who is no swinging liberal, and he's firing questions," Agnos says. "Things finish up, and a couple of days later Hearst puts out the word: I got the endorsement."

Agnos won the election and he credits the newspaper's support.

What helped save his candidacy, he believes, was an unusual business arrangement known as a joint operating agreement (JOA). San Francisco's JOA exempted both papers from federal antitrust laws and allowed the faltering Examiner to share production, circulation and advertising expenses with the Chronicle, while publishing a separate, competing newspaper.

"The JOA kept them both alive, and it kept me alive politically, too," says Agnos.

As the number of JOAs in the U.S. dwindles, and the future of Seattle's own tandem newspaper arrangement grows murky, there are lessons to be learned from other JOA cities like San Francisco.

These days, newspaper people, especially high-ranking ones whose names show up on the masthead, tend to write off JOAs.

It has not always been so. The American Newspaper Publishers Association, whose successor, The Newspaper Association of America (NAA), is meeting in Seattle this week, lobbied hard for the Newspaper Preservation Act when it was passed in 1970. Former Hearst Chief Executive Richard Berlin went so far at the time as to remind Justice Department officials in a note discovered by media critic Ben Bagdikian of the near-unanimous support President Richard Nixon's re-election bid had received from JOA supporters.

"It therefore seems to me," Berlin said, "that those newspapers should, at the very least, receive a most friendly consideration."

Years later, the tone had changed. John Sturm, the NAA's president and chief executive officer, declines to discuss JOAs. But in 1999 he told the American Journalism Review, a trade publication, that the Newspaper Preservation Act "cannot suspend the laws of economics, and the economics are driving the elimination of JOAs."

"I don't think the government should change a thing," Sturm added.

'Problematic operation'

Phil Bronstein, the Examiner's former executive editor and currently editor of the Chronicle, calls San Francisco's JOA "a very problematic operation in terms of good journalism and running a reasonable and successful business."

The city's JOA ended in 1999 when the U.S. Department of Justice approved Hearst's purchase of the Chronicle for $660 million. Hearst shed the fading Examiner, turning the paper over to the local Fang family, owner of a chain of giveaway papers. The deal included a $66 million, three-year subsidy by Hearst to the Fangs, who published the Examiner as a paid-circulation daily. In February, the Fangs laid off most of the paper's staff and cut the Examiner to a five-day-a-week giveaway after the subsidy ended.

Good riddance, says Bronstein, who maintains that San Franciscans are better served by a single strong paper like the Chronicle than a couple of struggling dailies — what San Francisco real-estate investor Clint Reilly calls "mediocrity squared."

Under the 1999 arrangement, the Chronicle absorbed many of the Examiner's staff, while attempting to boost the quality of the paper. Bronstein says it reported aggressively on a recent local police scandal and remains competitive with newspapers in Oakland, San Jose and in the suburbs that ring the city.

"I don't think there's a danger people will go unheard," says Bronstein.

In Seattle, Frank Blethen, publisher of The Seattle Times, takes a similar stance. Blethen calls JOAs "dinosaurs" and says they serve only to drain resources and journalistic vitality from both participants.

Blethen, whose family controls the paper, said in an interview in January that JOAs are "not a viable long-term model." The Times, says Blethen, "bent over backward" in recent years to make its JOA partner, Hearst's Post-Intelligencer — which Blethen called "a failing paper" — as successful as possible.

For the year ended Sept. 30, according to the latest figures available from the Audit Bureau of Circulations, the industry numbers-

cruncher, The Times' daily circulation rose about 2 percent to 224,140. The P-I's circulation fell during the same period by about 7 percent to 157,558. In an internal memo last month, Blethen said The Times' circulation had climbed to 228,373 in 2002 and was forecast to reach 237,373 this year.

The effort to keep the P-I publishing, Blethen maintains, cost The Times resources that would better have benefited both the paper and its readers.

Diversity, perspective

At the other end of the journalistic pipeline, however, some readers, politicians, activists and even competitors see a different picture.

Having two papers, says Agnos, is "like giving a city two eyes instead of one. You get perspective and depth."

Ken Maley, a 57-year-old public-relations and media consultant and a member of San Francisco's gay community, says both San Francisco daily papers largely ignored the city's huge gay population into the 1980s.

AIDS was starting to cut its fearful swath, and gay businesses were becoming serious players in the local economy. Still, Maley says, "We'd get a quarter of a million people out marching on Gay Pride Day and if the papers ran anything, it would be a picture of someone in a funny costume."

That ended in 1981 when the Chronicle hired a young man named Randy Shilts to cover the gay community and AIDS. Shilts was the first openly gay reporter to cover a gay beat for a major urban daily.

He went on to write three best-selling books, including "And the Band Played On" about AIDS' impact on San Francisco and the gay community. He died from the disease in 1994.

"Before Randy Shilts was hired," says Maley, "it was very difficult to get coverage. Reporters would say, 'I've already done a story on gays. I can't do any more.' "

Not long after Shilts began reporting, the Examiner assigned its own reporter to the AIDS beat.

