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VOLUME 10
PAGES 2037 - 2294
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
BEFORE THE HONORABLE VAUGHN R. WALKER, JUDGE
CLINTON REILLY, )
)
PLAINTIFF, )
)
VS. ) NO. C 00-0119 VRW
)
THE HEARST CORPORATION, )
ET AL., )
)
DEFENDANTS. )
____________________________)
SAN FRANCISCO, CALIFORNIA
MONDAY, MAY 15, 2000
TRANSCRIPT OF PROCEEDINGS
APPEARANCES:
FOR PLAINTIFF: JOSEPH M. ALIOTO LAW FIRM
ONE EMBARCADERO CENTER, SUITE 4000
SAN FRANCISCO, CALIFORNIA 94111
BY: JOSEPH M. ALIOTO
ANGELINA ALIOTO-GRACE
ATTORNEY AT LAW
SHULMAN, WALCOTT & SHULMAN, P.A.
121 WEST FRANKLIN AVENUE
MINNEAPOLIS, MINNESOTA 55404
BY: DANIEL R. SHULMAN
JAMES HILBERT
ATTORNEYS AT LAW
(APPEARANCES CONTINUED ON FOLLOWING PAGE)
REPORTED BY: JO ANN BRYCE, CSR, RMR, CRR, FCRR
JUDITH N. THOMSEN, CSR, RMR, FCRR
OFFICIAL REPORTERS, USDC
COMPUTERIZED TRANSCRIPTION BY ECLIPSE
2038
1 APPEARANCES: (CONTINUED)
2 FOR DEFENDANT SHEPPARD, MULLIN, RICHTER & HAMPTON
HEARST CORPORATION: FOUR EMBARCADERO CENTER, 17TH FLOOR
3 SAN FRANCISCO, CALIFORNIA 94111
BY: GARY L. HALLING
4 THOMAS D. NEVINS
ATTORNEYS AT LAW
5
BAKER & HOSTETLER LLP
6 1050 CONNECTICUT AVE., N.W.
SUITE 1100
7 WASHINGTON, D.C. 20036
BY: GERALD A. CONNELL
8 ATTORNEY AT LAW
9 FOR DEFENDANT LATHAM & WATKINS
CHRONICLE PUBLISHING 505 MONTGOMERY STREET
10 COMPANY: SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
11 BY: PETER K. HUSTON
J. THOMAS ROSCH
12 GREGORY P. LINDSTROM
ATTORNEYS AT LAW
13
FOR INTERVENOR- MC CUTCHEN, DOYLE, BROWN & ENERSEN
14 DEFENDANT EXIN, LLC: THREE EMBARCADERO CENTER, SUITE 1800
SAN FRANCISCO, CALIFORNIA 94111
15 BY: DAVID M. BALABANIAN
CHRISTOPHER B. HOCKETT
16 THOMAS S. HIXSON
ATTORNEYS AT LAW
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1 I N D E X
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DEFENDANTS' WITNESSES PAGE VOL.
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5 FANG, TED
DIRECT EXAMINATION BY MR. BALABANIAN 2044 10
6 CROSS-EXAMINATION BY MR. HALLING 2193 10
CROSS-EXAMINATION BY MR. ALIOTO 2202 10
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1 I N D E X
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PLAINTIFF'S EXHIBITS W/DRAWN IDEN EVID VOL.
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122 2043 10
6 126 2159 10
7 DEFENDANTS' EXHIBITS W/DRAWN IDEN EVID VOL.
8 E-133 2100 10
E-134 2108 10
9 E-135 2165 10
E-137 2164 10
10 H-1188 2043 10
H-1205 2042 10
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2041
1 MONDAY - MAY 15, 2000 8:45 A.M.
2
3 THE COURT: VERY WELL. GOOD MORNING, COUNSEL.
4 MR. ALIOTO: GOOD MORNING, YOUR HONOR.
5 MR. HALLING: GOOD MORNING, YOUR HONOR.
6 THE COURT: MR. ALIOTO.
7 MR. ALIOTO: SIR.
8 THE COURT: MISSION ACCOMPLISHED; WAS IT?
9 MR. ALIOTO: YES, SIR. THANK YOU VERY MUCH. I'M
10 HERE PHYSICALLY, YOUR HONOR.
11 THE COURT: GOOD.
12 MR. HALLING?
13 MR. HALLING: YOUR HONOR, AS PART OF OUR CASE, WE
14 WOULD LIKE TO OFFER THREE EXHIBITS. ONE -- THE FIRST ONE IS
15 THE JUSTICE DEPARTMENT PRESS RELEASE ON SAN ANTONIO, WHICH YOU
16 ASKED ABOUT ON FRIDAY. WE'VE MARKED IT AS EXHIBIT 1205. IT'S
17 BEEN SERVED.
18 AND, JUST FOR THE RECORD, I HAVE TWO OTHER EXHIBITS.
19 1188, HEARST 1188, WHICH IS THE STIPULATION PERMITTING SALE AND
20 ORDER IN THE HAWAII CASE WHERE THE PARTIES AGREED THAT THE
21 PAPER WOULD BE PUT UP FOR SALE OUTSIDE THE JOA WITHOUT A
22 SUBSIDY. THAT ORDER IN THE HAWAII CASE SIGNED BY THE JUDGE IS
23 OUR EXHIBIT 1188.
24 THE THIRD EXHIBIT IS PLAINTIFF'S EXHIBIT 122, WHICH
25 IS A LETTER FROM MR. SIAS TO MR. BENNACK DATED APRIL 23, 1998.
2042
1 THE COURT: MR. SIAS TO BENNACK?
2 MR. HALLING: FROM SIAS TO BENNACK. IT WAS USED IN
3 MR. BENNACK'S EXAMINATION BUT OUR RECORDS SHOW IT'S NOT IN
4 EVIDENCE. SO AT THIS POINT I WOULD LIKE TO OFFER THOSE THREE
5 EXHIBITS, H-1205, THE SAN ANTONIO PRESS RELEASE; H-1188, THE
6 HAWAII STIPULATION AND ORDER; AND P-122, THE SIAS-TO-BENNACK
7 4/23/98 LETTER.
