But ceding JOA to morning Advertiser may not be so easy

By Joyce Nishioka & Associated Press

Though feared for years, news of the impeding demise of Honolulu’s afternoon daily caught even the most jaded journalist off-guard, almost as if a long-ailing but resilient relative had died.

“Working here has been both a career and a second family for most of my adult life,” said Art Director Lucy Young-Oda, who began her career as an Star-Bulletin intern 17 years ago and worked her way up.

“It’s been an honor working with these people who day after day, year after year, work so hard in what we believe is so important: the people’s right to know.”

On Sept. 16, Rupert Phillips, general partner and CEO of Liberty Newspapers Limited Partnership, told the newsroom he is terminating the paper’s 37-year-old joint operating agreement with the Honolulu Advertiser. The morning paper has 102,000 weekday readers, about 50 percent more than the Star-Bulletin’s 67,500.

The next day’s front page carried the news that the paper would close Oct. 30. Almost 100 journalists -- some 70 percent of them of Asian descent -- would lose their jobs. The Advertiser said it would expand but would need only 20 to 30 people.

“My career has been spent buying troubled newspapers and turning them around. But it was just something we couldn’t do,” said Phillips. He cited declining circulation, a sluggish local economy and better investment opportunities on the mainland as factors in his decision.

Newspaper unions, though, question whether the Star-Bulletin is indeed fatally hemorrhaging cash, and they wonder why Phillips decided to close it rather than offer it for sale. According to feature reporter Cynthia Oi, it was reported at a union meeting that Phillips was making 12 percent profit annually but that it wasn’t enough for him,” she said. As it stands now, “there is no guarantee any of us will get jobs.”

If the closure goes through as planned, Phillips will get more than $30 million for shutting down the Star-Bulletin,13 years before the JOA was to expire, according to Guild administrative officer Wayne Cahill. That sum is believed to be based at least in part on savings that Gannett could realize from being relieved of its obligations to print a second paper.

Phillips refused to discuss the details of that payment except to say that investors who bought the paper in 1993 would recoup at least their initial investment.

Union leaders now say their attorneys are in contact with the U.S. Justice Department, which oversees antitrust issues. Moreover, union leaders say, Gov. Ben Cayetano has already directed state Attorney General Earl Anzai to look into the matter.

A CONSOLIDATED HISTORY

Both the Advertiser and the Star-Bulletin were started by Henry Whitney, the son of New England missionaries who came to the islands in the early 19th century, when Hawaii was an independent kingdom. Whitney founded the Pacific Commercial Advertiser, the precursor to the Advertiser, in 1856 and then the Daily Bulletin, the forerunner of the Star-Bulletin, in 1882. The Daily Bulletin merged with the Hawaiian Star in 1912.

In 1961, the Star-Bulletin was purchased by an investor group headed by Honolulu financier Chinn Ho, previously a director of the Honolulu Advertiser. A strong believer in saving money, Ho pushed strongly for a joint operating agreement between his then-dominant paper and the family-owned Advertiser, on the verge of bankruptcy at the time.

Management of the Star-Bulletin shifted to the mainland when Gannett Corp. bought it in 1971. A year after buying the Advertiser from the Twigg-Smith family, Gannett, sold the newspaper to Liberty in 1993.

“The talk was that the deal was made so that Gannett could buy the Advertiser,” recalled Oi, who said Phillips had gotten a handsome payback for his part of the deal. As for the Star-Bulletin, she said, “it didn’t matter if the paper made money or didn’t.”

After that, Gannett shut down one of the Star Bulletin’s three editions as well as its Sunday edition and quit distributing the paper outside Oahu, according to Oi.

“A lot of merchants wanted to sell the Star Bulletin. Because it was an afternoon newspaper, it published the closing stock prices,” she said. “But they couldn’t get it distributed to them.”

DISSOLUTION IN QUESTION

Phillips said he does not need Justice Department approval to dissolve the JOA and that Liberty initiated the idea of shutting down the paper because “there wouldn’t be a buyer for it.”

But the law that sanctioned JOAs almost 30 years ago was intended to keep more than one editorial voice alive in a city, even if it meant exempting papers from antitrust rules that would otherwise bar them from consolidating production and other operations.

Under the Newspaper Preservation Act of 1970, JOAs normally require government approval to put together and to take apart. However, a few agreements -- including San Francisco’s and Honolulu’s -- took place before the law passed in 1970. For most observers, that makes the rules that Honolulu may have to abide by especially perplexing.