Agnos says there was nothing altruistic about the papers' decision to cover gays.

"It was purely a business decision," he says, "because it gave them a competitive edge over their rival."

Whatever the motivation, says Agnos, "The existence of two papers gave people who weren't acceptable to one an opportunity to be heard."

Splitting the profits

Under the Newspaper Preservation Act, JOA participants usually create a jointly run newspaper agency to handle noneditorial functions. In some cases, such as in San Francisco, the papers split remaining revenue 50-50, with each handling its own news and editorial functions.

In other cities, one paper — in Seattle, The Times — handles all the non-news operations for the agency. A 1999 revision of Seattle's 20-year-old JOA allowed The Times to move to morning publication, creating head-to-head competition with the P-I. The Times gets 60 percent of the agency income after non-news expenses and the P-I takes the rest.

Under terms of Seattle's revised JOA, Blethen can pressure Hearst to negotiate a closing date for the P-I within 18 months after he notifies his smaller rival that The Times had a loss for three straight years. If the P-I doesn't fold, Hearst could run it as a stand-alone paper, but industry experts say that would be prohibitively expensive and would still leave the P-I the No. 2 paper in the city.

If Hearst voluntarily shuts the P-I before the 18-month deadline is up, it would receive 32 percent of The Times' profit for the next 80 years.

Seattle's JOA is being closely watched, both inside and outside the news industry. In January, The Times Co. said its Seattle paper lost money for the past three years. It's not clear whether privately held Hearst — which can also invoke the three-year-loss provision — also had losses at the P-I over that period.

Neither company will say whether The Times has formally notified Hearst of the loss — the company has until September to do so — which would set the clock ticking on the shutdown deadline.

A Hearst spokesman last week said the New York-based company considers any loss-notification by The Times "proprietary information" and declined comment.

But the spokesman reiterated Hearst's previous position on its Seattle JOA — that neither company has a basis for ending the agreement. So far, the P-I shows no sign of backing off. Earlier this month, its editorial cartoonist, David Horsey, won his second Pulitzer Prize, journalism's highest accolade. The Times, which has won seven Pulitzers, had two finalist entries in other news categories this year.

Watchdog role

So who wins? Seattle, which has two dailies for now, but which Blethen insists are weaker than a single Times without the P-I? Or San Francisco, now facing the future with a single local daily voice?

The answer, says Joseph Barletta, a veteran newspaper editor and manager, is: "It depends."

"If you think the public is best served by one paper watchdogging the other paper in town, it argues in favor of a JOA, even if both papers are very stripped-down," says Barletta, who ran the San Francisco Newspaper Agency through most of the 1980s, and who has run papers in Chicago and New York. "If you believe the public is better served by a quality paper with lots of resources, you go the other way."

Bronstein, the Chronicle's editor, agrees there is no pat answer. There are too many variables, he says: a city's location, readers' expectations, the history of the papers involved.

"Doing a hell of a job," he says, "means very different things to different readers."

But, he concludes, ''in practice, it is probably better to have one great paper than six lousy ones."

Financially, the JOA debate may be more academic, unless, of course, you may be about to lose your favorite morning paper in Seattle — or your job.

The decline of JOAs seems inexorable. Counting Seattle, far fewer than half of the JOAs approved by the U.S. Department of Justice since the passage of the Newspaper Preservation Act are still going. Most died unmourned and broke.

Denver is an exception. Two years ago, The Denver Post and the Rocky Mountain News signed the first new JOA in a decade. In its application to the Justice Department, E.W. Scripps, owner of the News, said it lost $123 million over the preceding decade. Most of that, however, was depreciation on a printing plant it built in the mid-1980s, says Michael Wirth, who teaches media economics at the University of Denver.

The Post's owner, MediaNews Group, said it made about $200 million during the same period.

Both Denver papers started their JOA in relative financial health, Wirth says, and both still seem to be doing well. In October, MediaNews reported that the Post's operating profit rose $9.1 million, or nearly 4 percent, over the year-earlier period. The papers split their joint income evenly after expenses.

Circulation at each paper dropped during the year. But the agency that runs the JOA said most of that loss was expected.

The primary beneficiaries of Denver's JOA are the papers' bank balances, says Wirth. The agreement ended a circulation war that had dropped the price of a new Post subscription to a penny a day.

Gary Gerlach, whose Jeffco Publishing competes with the Denver JOA, says his five suburban papers were braced for a post-JOA assault by what he calls "the colossus."

It never happened. "They made a run at us for a while with some subsidized sections," Gerlach says, "but they shut them after a couple of months."

Journalistically, he adds, "I'd be hard-pressed to say I can see much of a difference."

Bill Richards is a free-lance writer hired on a special contract by The Seattle Times to cover events involving the joint operating agreement with the Seattle Post-Intelligencer. He can be reached at brichards@seattletimes.com.