8 THE COURT: VERY WELL. I ASSUME THERE'S NO
9 OBJECTION, MR. ALIOTO?
10 MR. ALIOTO: NO OBJECTION TO ALL OF THEM EXCEPT FOR
11 H-1205, YOUR HONOR.
12 THE COURT: ALL RIGHT.
13 MR. ALIOTO: THE GROUNDS FOR THE OBJECTION IS THAT
14 IT'S HEARSAY, ESPECIALLY THE LAST PARAGRAPH. NO WAY TO VERIFY
15 IT.
16 MR. HALLING: THIS IS A PRESS RELEASE FROM THE
17 DEPARTMENT OF JUSTICE, YOUR HONOR. YOU COULD TAKE JUDICIAL
18 NOTICE OF IT.
19 THE COURT: WELL, I CAN AND I BELIEVE IT WOULD FALL
20 UNDER ONE OF THE MYRIAD EXCEPTIONS TO THE HEARSAY RULE, SO THE
21 OBJECTION WILL BE OVERRULED. 1205 WILL BE ADMITTED.
22 (DEFENDANTS' EXHIBIT H-1205
23 RECEIVED IN EVIDENCE)
24 THE COURT: ALL RIGHT.
25 MR. HALLING: AND 1188 AND 122 ARE ALSO ADMITTED?
2043
1 THE COURT: YES. THERE'S NO OBJECTION, AS I
2 UNDERSTAND IT, TO 1188 AND 122.
3 MR. ALIOTO: THAT'S CORRECT, YOUR HONOR.
4 THE COURT: AND THEY WILL BE ADMITTED.
5 (DEFENDANTS' EXHIBIT H-1188
6 RECEIVED IN EVIDENCE)
7 (PLAINTIFF'S EXHIBIT 122
8 RECEIVED IN EVIDENCE)
9 MR. HALLING: YOUR HONOR, AT THIS POINT I BELIEVE
10 THE PLAINTIFF'S CASE IS NOW CLOSED. IF YOU RECALL, MR. ALIOTO
11 RESERVED HIS QUESTIONING OF MR. BENNACK AND MR. IRISH. THAT'S
12 NOW OCCURRED. NOTHING HAS COME UP THAT'S CHANGED THE SITUATION
13 CONCERNING STANDING; AND, FOR THE RECORD, WE WOULD RENEW OUR
14 MOTION UNDER RULE 52(C).
15 THE COURT: VERY WELL. THANK YOU, MR. HALLING.
16 MR. ROSCH: YOUR HONOR, FOR THE RECORD, WE JOIN IN
17 THAT.
18 THE COURT: VERY WELL. THANK YOU, MR. ROSCH.
19 AND THE COURT'S RULING ON THOSE MOTIONS WILL BE
20 RESERVED.
21 MR. BALABANIAN, ARE YOU READY WITH YOUR WITNESS?
22 MR. BALABANIAN: WE ARE, YOUR HONOR.
23 THE COURT: VERY WELL.
24 MR. BALABANIAN: CALL TED FANG.
25 THE CLERK: PLEASE RAISE YOUR RIGHT HAND TO BE
2044
FANG - DIRECT / BALABANIAN
1 SWORN.
2 TED FANG,
3 CALLED AS A WITNESS FOR THE DEFENDANTS, HAVING BEEN DULY SWORN,
4 TESTIFIED AS FOLLOWS:
5 THE CLERK: THANK YOU. PLEASE BE SEATED.
6 PLEASE STATE YOUR FULL NAME AND SPELL YOUR LAST
7 NAME.
8 THE WITNESS: TED FANG, F-A-N-G.
9 MR. BALABANIAN: MAY IT PLEASE THE COURT.
10 THE COURT: VERY WELL.
11 DIRECT EXAMINATION
12 BY MR. BALABANIAN:
13 Q. MR. FANG, DO YOU HOLD A POSITION WITH THE SAN FRANCISCO
14 INDEPENDENT?
15 A. YES, I DO.
16 Q. AND WHAT IS THAT POSITION?
17 A. MY POSITION IS EDITOR AND PUBLISHER.
18 Q. FOR HOW LONG HAVE YOU HELD THAT POSITION?
19 A. SINCE APRIL OF 1987.
20 Q. THAT WOULD BE APPROXIMATELY 14 YEARS?
21 A. I THINK IT'S 13.
22 Q. 13. HOW OLD ARE YOU?
23 A. I'M 37 YEARS OLD.
24 Q. BRIEFLY DESCRIBE YOUR EDUCATION FOR THE COURT, IF YOU
25 WILL.
2045
FANG - DIRECT / BALABANIAN
1 A. I WENT TO FRANCIS SCOTT KEY ELEMENTARY SCHOOL, A.P.
2 GIANNINI JUNIOR HIGH, LOWELL HIGH SCHOOL AND DID MY COLLEGE
3 WORK AT THE UNIVERSITY OF CALIFORNIA AT BERKELEY.
4 Q. HOW DID YOUR FAMILY GET INTO THE PUBLISHING BUSINESS IN
5 SAN FRANCISCO?
6 A. WELL, WHEN MY FATHER CAME TO THIS COUNTRY, HE WAS A
7 NEWSPAPERMAN IN HIS HOMELAND AND WANTED TO BECOME -- GET INTO
8 NEWSPAPERS IN THIS COUNTRY. AND SO WHEN HE CAME TO THIS
9 COUNTRY, THE FIRST THING THAT HE DID WAS HE GOT INVOLVED IN THE
10 PRINTING BUSINESS BECAUSE HE FELT THAT IF HE WANTED TO BE SURE
11 OF BEING ABLE TO PRINT ALL OF HIS OWN VIEWS IN HIS NEWSPAPERS,
12 HE NEEDED TO HAVE HIS OWN PRINTING PRESSES FIRST. SO HE GOT
13 INTO THE PRINTING BUSINESS FIRST AND THEN GOT INTO THE
14 NEWSPAPER BUSINESS AFTER THAT IN THIS COUNTRY.
15 Q. WHAT WERE HIS INITIAL ACTIVITIES IN THE PRINTING BUSINESS?
16 A. WELL, WHEN HE FIRST CAME TO THIS COUNTRY, MY MOTHER AND
17 FATHER DIDN'T HAVE A WHOLE LOT OF MONEY. SO WHAT THEY DID WAS
18 THEY LEASED A PRINTING COMPANY CALLED GRANT PRINTING COMPANY
19 WHICH LATER ON THEY BOUGHT THROUGH A SMALL BUSINESS LOAN. AND
