Turnaround at San Francisco Chronicle shows way for legacy newspapers

The San Francisco Chronicle is for sale inside a newspaper box on October 13, 2013 in San Francisco. (Photo by Margarethe Wichert/Getty Images)

The hiring freeze started right after Jill Tucker was hired by the San Francisco Chronicle in 2006. The paper was losing tens of millions of dollars a year and shedding staff through buyouts and attrition. Layoffs started a couple of years later.

“I was the least senior reporter here for four or five years,” says Tucker, who covers K-12 education for the Chronicle. One of the senior editors who hired her told her, in 2007, that he didn’t think he’d ever hire another journalist again.

The scale and duration of the Chronicle’s losses at the time were staggering. The paper lost money for 12 years, before, during, and after the recession, hemorrhaging $50 million or more per year in 2008 and 2009, according to its parent company, Hearst Communications. In early 2009, Hearst, which is privately held, made those losses public for the first time, and announced that it would sell or shut down the Chronicle if it couldn’t cut costs quickly and deeply. San Francisco was close to becoming the biggest city in the nation to lose its primary newspaper.

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Hearst did make cuts, and it didn’t sell or shutter the Chronicle. Instead, its team engineered a complete turnaround, restoring the Chronicle to the business health it enjoyed before a troubled merger with the San Francisco Examiner in 2000. The Chronicle has been profitable for four straight years, and is adding editorial and business staff. Revenue is growing at a rate of about 4 percent per year, says Publisher Jeff Johnson. That’s at a time when revenue at most of the major publicly traded newspaper companies has continued to drop, according to Pew Research.

CJR recently visited the Chronicle to learn how the newspaper righted its ship and what lessons its comeback might have for other news organizations. The turnaround rests on an improving economy, cutbacks made during the lean years, a willingness to try new things on both the editorial and business sides, and a renewed commitment to journalistic excellence. Also crucial were two major hires: a new publisher in 2013, and in 2015, a new editor in chief, the first woman to run the newsroom in the Chronicle’s history.

I feel like we can all do the kind of journalism we believe in, and that’s the best thing you can say about any newspaper.”

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Audrey Cooper, now 39, took over as editor in chief in January 2015. Since then, the Chronicle has, among other things: started a new investigative team, with three reporters and an editor, and published investigations into a prominent local charity and foster group homes across the state; made and distributed a feature-length documentary film to go with its story on long-term AIDS survivors; led the San Francisco Homeless Project, a cooperative reporting and analysis project with more than 80 news organizations; launched Green State, a website vertical, email newsletter, and print quarterly covering the newly legal marijuana industry; and turned up the heat on routine watchdog reporting on topics such as city spending and crime on Bay Area Rapid Transit trains.

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Johnson, a former publisher and CEO of the Los Angeles Times, has been publisher since 2013. Since he took over the Chronicle’s business side, the paper has been profitable every year. The new profitability comes from both revenue growth and spending cuts, including editorial layoffs and outsourcing the printing operation. The cuts appear to be in the past, while the cash coming in the door continues to grow. Digital advertising revenue has been particularly strong, and now makes up 52 percent of the paper’s revenue, up from 18 percent in 2014, says Ginger Neal, the Chronicle’s vice president of digital sales. (Hearst does not disclose revenue totals for its newspapers.) The newspaper credits the gains in part to new products launched under Johnson’s watch, like 46Mile, an in-house digital marketing agency, and a native ad division called StoryStudio.

The basic strategy is the same at the other large Hearst papers, which are also profitable, says Mark Aldam, the president of the company’s newspaper division. But the Chronicle has been the star lately. “Clearly the market conditions in the Bay Area have helped, but the local execution has been very good as well,” Aldam says.

The multimillion-dollar losses and the threat of shutdown are now far enough in the past that staffers can joke about them. When I visited the Chronicle building in July, editors, reporters, and advertising representatives seemed to wear their survival of those losses, of $1 million or more per week, as a macabre badge of honor.

That kind of burn rate is remarkable at a daily newspaper, but not unheard of in the South of Market neighborhood that surrounds the 93-year-old Chronicle building. SoMa is the hub of the city’s, and by extension the world’s, current tech boom; the messaging company Slack is headquartered next door to the Chronicle. Like a lot of those tech companies, the Chronicle is chasing revenue growth and trying to keep up with a changing world; unlike a lot of them, the newspaper is profitable.

“After all those years of feeling like at any moment you could lose your job, that cloud is gone now,” Tucker says. “I feel like we can all do the kind of journalism we believe in, and that’s the best thing you can say about any newspaper.”

