H. THE FANG/HEARST SHAM

After entering into its agreement with the Fangs, Hearst claimed that it had preserved competition in the daily newspaper market in San Francisco. Nothing could be further from the truth, as Hearst well knows. The transaction is a sham that will have the effect of destroying competition, not preserving it, and creating a newspaper monopoly controlled by Hearst.

The agreement, as shown, not only limits the amount of Hearst’s support to $25 million per year, but also provides incentives for the Fangs to try to operate the paper on an annual budget of $15 million, so that they can pocket the extra $5 million "no-strings" payment from Hearst. Indeed, the Fangs themselves have testified that their budget for The Examiner, if they ever get it, will be between $15 and $25 million per year; their internal planning documents place the number much closer to $15 million than $25 million, although they include a $500,000 salary for Ted Fang, with a $500,000 bonus. (PX 101, PX 104; T. Fang Depo., pp. 75-76.) Nor do the Fangs intend to put one penny of their own money into The Examiner. (T. Fang Depo., pp. 7-9.) It is not likely they could, given their statements in other litigation attesting to their straitened financial circumstances. (PX 107, PX 108, PX 109.) Their own documents also portray the amount of the Hearst subsidy as so low as to "squeeze" the Fangs so that neither The Examiner nor The Independent will be successful. (PX 104; T. Fang Depo., pp. 105-06.)

Whether or not the Fangs are right about The Independent, they are right about The Examiner. It is simply impossible to operate a daily newspaper in San Francisco in competition with The Chronicle for $25 million a year, let alone the $15 million the Fangs and Hearst envision. The Examiner going against The Chronicle on a $25 million dollar budget will fail. Apart from the Fangs, every witness who will testify in this case knows this, from Hearst and CPC executives to defendants’ experts to plaintiff’s experts. There will not be a scintilla of credible evidence in this record to support a finding otherwise.

The very experts plaintiff assembled to advise about The Examiner acquisition will all testify that the idea of publishing a daily newspaper in competition with The Chronicle for $25 million a year is absurd. The proposed subsidy of $67 million for the Fangs is roughly 25 percent of what is actually needed, a total of $250 million. If the Fangs spend only the $15 million Hearst is paying them to spend, the subsidy falls to under 20 percent of what is needed. Plaintiff’s experts, seven of whom will testify at trial, have impeccable credentials and varied and extensive experience, including direct management of key Agency newspaper functions. They have also done detailed analysis of the investment and resources required for The Examiner to be viable. (See previously filed declarations of Messrs. Clancy, Flood, Ingram, Osborn, Page, Weaver; PX 55-60, 62.)

Nor are plaintiff’s experts alone. Defendants’ experts also agree that The Examiner cannot survive against The Chronicle on $25 million a year. They go even further, opining that The Examiner cannot survive regardless of the amount spent to keep it afloat. Dr. Joseph W. McAnneny, an economist making a report on behalf of Hearst to the Justice Department, concluded that "there are no commercially viable options available to maintain The Examiner as a second competitive daily newspaper in San Francisco." (PX 94.) Hearst’s other experts, John Morton and Dr. James Rosse, both of whom advised Dr. McAnneny, concur. (Deposition of John Morton ("Morton Depo."), pp. 92-93, 97-98.) Morton has commented on national television that Hearst’s acquisition of The Chronicle will lead to Hearst’s’ "owning the only paid circulation metropolitan daily newspaper in San Francisco." (PX 43; Morton Depo., pp. 47-48.) Hearst’s lawyers in this very case have told the Court that The Examiner is an irretrievably failing enterprise. (April 13 Transcript of Proceedings, p. 6.)