20 HE FIRST BEGAN TO PUBLISH SOME WHAT WE'LL CALL HANDY GUIDES,
21 CHINATOWN HANDY GUIDES, AND THEY'RE BASICALLY LIKE TOURIST --
22 TOURIST GUIDES FOR CHINATOWN.
23 AND THEN HE BECAME THE ASSOCIATE PUBLISHER OF THE
24 YOUNG CHINA DAILY NEWS AND EVENTUALLY BECAME THE PUBLISHER OF
25 THE YOUNG CHINA DAILY NEWS WHICH AT THE TIME WAS THE LONGEST
2046
FANG - DIRECT / BALABANIAN
1 CONTINUOUSLY-PUBLISHED DAILY NEWSPAPER, CHINESE DAILY
2 NEWSPAPER, IN THE UNITED STATES.
3 Q. AT THE PRESENT TIME DOES YOUR FAMILY PUBLISH ANYTHING
4 EXCEPT THE INDEPENDENT?
5 A. YES. WE PUBLISH A NUMBER OF OTHER PUBLICATIONS. IN 1979
6 MY FATHER LEFT HIS POSITION AT THE YOUNG CHINA DAILY NEWS AND
7 STARTED HIS OWN NEWSPAPER CALLED THE ASIAN WEEK NEWSPAPER,
8 WHICH WAS -- WHICH IS AN ENGLISH-LANGUAGE WEEKLY NEWSPAPER
9 THAT'S GEARED TOWARDS THE ASIAN AMERICAN COMMUNITY.
10 MY FAMILY ALSO PUBLISHES THE CHINESE TV GUIDE, WHICH
11 IS A CHINESE-LANGUAGE WEEKLY THAT IS BASICALLY A TELEVISION
12 LISTING OF ALL THE PROGRAMS THAT ARE ON EVERY WEEK AND IT ALSO
13 HAS A LOT OF STORIES ABOUT THE ASIAN MOVIE STARS. IT'S
14 PRIMARILY GEARED TOWARDS THE IMMIGRANT POPULATION, THE CHINESE
15 IMMIGRANT POPULATION.
16 LAST YEAR WE ALSO ACQUIRED ANOTHER SMALL PUBLICATION
17 CALLED THE REDWOOD CITY ALMANAC, WHICH IS A SUBSCRIPTION WEEKLY
18 NEWSPAPER BASED IN REDWOOD CITY, CALIFORNIA.
19 Q. PLEASE TELL THE COURT HOW YOUR FAMILY CAME TO OWN THE
20 INDEPENDENT.
21 A. WE CAME TO OWN THE INDEPENDENT IN 1987. AND THE WAY THAT
22 HAPPENED WAS THAT WHEN I LEFT COLLEGE IN 1983, MY PARENTS
23 BECAME INVOLVED IN A RESTAURANT AND THEY HAD THE PRINTING
24 COMPANY. AND SO WHEN I GRADUATED OR WHEN I LEFT COLLEGE, I
25 WENT TO GO WORK FOR THE PRINTING COMPANY AND STARTED PRINTING A
2047
FANG - DIRECT / BALABANIAN
1 NUMBER OF DIFFERENT NEWSPAPERS.
2 ONE OF THE NEWSPAPERS THAT WE PRINTED WAS A
3 NEWSPAPER CALLED SAN FRANCISCO INDEPENDENT. AT THAT TIME IT
4 WAS A SMALL TABLOID PUBLICATION ABOUT 12 PAGES AND 40,000
5 COPIES, AND IT WAS RUN BY A LADY NAMED MARCIA FONTES WHO WAS
6 HAVING -- WAS DOING WELL ON ONE HAND WITH THE NEWSPAPER BUT ON
7 THE OTHER HAND FINANCIALLY SHE WAS HAVING SOME PROBLEMS.
8 AND SHE BEGAN OWING ME, AS HER PRINTER, SOME MONEY
9 AND HAD SOME MONIES DUE TO ME, AND WAS ALSO GETTING TIRED OF
10 THE NEWSPAPER BUSINESS BECAUSE IT WAS A LOT OF WORK.
11 AND SO BY THIS TIME I HAD BEEN WORKING AT THE
12 PRINTING COMPANY FOR THREE OR FOUR YEARS AND HAD BEEN
13 RELATIVELY SUCCESSFUL AND HAD SOME EXTRA TIME ON MY HANDS AND
14 THOUGHT THAT SHE HAD A NICE PUBLICATION THAT I'D BE INTERESTED
15 IN. AND SO SHE AND I STRUCK A DEAL WHEREBY I ACQUIRED HER
16 NEWSPAPER IN EXCHANGE FOR SOME DEBT AND SOME CASH.
17 Q. AT THAT TIME WHAT WAS THE CIRCULATION OF THE INDEPENDENT?
18 A. AT THAT TIME THE CIRCULATION OF THE INDEPENDENT WAS 40,000
19 COPIES. IT WAS A TABLOID-SIZE NEWSPAPER, ABOUT 12 PAGES, AND
20 IT WAS CIRCULATED PRIMARILY IN THE WEST PORTAL AND LAKE MERCED
21 NEIGHBORHOODS OF SAN FRANCISCO.
22 Q. AND THE CIRCULATION TODAY?
23 A. THE CIRCULATION TODAY OF THE INDEPENDENT IS 379,000
24 COPIES, AND WE CIRCULATE FROM THE GOLDEN GATE BRIDGE, ALL OF
25 SAN FRANCISCO, DOWN THROUGH SAN MATEO TO REDWOOD CITY.
2048
FANG - DIRECT / BALABANIAN
1 Q. IS THERE ANY CONNECTION OR WAS THERE ANY CONNECTION
2 BETWEEN THE SAN FRANCISCO PROGRESS AND THE INDEPENDENT?
3 A. THERE'S NO DIRECT CONNECTION. HOWEVER, WHEN I TOOK OVER
4 THE INDEPENDENT FROM MS. FONTES, SHE AGAIN HAD A RELATIVELY
5 SMALL OVERHEAD AT THAT TIME. I THINK HER PRINTING BILL WAS
6 ABOUT $1500 A WEEK AND WE FELT THAT HER OTHER EXPENSES WAS
7 ABOUT -- I THINK HER TOTALLY WEEKLY EXPENSES WAS ABOUT $3,000 A
8 WEEK. AND SO WHEN I TOOK OVER THE INDEPENDENT, I THOUGHT THAT
9 WAS A SMALL NUT TO CRACK, BUT QUICKLY REALIZED THAT IN THE