 

‘A real turnaround’

Editorial quality is a subjective thing. During the second half of the twentieth century, and into the twenty-first, the Chronicle had all the trappings of a prestige newspaper, including foreign bureaus and locally famous columnists. But its reputation for serious journalism was never on par with that of the other major papers in the state, chiefly the Los Angeles Times and the San Jose Mercury News.

“I think it was overstated how shitty we were, but it’s true, the Chronicle’s reputation wasn’t all that great,” says Carl Hall, a reporter there from 1987 until 2009 who is now executive director of the paper’s Newspaper Guild chapter, the Pacific Media Workers Guild.

“They were not really known as an investigative paper when I was there,” says Dawn Garcia, a City Hall reporter for the Chronicle from 1986 to 1991. She is now director of the John S. Knight Journalism Fellowships at Stanford University.

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These days, there’s a near consensus, inside and outside the Chronicle, that the paper is doing its best work in years, perhaps ever. While few metro newspapers are central to civic life the way papers were 30 years ago, the Chronicle has put itself back into the city’s daily conversations. The homelessness project, for example, struck a real chord, Garcia says.

“I think there has been a real turnaround for the Chronicle,” Garcia says. “San Francisco is a fabulous city to cover, but the paper feels very different as I read it now than back in the ’80s. … We did some great work, but it was not overall the kind of paper that supported the kind of vibrant investigative reporting and expertise that they have now.”

Garcia gives a lot of the credit to Cooper. The first woman to hold the position of editor in chief in the paper’s history, she is also one of the youngest editors of a major US newspaper.

“People often ask if being a woman is what’s so hard about it, and I would say it’s actually more age than gender,” Cooper says. “I never have been in a newsroom without the internet, so there’s certain things that seem very obvious to me that maybe aren’t obvious to my older colleagues.”

Cooper is a native of the suburbs of Kansas City, Kansas, and a graduate of Boston University. After college, her husband got into a PhD program at UC Berkeley, so she came to the Bay Area to break into newspapers. She started at the Tri Valley Herald, which is now part of the East Bay Times, and then spent two years with the Associated Press and five with the Stockton Record, before joining the Chronicle in 2006 as an assistant city editor.

“I always wanted to come here,” Cooper says. “Kirk and I drove to California in the Geo Metro, and he said, ‘Where do you want to go in San Francisco?’ First I said I wanted to go to Fifth and Mission and see the Chronicle building, and then I want to go to the intersection of Haight and Ashbury, because I’d studied the counterculture in school a lot.”

Audrey Cooper. Courtesy photo.

Her break into editing came at the Stockton Record, when she came to realize she was, in her words, only “an above-average reporter.”

“I was never going to be the best in the world at it, so I came to terms with the fact that I’d peaked as a reporter,” she says.

Audrey wants us to try ambitious journalism, and she gives the newsroom the time and space to do that. There is this desire to sort of push the envelope and do big projects.”

No one in charge is universally beloved, but Cooper is widely respected both in and out of the newsroom. She works hard—her 11-hour, 2,000-email days were the subject of a New York magazine interview last year—and pushes reporters and editors to try new things.

“Audrey wants us to try ambitious journalism, and she gives the newsroom the time and space to do that,” says Joaquin Palomino, one of the Chronicle’s investigative reporters. “There is this desire to sort of push the envelope and do big projects.”

The documentary on living with AIDS was a prime example. The Chronicle didn’t hire a documentary crew; it put a reporter and two of its own photographer/videographers on the project for a year.

 

Seeing green

Green State, the cannabis vertical, is another new venture, launched, naturally, on April 20. It’s not exactly groundbreaking: After Colorado legalized marijuana, the Denver Post started The Cannabist, a similar project. But Green State is the biggest effort by a mainstream news organization to cover cannabis in its biggest legal market, California.

“The working thesis behind Green State is that as stigma declines and legalization increases, the gap between the cannabis media and the mainstream media will narrow and close,” says David Downs, Green State’s editor. “Over the medium to long term, mainstream media will take over the beat. … There was clearly an opportunity for a blue-chip media company to apply its expertise to the space.”

Downs has covered the marijuana industry and its road to legalization for years, and last fall the Chronicle brought him in as a consultant to talk about cannabis coverage. Instead of just picking his brain, the paper hired him. (Disclosure: Downs and I were college newspaper colleagues, and he remains a close friend; I had dinner at his house after interviewing him for this story.)

Nearly everyone I spoke with on the business side of the Chronicle brought up Green State, unbidden, as an important revenue opportunity. The target audience is “affluent, responsible users” between the ages of 35 and 60, says Neal, the vice president of digital sales.

“We really feel like there’s an opportunity to have an upscale voice for cannabis, and really bring cannabis out of the shadows and into the wine bars, so to speak,” says Sarah Morse, the Chronicle’s vice president of marketing.