Longtime media consultant and newspaper analyst John Morton said it is not clear whether Honolulu’s dailies have followed federal Department of Justice procedures in moving to terminate the agreement or whether they are “flying blindly in the night.”

Morton also expressed surprise that Gannett and Liberty agreed to terminate the JOA now, saying that such agreements typically end when the weaker newspaper drops to a fifth of the circulation of the stronger. However, that had been the case in San Francisco for at least five years before Hearst announced on Aug. 6 that it planned to buy the San Francisco Chronicle and shut down its Examiner if no buyer could be found.

As with Honolulu, the Department of Justice has heard plenty of pleas from San Franciscans seeking to keep two dailies in town. District Attorney Terence Hallinan has not ruled out a suit to block the sale and the shutdown of the Examiner, and insiders have publicly wondered whether the terms of its sale -- reportedly $300 million for the paper’s name and a tiny circulation list -- are a sham concocted simply to satisfy Justice Department authorities.

Boalt Law School professor Stephen Barnett said the newspapers can dissolve the JOA as long as they “meet the requirements of the law” by showing the failing newspaper can’t be sold -- but Liberty should be made to try, he said. “I think that is what the law is, and the Justice Department should require it.”

John Flanagan, editor and publisher of the Star-Bulletin, noted that the Honolulu JOA had significant differences from San Francisco’s. San Francisco’s JOA, like Honolulu’s, sets up joint printing facilities, ad departments and distribution networks. But unlike the island JOA, San Francisco’s was from its 1965 inception a deal between two independent companies.

“I think there’s been some misunderstanding of what Liberty Newspapers owns in Honolulu,” Flanagan said. “In 1992, Gannett purchased the Advertiser, including the printing plant, the equipment, the real estate and sold to Liberty the right to print content for the Star-Bulletin.”

Flanagan said he isn’t aware of any legal provisions that prevent them from dissolving the JOA without DOJ approval. Liberty Newspapers has no tangible assets to put up for sale, he said. (But on the other hand, neither does the Examiner.)

Even if Liberty agreed to try to sell, it would be unlikely to get any offers since Liberty itself could set the terms as high as it wished, according to UC Berkeley journalism professor Ben Bagdikian.

And as for dissolving JOAs, he said, the Department of Justice “has been very permissive.” Generally, he said, the feds let media corporations do what they want “under the free-market philosophy.”

He does see one exception, which he alluded to in an interview about the San Francisco JOA: “organized pressure.”

LEADERS REACT

Honolulu bigwigs, including former mayor Frank Fasi, are stepping up to that task.

“The federal government ought to look into that,” Fasi said. “Both newspapers have said people have the right to know, but we don’t know the back-room deals that were made. They haven’t told us.”

Since 1993, he said, both papers have been “totally controlled” by Gannett and the Hawaii Newspaper Agency, the JOA arm of the two papers. By creating a monopoly, he said, “Gannett is doing what a lot of corporations are doing. They live by the philosophy of more profit.”

Cayetano, who was quoted last month as saying, “I could care less if there is one or two papers in the state” has since changed the tenor of his opinion on the issue. Press Secretary Kathleen Ricuya-Markrich said he “empathizes with the employees and reporters who work hard to make a good afternoon newspaper.”

Whether the Star-Bulletin closure meets the intent of the Newspaper Preservation Act is a key question for the governor, Ricuya-Markrich said. “He recognizes that this is a trend that is happening to daily newspapers nationwide.”

“It is always sad to see an important institution in our society disappear,’’ said Sen. Daniel Inouye, D-Hawaii. “We will now have just one voice. It is in Hawaii’s best interest to have competing voices.’’

U.S. Rep. Neil Abercrombie, a critic of the Honolulu JOA, wants the U.S. Justice Department to investigate the situation. He questions whether the JOA allows one competitor to pay another to shut down and if Gannett will pay an undisclosed amount to end the JOA early.

“I can’t say with any definitive sense as to whether it’s a prosecutable fraud but it certainly is a fraud in the sense of the spirit of what the JOA was ostensibly aimed at,’’ Abercrombie said.

He and Cayetano asked whether the Star-Bulletin should have looked for a buyer who would have kept the newspaper going.

Leaders of the Hawaii Newspaper Guild and ILWU, two of the unions which represent employees of the newspaper and the Hawaii Newspaper Association, say the newspaper is making money and that they believe that Phillips has an obligation under the JOA to keep it running.

The unions hope to show that the closure would cause irreparable damage to the community. While the legal process could go on for years, but the immediate goal is to slow the process, Cahill said.