10 NEWSPAPER BUSINESS THAT YOU NEED TO REACH A CERTAIN CRITICAL
11 MASS IN ORDER TO SELL ANY ADVERTISING AT ALL. AND WE COULDN'T
12 EVEN GET IN THE DOOR OF MOST ADVERTISERS TO TALK TO THEM
13 BECAUSE IT WAS SUCH A SMALL NEWSPAPER.
14 AT THAT TIME WE HAD SOME GROCERY STORE ADVERTISING
15 WHICH I FELT WAS THE GROWTH AREA FOR THE INDEPENDENT, AND THE
16 BULK OF ALL THE GROCERY STORE ADVERTISING AT THAT TIME WAS WITH
17 A NEWSPAPER CALLED THE SAN FRANCISCO PROGRESS, WHICH WAS IN
18 SOME WAYS SIMILAR TO WHAT THE INDEPENDENT WAS, IN THAT IT WAS A
19 FREE HOME DELIVERY NEWSPAPER AS THE INDEPENDENT BUT IT WAS
20 DELIVERED TO A MUCH LARGER CIRCULATION.
21 AND SO WE DID LOOK AT THE SAN FRANCISCO PROGRESS AS
22 THE NEXT STEP FOR THE INDEPENDENT. AND SO WE DID LOOK TO THAT
23 AND WANT TO GET SOME OF THAT BUSINESS.
24 IN FACT, WE PUT TOGETHER VARIOUS PROPOSALS TO GO TO
25 THE GROCERY STORE ADVERTISERS TO TRY TO GET SOME OF THOSE
2049
FANG - DIRECT / BALABANIAN
1 GROCERY STORE ADVERTISING.
2 AND ONE OF THE THINGS THAT HAPPENED WITH THE
3 INDEPENDENT AND THE PROGRESS, WAS ABOUT THE SAME TIME I BOUGHT
4 THE INDEPENDENT, THERE WAS ANOTHER GENTLEMAN THAT CAME OUT OF
5 CHICAGO THAT BOUGHT THE PROGRESS. AND WHEN HE CAME AND HE
6 BOUGHT THE PROGRESS, THERE WAS A LOT OF -- THERE WAS A LOT OF
7 ATTENTION TO HIM COMING TO BUY THE PROGRESS, AND HE WAS A VERY
8 DYNAMIC PERSONALITY, DID A LOT OF THE TALK SHOWS, AND SO A LOT
9 OF PEOPLE TALKED ABOUT HIM BUYING THE PROGRESS AND THERE WAS A
10 LOT OF ATTENTION GIVEN TO THAT.
11 HOWEVER, HIS OPERATIONS AT THE PROGRESS WERE HAVING
12 PROBLEMS. THEY WERE HAVING DELIVERY PROBLEMS. A LOT OF THE
13 ADVERTISERS WERE GETTING -- WERE UNHAPPY ABOUT THIS SITUATION
14 AT THE PROGRESS WITH THE CIRCULATION AND THE QUALITY OF THE
15 NEWSPAPER. AND SO ONE OF THE THINGS THAT WE DID AT THE
16 INDEPENDENT WAS THAT WE REALIZED THAT THE GROCERY STORE
17 ADVERTISING WOULD BE OUR BIGGEST, AND SO WE PREPARED A PROPOSAL
18 FOR ALL OF THE INDEPENDENT GROCERY STORES IN SAN FRANCISCO AND
19 SAID THAT WE COULD EXPAND THE INDEPENDENT AND PROVIDE THEIR
20 ADVERTISING SERVICES THROUGH AN EXPANDED INDEPENDENT THAT WOULD
21 BE BETTER OR MORE EFFECTIVE THAN WHAT THE GROCERY STORES WERE
22 GETTING IN THE SAN FRANCISCO PROGRESS.
23 AND, IN FACT, WHAT WE DID IS THAT WE HAD A MEETING
24 WITH ALL OF THE INDEPENDENT LOCAL GROCERY STORES OF SAN
25 FRANCISCO, IT WAS ACTUALLY A LUNCH MEETING, AND WE PRESENTED
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FANG - DIRECT / BALABANIAN
1 OUR PROPOSAL AND TOLD THEM THAT WE WOULD, YOU KNOW, GEAR OUR
2 PUBLICATION AND ZONE IT ACCORDING TO THEIR NEEDS AND OFFER THEM
3 BETTER SERVICE.
4 AND DURING THAT MEETING, WE HAD A VERY FAVORABLE
5 RESPONSE FROM THESE GROCERS, AND THEY ALL SEEMED TO LIKE THE
6 IDEA VERY MUCH.
7 THE COURT: MR. BALABANIAN, PERHAPS --
8 MR. BALABANIAN: A QUESTION, YOUR HONOR?
9 THE COURT: -- A QUESTION MIGHT FIT INTO THIS A
10 LITTLE BIT.
11 WHY DON'T YOU JUST --
12 MR. BALABANIAN: I WILL.
13 THE COURT: -- LISTEN TO THE QUESTION AND ANSWER THE
14 QUESTION. DON'T PROVIDE US A NARRATIVE, MR. FANG.
15 MR. BALABANIAN: CERTAINLY, YOUR HONOR.
16 Q. WHAT HAPPENED TO THE PROGRESS?
17 A. WELL, WHAT HAPPENED TO THE PROGRESS WAS THAT WE WEREN'T
18 ABLE TO GET THE GROCERY STORE ADVERTISING AT THAT POINT; AND WE
19 FELT -- AND THIS MEETING HAPPENED IN LIKE MIDDLE OF 1988, BUT
20 WE FELT THAT THE PROGRESS WAS HAVING PROBLEMS. AND SOME OF
21 THESE GROCERS TOLD US THAT THEY WANTED --
22 THE COURT: THE QUESTION, MR. FANG, IS: WHAT
23 HAPPENED TO THE PROGRESS?
24 THE WITNESS: THE PROGRESS ULTIMATELY FAILED IN
25 DECEMBER OF 1988.
2051
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1 THE COURT: ALL RIGHT. YOU'VE ANSWERED THE
