Wednesday, February 16, 2005

Feeding a cornered dinosaur

Knight Ridder took a juicy morsel out of the shrinking turf of the San Francisco Chronicle today by purchasing a small but potent group of free newspapers in the high-demographic territory between San Francisco and San Jose.

The Palo Alto Daily News and its affiliated properties, which were acquired by Knight for an undisclosed sum, are not big enough to tip the scales in the competitive Bay Area market. The deal is significant, however, because it means that the Hearst-owned Chronicle now is completely cornered.

To the south and northeast, the Chron faces Knight's excellent dailies in, respectively, San Jose and Contra Costa County. MediaNews Group owns the significant newspaper franchises immediately to the north in Marin County and across San Francisco Bay in Alameda County. Farther north, the New York Times owns the paper in Santa Rosa.

The Chron stands alone only in San Francisco, unless you count the free San Francisco Examiner, which is giving the Chron a run for its readers, if not exactly poaching any of its advertisers.

The Chronicle can continue to claim the largest circulation in the Bay Area with Sunday circ of more than 540k copies (vs. 298k for the San Jose Mercury, the next closest), but its readership is hundreds of miles wide and not very deep. To maintain its gross circulation numbers, the Chron has to ship copies as far as the Oregon border, Reno and even Hawaii.

This makes the newspaper a fairly inefficient purchase for all but the largest national or regional advertisers, the very marketers whose budgets, as previously reported, are switching increasingly to targeted media that can deliver empirically quantifiable results.

The Chronicle, therefore, has the same problem as a dinosaur: A large body to support with a dwindling food supply.

When I joined the Chron as city editor in 1984, we had aggressive plans to publish zoned editions in the surrounding counties to compete with the independent papers that had not yet been acquired and professionalized by the likes of Knight, MediaNews and the New York Times. Those plans were nuked, because the Chronicle was not master of its own domain.

The Chron, then owned by descendants of the founding DeYoung family, was a 50-50 partner in a joint operating agreement with the Examiner, which at the time was owned by Hearst. Although the newspapers shared equally in the profits of the joint venture, the Ex was a dying afternoon newspaper whose circulation was less than a third of the Chron's. Even though the Chron was delivering the lion's share of revenues supporting both papers, Hearst vetoed the Chron's suburban strategy, because it would do nothing to reverse the Ex's circulation slide.

Of course, nothing could save the Ex. When the Chron went up for sale in 1999, Hearst bought it for $660 million and then paid a local group $66 million more to take over the tattered Ex.

And that's how Hearst came to be the rightful owner of a hungry, cornered dinosaur.


Blogger Susan said...

excellent post!

5:36 PM  

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