Oi said the Hawaii Newspaper Guild, which represents journalists, has asked for involvement from Congress as well as the Justice Department. Still, she said, “Things are not hopeful. The Department of Justice doesn’t care about a small newspaper in Hawaii,” she said.

THE DIVERSITY QUESTION

Some observers, however, say that the loss of one of Honolulu’s two white-owned dailies won’t worsen coverage of the multiethnic community -- because stories lack so much already.

Mark Santoki, editor of the monthly Hawaii Herald, said that the Star-Bulletin seemed to cover ethnic issues better than the morning paper, but that neither has done a great job. Despite largely Asian American staffs, he said, API coverage has been “inadequate to begin with. To us it’s the same. The two newspapers are pretty much in cahoots.”

Santoki said that to him, the Star Bulletin did a better job in covering local and ethnic communities than the morning daily, but added that neither was adequate. “Two-thirds of the population is API but that is never really reflected in the daily papers. You’re likely to see Samoans and Tongans in the sports and crime sections but there aren’t in-depth feature stories on them.”

Michael J. Fisch, president of the Hawaii Newspaper Agency and president and publisher of the Advertiser, said his paper would add six to eight pages to the paper Monday through Saturday and three more on Sunday, according to the Star-Bulletin article. And Advertiser managing editor Jim Kelly said he hopes that the new developments improve his paper in many ways, including that of diversity coverage.

“We want to increase our focus on local coverage,” he said, “Both newspapers do a pretty good job, but by bringing in staff and increasing space, we think we will be able to do an excellent job every single day.”

Like Santoki, Edwin Quinabo, associate editor of the Hawaii Filipino Chronicle, said that if there was an edge, the Star-Bulletin had it. “We are disappointed. The Star-Bulletin covered issues with relevancy to the Filipino community and other subcultures,” he said, adding that he thinks it is likely that the Advertiser will continue to ignore those issues.

Kelly said he “wouldn’t dispute” contentions that his newspaper’s content is not representative of Asian American communities. But he added, “I think we do a pretty good job of representing everyone. It would be hard to go through a day without reading a quote from someone who isn’t white.”

Still, he admitted that doesn’t mean “the paper can’t do better.”

“It’s more than just getting a quote. We are planning to look deeper into the different communities, whether it’s the Filipino and native communities or the Japanese American community, and cover the issues in each of these communities.”

LOOMING LAYOFFS

The announcement that Honolulu’s papers were to dissolve their JOA came barely six weeks after similar news broke in San Francisco. But unlike journalists at the Examiner, who like those at the Chronicle have been promised a job for a year, if no buyer is found and the two papers merge, those at the Star-Bulletin have been promised far less: a week of severance pay for every year of service, health benefits through Nov. 30 and help in finding work elsewhere. And unlike either San Francisco daily, both of which have less than 10 percent Asian American representation, the Star-Bulletin’s editorial workforce is 70 percent API, while minorities make up 48 percent of the Advertiser staff and 53 percent of its managers.

The Star-Bulletin, though, is not alone in its hard times. Hawaii’s economy is in the midst of a deep recession. The same week, a community newspaper publisher announced that three remaining Sun Press community newspapers will publish their final issues on Sept. 30.

Ken Berry, publisher of RFD Publications, informed advertisers in a letter Monday that escalating costs and other factors prompted the termination of the Kailua, Kaneohe and Hawaii Kai weekly newspapers. It was not known how many jobs are affected by the latest shutdowns, or if they were precipitated by worries that a beefed-up Advertiser would go after its markets with copycat publications.

At various times, Sun Press has had eight community newspapers on Oahu. The most recent to be closed was the Central Oahu edition, in October 1997. At the time, Berry cited declining advertising revenues.

For his part, though, Quinabo said he doubts Gannett would ever try to come out with a copycat version of the Hawaiian Filipino Chronicle. “Ethnic newspapers are not profitable businesses in Hawaii,” he explained.

A FINAL SADNESS

Fewer than 50 American cities today have more than one daily newspaper. And if a city has two or more papers, chances are they’re in a JOA -- less than 20 cities support two papers independent of each other.

“Publishers are looking at it from the point of view of profit making, not what newspapers are about.” Oi said. “ They need to realize that newspapers are part of the community. They have an impact on what happens in the community. People depend on newspapers.”

News editor Curt Brandao has worked at the Star-Bulletin for only a year. He said he will probably go back to the mainland if it folds.

“I don’t have the ties others do,” he explained. “Most more than want to stay; they need to stay. The area is such a part of their lives. It’s real heartbreaking. This organization was like a family.”