2 QUESTION.
3 THE WITNESS: I'M SORRY, SIR.
4 BY MR. BALABANIAN:
5 Q. THANK YOU, MR. FANG.
6 AND WHAT DID YOU DO IN RESPONSE TO THE FAILURE OF
7 THE PROGRESS?
8 A. WE INCREASED OUR CIRCULATION TO TAKE THE PLACE OF THE
9 PROGRESS.
10 Q. HOW QUICKLY DID YOU DO THAT?
11 A. WELL, WE HAD PLANNED THAT WE COULD REPLACE THE PROGRESS --
12 WE HAD PLANNED THAT THE PROGRESS WOULD LAST THROUGH JANUARY OF
13 1988, AND SO -- JANUARY OF 1989, AND SO WE HAD OUR PLANS THAT
14 WE WOULD NOT HAVE TO GEAR UP UNTIL JANUARY OF 1989.
15 THE PROGRESS CLOSED ITS DOOR UNEXPECTEDLY ON
16 DECEMBER 15TH, 1988. SO SIX DAYS LATER WE CHANGED THE
17 INDEPENDENT FROM A TABLOID TO A BROADSHEET AND INCREASED OUR
18 CIRCULATION FROM ABOUT 60,000 TO 180,000, AND IT HAPPENED IN
19 SIX DAYS.
20 Q. THANK YOU.
21 DO YOU OPERATE ANY NEWSPAPERS ON THE PENINSULA?
22 A. YES, WE DO.
23 Q. AND UNDER WHAT NAME ARE THEY OFFERED TO THE PUBLIC?
24 A. THEY ARE ALSO CALLED THE INDEPENDENT NEWSPAPER RIGHT NOW.
25 Q. CAN YOU GIVE US BRIEFLY THE HISTORY OF YOUR ACQUISITION OF
2052
FANG - DIRECT / BALABANIAN
1 THOSE NEWSPAPERS?
2 A. I'LL TRY TO BE AS BRIEF AS POSSIBLE.
3 WHAT HAPPENED WAS THAT --
4 THE COURT: JUST NAME THE PUBLICATIONS AND WHEN YOU
5 ACQUIRED THEM.
6 THE WITNESS: WELL, THEY'RE CALLED THE INDEPENDENT
7 RIGHT NOW. WE ACQUIRED THEM IN 1993. THEY WERE ACQUIRED FROM
8 THE CHICAGO TRIBUNE WHO AT THE TIME PUBLISHED THEM ALONG WITH
9 THE PALO ALTO DAILY PENINSULA TIMES TRIBUNE OR PALO ALTO DAILY
10 NEWS AND THE CHICAGO TRIBUNE WAS PULLING OUT OF THE MARKET AND
11 WAS CLOSING DOWN ALL THE OPERATIONS. AND SO WE ACQUIRED THOSE
12 PUBLICATIONS FROM THEM, AGAIN UNDER A KIND OF DISTRESSFUL
13 SITUATION.
14 BY MR. BALABANIAN:
15 Q. AND YOU OPERATE -- YOU NOW DISTRIBUTE TO ALL OF THE FORMER
16 SUBSCRIBERS OR RECIPIENTS OF THOSE PAPERS?
17 A. YES. I'M SORRY, THE NAMES OF THOSE NEWSPAPERS AT THE TIME
18 WERE THE MILLBRAE/SAN BRUNO SUN, THE BURLINGAME/HILLSBOROUGH
19 BOUTIQUE AND VILLAGER, THE SAN MATEO WEEKLY, THE FOSTER CITY
20 PROGRESS, THE SAN CARLOS/BELMONT ENQUIRER BULLETIN AND THE
21 REDWOOD CITY TRIBUNE. SO THERE WERE SIX DIFFERENT TITLES AT
22 THE TIME.
23 Q. WHAT THEN WAS THE CONDITION OF ALL OF THE NEWSPAPERS THAT
24 YOU BOUGHT OR REPLACED AT THE TIME YOU BOUGHT OR REPLACED THEM?
25 A. THEY WERE FAILING NEWSPAPERS AT THE TIME; AND, IN FACT,
2053
FANG - DIRECT / BALABANIAN
1 WHEN WE PURCHASED THOSE NEWSPAPERS, FOR WHATEVER REASON, THE
2 CHICAGO TRIBUNE WAS PULLING OUT OF THE MARKET VERY QUICKLY AND
3 WE WERE -- WE WERE NOT ABLE TO BUY VERY MANY HARD ASSETS FROM
4 THE CHICAGO TRIBUNE. IN FACT, WE WERE NOT ENABLE TO GET OFFICE
5 SPACE FROM THE CHICAGO TRIBUNE. THEY WOULD NOT LET US EVEN
6 TAKE OVER THEIR LEASED OFFICE SPACE.
7 AND SO FOR THE FIRST TWO WEEKS WHEN WE TOOK OVER
8 THOSE PUBLICATIONS, WE ACTUALLY HAD TO RENT OUT A SUITE OF
9 ROOMS IN THE MARRIOTT AIRPORT HOTEL AND PUBLISH THE NEWSPAPERS
10 OUT OF THOSE HOTEL ROOMS.
11 THE COURT: PRIOR TO YOUR ACQUISITION, WERE THOSE
12 NEWSPAPERS PAID CIRCULATION PAPERS?
13 THE WITNESS: NO, THEY WERE FREE CIRCULATION
14 NEWSPAPERS AND THEY WERE ALSO TABLOIDS. ONE OF THE FIRST
