Verging on a merger surge
In a far-reaching case, Justice and the judge each ruled separately that it is not anti-competitive for MediaNews to own all but one significant daily newspaper in the San Francisco Bay Area.
These decisions will clear the way not only for the immediate acquisition of the two Knight Ridder castoffs in San Jose and Contra Costa County, but also, in the fullness of time, for the ambitious clustering of newspaper properites throughout the land, as owners buy, sell and swap properties to build ever-larger and more cost-efficient footprints in the markets they elect to serve.
Six years ago, a major newspaper transaction in San Francisco was seriously blocked by concerns about market consolidation. This time around, the deal barely braked for the speed bumps established by the antitrust laws. Compare what happened then to what is happening now.
In 2000, a local businessman and sometime-political fixer named Clint Reilly managed to halt for some six months the acquisition of the San Francsico Chronicle by Hearst Corp. Clint argued that editorial diversity and competition in ad rates would be imperiled by the sale of the Chron and the likely closing of the Examiner, then owned by Hearst.
In its eagerness to end the suit and consummate the transaction, Hearst paid a local family $66 million to continue publishing the staggering Ex and gave $2.8 million to Clint and his attorneys to compensate them for their trouble.
In an effort to reprise his campaign for editorial and advertising diversity -- and perhaps pick up a few million more -- Clint went to court a few weeks ago to challenge the MediaNews purchase on the same grounds. This time, he was rebuffed promptly by a federal judge.
"There will continue to be other sources that continue to provide consumers with 'news, editorial, entertainment and advertising content' such as the television, radio and the Internet," ruled U.S. District Court Judge Susan Illston.
Ditto, said Justice in bestowing its blessing today to the pending roll-up. ``After a careful investigation of MediaNews' proposed acquisition of the Contra Costa Times and the Mercury News from The McClatchy Company, the Antitrust Division determined that the transaction is not likely to reduce competition substantially,'' said the feds.
Taken togather, the Justice decision and the judge's order appear to reverse the long-held doctrine that multiple newspapers are necessary for a community to enjoy a diversity of editorial voices and true compeition in advertising and circulation rates.
With this long-standing legal barrier now decisively toppled, the way seems to be clear for a surge in mergers as publishers mix and match properites to gain control of the maximum number of titles in the most efficient manner in the markets they serve.
Taken to a logical conclusion, a major metro would publish not only the dominant daily but any number of small- and medium-titles serving individual suburbs or such specialized verticals as car buyers or ethnic audiences. This form of total market coverage, which is known as clustering, would give advertisers great flexibility in targeting their campaigns, while providing publishers with unprecedented efficiency in creating content, producing papers and delivering them.
If pursued constructively, consolidation offers new economic leverage for an industry struggling to maintain market share and profitability. If publishers use this opportunity only to whack costs and consequently degrade the quality of their publications, they will drive the industry to irrelevancy and ruin.
Now that the good times appear to be rolling for publishers, let's hope they roll-up wisely.