Pot ads, of course, will always be a small part of the revenue picture. Chronicle executives are also excited about the early performance of 46Mile, an agency similar to those owned by Hearst in Houston and four other markets. The target client is a small or medium-sized business that’s never hired a marketing firm before.

The agency opened for business three years ago. It had $2 million in sales in its first year, $4 million in its second, and is projected to have $6 million in its third, Johnson says. “We hope it will grow to be about a $20 million revenue stream, which would be significant to us.”

Editor in Chief Audrey Cooper pours sparkling wine during a San Francisco Chronicle staff celebration in honor of the company’s 150th birthday on January 16, 2015, about a week after she was named to the top job. Photo courtesy of the Chronicle.

StoryStudio is another new product. Last year it produced 400 native ad “stories,” and this year it’s on pace for more than 1,000, Johnson says. The division produces ads for other Hearst properties as well, primarily for the websites of local television stations. Johnson didn’t disclose sales figures, but said StoryStudio “has been a home run.”

StoryStudio and 46Mile (which Cooper and Johnson say operate completely separate from editorial operations) are two of the ways the Chronicle is trying to move beyond display advertising, both in print or online. They also represent its diversification strategy. The paper hasn’t turned itself around by doing one big thing; it’s doing a bit of everything.

The Chronicle has two websites, which allows it to try both a metered subscription model and a high-traffic, ad-supported model. The free site is SFGate.com, which has breaking news, celebrity stories and other high-traffic content. It drew 34.2 million unique users per month in the second quarter of 2017, most of them from outside of the Bay Area. That was up 10.8 percent from the monthly average for 2016, according to data provided by the Chronicle. The paper’s other website, SFChronicle.com, is for locals and subscribers, and draws 2.8 million unique visitors per month, 22.4 percent more than in 2016. It has the paper’s “premium content”: investigations, features, and everything from the print edition.

The print newspaper has around 220,000 paid Sunday subscribers and 163,000 weekday subscribers, both down from more than 500,000 in the early 2000s. Chronicle management has nearly tripled print subscription prices in that time, though, and the paper is now as much as $14 per week for seven-day home delivery. At that price, printing and delivery is no longer a loss leader, and the print business should be a sustainable niche even as it declines in popularity.

“I think I will be retired before we stop publishing seven days a week in print, and I think the paper will be around to print my obituary,” Cooper says.

 

A rocky merger

Eight and a half years ago, the Chronicle seemed to be preparing its own obituary. There was speculation at the time in the newsroom that Hearst was exaggerating just how bad things were, but Hall, the union executive, says he saw the possibility of closing the paper as “a serious threat.”

So the union agreed to amendments to its contract, including salary rollbacks, a pension freeze, the loss of seniority rules for layoffs, and the loosening of rules that prevented freelancers from doing certain work. Hall says those concessions were necessary to save the paper, but now he believes management should give back some of those benefits. Johnson, the publisher, declined to comment on whether Hearst and the Chronicle are open to walking back some of those contract revisions.

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The layoffs and the new work rules were delayed reactions to the merger in 2000 between the Chronicle and its onetime rival, the San Francisco Examiner. When Hearst bought the Chronicle and combined the staffs of the two papers, it pledged not to lay anyone off. That meant duplications all over the newsroom: “two Giants beat reporters, two outdoors reporters, two theater critics,” Cooper says. When Tucker started in 2006, she was one of five K-12 education reporters. Now, she’s the only one.

Even with new hires in the last few years, the newsroom has around 200 editorial employees, less than half its peak in the early 2000s.

Hearst is large and diversified, which helped it endure the decade of losses that followed the merger. In addition to newspapers, magazines, television stations, and digital media properties, it owns the credit rating company Fitch and a network of healthcare information businesses.

Still, $1 million a week in losses at the Chronicle was a lot to swallow. Aldam said the company was committed to keeping the Chronicle alive in part because San Francisco is where the Hearst family started its first newspaper, the Examiner.

It’s even more personal for Tucker than for most Chronicle reporters. Her husband was recently laid off by Bay Area News Group, which publishes the East Bay Times and San Jose Mercury News. Bay Area News Group is owned by Digital First Media, which is owned by Alden Global Capital.

“With my husband laid off by a hedge fund, I’m incredibly grateful that Hearst is what it is, a diversified company that’s privately held and that cares about journalism,” she says.

Countless journalists have heard their corporate managers and newsroom editors tell them the business would turn around, that layoffs were a stopgap, that this round of cuts would be the last, because the paper couldn’t possibly operate any leaner. The Chronicle staff heard that, too. The difference in San Francisco was that what they heard so far has proved true.

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Tony Biasotti is a freelance writer in Ventura, California. Find him on Twitter @tonybiasotti.