15 THINGS THAT WE DID WAS WE SWITCHED THEM TO BROADSHEETS.
16 THE COURT: BUT THEY REMAINED FREE DISTRIBUTION
17 PAPERS?
18 THE WITNESS: YES, SIR.
19 THE COURT: OKAY.
20 BY MR. BALABANIAN:
21 Q. MR. FANG, YOU'VE HEARD SEVERAL FORMER NEWSPAPERMEN
22 RETAINED BY MR. REILLY SAY THAT THE NEW EXAMINER IS DOOMED TO
23 FAILURE. HAVE YOU EVER HEARD THAT BEFORE?
24 A. YES, I HAVE.
25 Q. WHEN?
2054
FANG - DIRECT / BALABANIAN
1 A. EVERY TIME I'VE TAKEN OVER ONE OF THESE NEWSPAPERS,
2 WHETHER IT BE THE INDEPENDENT OR TO TRY TO FILL THE SHOES AT
3 THE PROGRESS OR TOOK OVER THE PAPERS FROM THE CHICAGO TRIBUNE,
4 OR EVEN THE REDWOOD CITY ALMANAC, EVERYBODY SAID THAT THESE
5 NEWSPAPERS COULD NOT BE REVIVED BECAUSE BY THE TIME I TOOK THEM
6 OVER, THEY WERE ALL FAILING NEWSPAPERS, AND EVERYBODY SAID I
7 CAN NEVER TURN THEM AROUND.
8 Q. DO YOU THINK YOU'LL FAIL THIS TIME?
9 A. I HOPE I DO NOT.
10 Q. THERE'S BEEN PRIOR REFERENCE TO YOUR FAMILY'S DREAM OF
11 OWNING A DAILY NEWSPAPER. WHY IS IT THAT YOU HAVE THAT DREAM?
12 A. WELL, I THINK THAT IT'S REALLY ONLY WITH A DAILY NEWSPAPER
13 THAT YOU'LL BE ABLE TO OFFER THE FULL SPECTRUM OF COMPREHENSIVE
14 NEWS COVERAGE FOR LOCAL NEWS AND EVENTS. ONE OF MY
15 FRUSTRATIONS RIGHT NOW, EVEN WITH THE INDEPENDENT NEWS
16 OPERATIONS, IS THERE ARE A LOT OF EVENTS WHICH YOU SIMPLY
17 CANNOT COVER ON A DAILY BASIS THAT NEED THE DAILY COVERAGE OF
18 UPDATES TO PROPERLY GIVE THE FULL NEWS COVERAGE, AND WE SIMPLY
19 CAN'T DO THAT WITH THE INDEPENDENT.
20 SO THERE ARE LOTS OF TYPES OF NEWS THAT FALL THROUGH
21 THE CRACKS WITH THE INDEPENDENT RIGHT NOW.
22 ALSO, FROM AN ADVERTISING PERSPECTIVE AND A REVENUE
23 PERSPECTIVE, AN ECONOMIC PERSPECTIVE, THERE'S A LOT MORE
24 REVENUE THAT CAN BE ACHIEVED THROUGH A DAILY NEWSPAPER OR NEW
25 REVENUE THAT CAN BE ACHIEVED THROUGH A DAILY NEWSPAPER THAN CAN
2055
FANG - DIRECT / BALABANIAN
1 JUST SIMPLY BE ACHIEVED THROUGH THE CURRENT OPERATIONS OF THE
2 INDEPENDENT.
3 Q. CAN YOU GIVE THE COURT SOME IDEA OF THE KIND OF NEWS OR
4 EVENTS THAT YOU ARE NOW UNABLE TO ADDRESS IN YOUR PUBLICATION,
5 CURRENT PUBLICATIONS?
6 A. WELL, I THINK ACTUALLY THIS TRIAL IS A GOOD EXAMPLE OF THE
7 KINDS OF NEWS THAT WE CANNOT COVER ON A REGULAR BASIS. IN THE
8 INDEPENDENT WE CAN ONLY SUMMARIZE WHAT HAPPENED DURING A WEEK'S
9 OR FEW DAYS' WORTH OF EVENTS AND TRY TO PICK OUT THOSE THINGS
10 THAT WE THINK ARE MORE IMPORTANT. WE CANNOT GIVE A DAY-TO-DAY
11 UPDATE TO THE PEOPLE OF SAN FRANCISCO.
12 I THINK THE OTHER THING WITH DAILY NEWSPAPERS IS
13 THAT DAILY NEWSPAPERS DRIVE THE ELECTRONIC MEDIA IN THIS TOWN
14 AS WELL; AND WHEN YOU NORMALLY HAVE ONE DAILY NEWSPAPER, YOU
15 KNOW, COVERING THE NEWS FROM ONE ANGLE, THAT TENDS TO INFLUENCE
16 HOW THE ELECTRONIC MEDIA IS GOING TO BE COVERING THE NEWS AS
17 WELL.
18 Q. MR. FANG, HAS YOUR FAMILY BEEN POLITICALLY ACTIVE?
19 A. YES. I THINK MY ENTIRE FAMILY HAS.
20 Q. WHY IS THAT?
21 A. WELL, I THINK THAT -- I THINK TO UNDERSTAND THE POLITICAL
22 ACTIVISM OF MY FAMILY, YOU REALLY NEED TO KIND OF UNDERSTAND
23 WHERE MY PARENTS CAME FROM. AND MY PARENTS GREW UP IN A
24 COUNTRY THAT WAS JUST GOING THROUGH THE END OF AN IMPERIAL
