Troubled San Francisco paper in danger of closing

[February 25, 2009]  SAN FRANCISCO (AP) -- The San Francisco Chronicle joined the lengthening list of imperiled newspapers as its owner set out to purge the payroll and slash other expenses in a last-ditch effort to reverse years of heavy losses.

If it can't reduce expenses dramatically within the next few weeks, the Hearst Corp. said Tuesday it will close or sell the Chronicle, northern California's largest newspaper with a paid weekday circulation of 339,430.

Hearst didn't specify a savings target or a deadline for wringing out the expenses. A Hearst spokesman didn't immediately respond to messages Tuesday.

But management made it clear that the cost-cutting will require a significant number of layoffs.

"Our current situation dictates that we accomplish these cost savings quickly," Chronicle Publisher Frank Vega wrote in a memo to the staff. "Business as usual is no longer an option."

The Chronicle has given Hearst financial headaches since the New York-based company bought the newspaper in a complex deal valued at $660 million. The late 2000 acquisition proved to be ill-timed. Shortly after Hearst took control, the San Francisco Chronicle was hard hit by a high-tech bust that caused its advertising revenue to shrivel

.

The newspaper's losses have been piling up ever since, despite previous job cuts and other austerity measures that were designed to stanch the bleeding. Now the 14-month-old recession, coupled with more advertising options on the Internet, has apparently pushed the 144-year-old newspaper to the breaking point.

Having lost more than $50 million last year, the Chronicle is off to an even worse start this year, said Hearst, as advertisers clamp down on their marketing budgets and increasingly divert more money to the Internet.

Given the challenges facing the Chronicle, Tuesday's grim warning hardly came as a surprise, said Kevin Fagan, who has been a reporter at the newspaper for 16 years.

"The mood here is more upbeat than you would expect," Fagan said. "There has been a lot of gallows humor but reporters are still doing what they do -- write stories." He said the newsroom of about 275 employees is still clinging to hope that the paper will survive because there still appear to be ways to lower the sprawling operation's overhead.

Several other newspapers around the country are facing a fate similar to the San Francisco Chronicle's.

Just last month, Hearst laid out plans to close the Seattle Post-Intelligencer if a buyer isn't found before April. A similar fate awaits The E.W. Scripps Co.'s Rocky Mountain News in Denver and Gannett Co.'s Tucson Citizen in Arizona unless buyers are found for those papers.

But there would still be at least one large daily newspaper left in those other big cities where publishers are mulling a shutdown.

The only other daily newspaper in San Francisco -- a city with a population of about 800,000 -- is the Examiner, which is given away for free. Hearst owned the San Francisco Examiner, but sold it for just $100 and even provided the new owners with a $67 million subsidy as a condition for completing the Chronicle acquisition. The Examiner changed hands in 2004, and is now owned by the Anschutz Co.

[Associated Press; By MICHAEL LIEDTKE]

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