25 REGIME AND AS THEY WERE TRYING TO SET UP A DEMOCRATIC
2056
FANG - DIRECT / BALABANIAN
1 GOVERNMENT, THEY WENT THROUGH A SECOND WORLD WAR. AND AS THEY
2 CAME OUT OF THE SECOND WORLD WAR, WENT INTO A COMMUNIST REGIME
3 AND MY PARENTS FLED THAT COUNTRY TO GO TO TAIWAN WHERE THEY
4 WERE TRYING TO SET UP ANOTHER DEMOCRATIC GOVERNMENT BUT IN
5 EFFECT HAD MARTIAL LAW.
6 AND SO MY PARENTS LEFT THAT COUNTRY TO COME TO SAN
7 FRANCISCO AND THE UNITED STATES, AND SO THEY REALLY BELIEVED IN
8 THIS DEMOCRATIC PROCESS AND RAISED THEIR CHILDREN AND RAISED
9 THE FAMILY TO SAY THAT YOU HAVE THE RIGHTS AND RESPONSIBILITY
10 TO PARTICIPATE IN THIS DEMOCRATIC PROCESS AND THIS POLITICAL
11 PROCESS. AND THAT'S WHY WE ARE HERE IN THE FIRST PLACE, AND
12 THAT'S WHAT THEY ENCOURAGED US TO DO.
13 Q. WOULD YOU SAY THAT YOUR FAMILY HAS EXTENSIVE POLITICAL
14 CONNECTIONS?
15 A. I WOULD NOT MAKE THAT CHARACTERIZATION. I WOULD SAY THAT
16 WE ARE POLITICALLY ACTIVE.
17 Q. HAVE YOU HEARD OTHER PEOPLE SAY SO?
18 A. YES, I'VE HEARD THAT PREDOMINANTLY IN THE DAILY NEWSPAPERS
19 AND I THINK IT'S A FAVORITE CHARACTERIZATION OF MY FAMILY BY
20 THE HEARST CORPORATION.
21 Q. MR. FANG, THE INDEPENDENT IS DISTRIBUTED WITHOUT CHARGE;
22 IS THAT CORRECT?
23 A. THAT IS CORRECT.
24 Q. HOW MANY DAYS A WEEK?
25 A. TWO DAYS A WEEK WITH A THIRD DAY, WHICH IS AVAILABLE
2057
FANG - DIRECT / BALABANIAN
1 THROUGH RACKS ONLY.
2 THE COURT: WHICH IS AVAILABLE WHAT?
3 THE WITNESS: THROUGH RACKS ONLY, NEWS RACKS,
4 NEWSSTANDS.
5 BY MR. BALABANIAN:
6 Q. NEWSSTANDS; IS THAT CORRECT?
7 THE COURT: YES, I UNDERSTAND. WHICH DAYS IS IT
8 HOME DELIVERED AND WHICH DAYS IS IT AVAILABLE ONLY ON NEWS
9 RACKS?
10 THE WITNESS: IT'S HOME DELIVERED ON TUESDAYS AND
11 SATURDAYS, THEN THERE'S A THURSDAY PUBLICATION WHICH IS ONLY
12 AVAILABLE ON NEWSSTANDS.
13 THE COURT: THANK YOU.
14 BY MR. BALABANIAN:
15 Q. HOW DOES THE NUMBER OF NEWSSTANDS THAT THE INDEPENDENT HAS
16 COMPARE WITH THOSE OF THE CHRONICLE AND THE EXAMINER?
17 A. WE -- WELL, IF YOU'RE TALKING TOTAL OR JUST IN SAN
18 FRANCISCO --
19 Q. SAN FRANCISCO.
20 A. IN SAN FRANCISCO WE HAVE, I THINK, ABOUT THE SAME AMOUNT.
21 WELL, ABOUT THE SAME AMOUNT AS EACH ONE OF THEM, BUT THEY HAVE
22 TWICE AS MUCH AS WE HAVE.
23 Q. TO HOW MANY HOMES IS THE INDEPENDENT DISTRIBUTED?
24 A. I SAY 379,000.
25 Q. AND HOW DOES THAT COMPARE WITH THE SAN FRANCISCO
2058
FANG - DIRECT / BALABANIAN
1 CIRCULATION OF THE CHRONICLE AND THE EXAMINER?
2 A. IN SAN FRANCISCO THE INDEPENDENT IS DELIVERED TO 211,000
3 HOMES, WHICH IS MORE -- WHICH IS A GREATER HOME-DELIVERED
4 CIRCULATION THAN THE CHRONICLE AND EXAMINER COMBINED.
5 Q. DOES THE INDEPENDENT CONTAIN ANY EDITORIAL CONTENT WHICH
6 IS PRODUCED BY YOUR OWN STAFF?
7 A. CURRENTLY VIRTUALLY ALL OF THE EDITORIAL CONTENT IN THE
8 INDEPENDENT IS PRODUCED BY OUR OWN STAFF.
9 Q. HOW DOES THE AMOUNT OF SUCH CONTENT COMPARE WITH THAT OF
10 OTHER FREE HOME-DELIVERED NEWSPAPERS AROUND THE COUNTRY?
11 A. WELL, ONE OF THE THINGS THAT MAKES THE INDEPENDENT UNIQUE
12 IS THAT FOR HOME-DELIVERED FREE NEWSPAPERS, WE HAVE THE MOST OR
13 THE LARGEST AMOUNT OF EDITORIAL CONTENT OF ANY OTHER FREE
14 HOME-DELIVERED NEWSPAPER IN THE COUNTRY.
15 Q. HOW DOES THE CIRCULATION OF THE INDEPENDENT COMPARE WITH
16 THAT OF OTHER FREE NEWSPAPERS AROUND THE COUNTRY?
17 A. WELL, I THINK TRADITIONALLY FOR FREE NEWSPAPERS THERE ARE
18 TWO MODELS OF HOW THEY'RE DISTRIBUTED, AND ONE MODEL IS WHERE
19 THE NEWSPAPERS ARE DELIVERED ONLY IN RACKS AND STORES, SUCH AS
20 IN SAN FRANCISCO YOU HAVE THE BAY GUARDIAN OR THE SF WEEKLY.
21 THE OTHER MODEL IS WHERE YOU HAVE NEWSPAPERS THAT ARE DELIVERED
22 TO HOMES BUT HAVE MUCH LOWER NEWS CONTENT. AND SO, AGAIN, WE
23 ARE UNIQUE IN THAT RESPECT.
24 Q. I HAVE A QUESTION, THOUGH. HOW DOES YOUR CIRCULATION TO
25 HOMES COMPARE WITH THAT OF OTHER HOME-DELIVERED FREE NEWSPAPERS
2059
FANG - DIRECT / BALABANIAN
1 AROUND THE COUNTRY? WHERE DO YOU STAND IN THE LEAGUE
2 STANDINGS?
3 A. WE ARE ACTUALLY THE LARGEST NONDAILY NEWSPAPER IN THE
4 UNITED STATES OF AMERICA, WHETHER IT BE FREE OR NOT FREE, TO
5 ANSWER YOUR QUESTION, SIR.
6 Q. WHAT IS THE SECOND --
7 THE COURT: LET ME INTERRUPT IF I MIGHT,
8 MR. BALABANIAN.
9 YOU SAID YOU'VE HAD HOME-DELIVERY CIRCULATION OF
10 211,000 IN SAN FRANCISCO; IS THAT CORRECT?
11 THE WITNESS: YES, SIR.
12 THE COURT: AND 379,000 TOTAL.
13 THE WITNESS: YES, SIR.
14 THE COURT: THE BALANCE OF THE HOME-DELIVERY
15 CIRCULATION IS, WHAT, NORTHERN SAN MATEO COUNTY PRIMARILY?
16 THE WITNESS: SAN MATEO COUNTY DOWN THROUGH REDWOOD
17 CITY. SO IT'S MORE THAN JUST NORTHERN SAN MATEO COUNTY. IT'S
18 ABOUT 168,000 IN SAN MATEO COUNTY.
19 THE COURT: AND HOW DO YOU DETERMINE WHO IS TO
20 RECEIVE ONE OF THESE ISSUES? DO YOU HAVE SUBSCRIBERS? DO
21 PEOPLE SIGN UP FOR DELIVERY OR DO YOU SIMPLY DELIVER THE
22 NEWSPAPER TO THEIR DOORSTEP OR MAILBOX?
23 THE WITNESS: WE DELIVER TO DOORSTEPS AND WE DELIVER
24 BASICALLY TO ABOUT 70 PERCENT OF THE HOMES IN SAN FRANCISCO AND
25 SAN MATEO COUNTY. AND THE REAL DETERMINATE OF WHO WE DELIVER
2060
FANG - DIRECT / BALABANIAN
1 TO IS ACCESSIBILITY OR DELIVERABILITY.
2 THE COURT: IF I WANT TO RECEIVE THE INDEPENDENT,
3 CAN I SUBSCRIBE TO IT AND GET A DELIVERY OF IT FREE OF CHARGE?
4 THE WITNESS: IF YOU WISH TO RECEIVE THE
5 INDEPENDENT, YOU CAN CALL, AND IF YOU ARE IN OUR MARKET AREA,
6 YOU CAN CALL AND YOU CAN EITHER GET IT FREE OR THERE ARE SOME
7 PEOPLE WHO VOLUNTEER TO PAY AND WE TAKE THEIR MONEY TOO.
8 THE COURT: WHAT IF I DON'T WANT IT?
9 THE WITNESS: IF YOU DON'T WANT IT, YOU CALL UP AND
10 YOU SAY, "I WOULD RATHER NOT RECEIVE IT," AND WE PUT YOU ON A
11 LIST OF PEOPLE WHO DON'T WANT TO RECEIVE IT.
12 THE COURT: AND YOU DON'T DELIVER TO THOSE
13 INDIVIDUALS?
14 THE WITNESS: WE TRY NOT TO, YES.
15 THE COURT: THANK YOU.
16 BY MR. BALABANIAN:
17 Q. MR. FANG, YOU SAID THAT THE INDEPENDENT IS THE LARGEST
18 CIRCULATION OF ANY FREE NEWSPAPER IN THE COUNTRY; IS THAT
19 CORRECT?
20 A. ANY NONDAILY, FREE OR NOT FREE.
21 Q. ANY NONDAILY, ANY NONDAILY WHETHER FREE OR NOT; IS THAT
22 CORRECT?
23 A. YES.
24 Q. WHAT IS THE SECOND LARGEST?
25 A. THE SECOND LARGEST IS THE VILLAGE VOICE IN NEW YORK.
2061
FANG - DIRECT / BALABANIAN
1 Q. THESE CIRCULATION FIGURES THAT YOU'VE BEEN USING, ARE THEY
2 MONITORED IN ANY WAY?
3 A. YES, THEY ARE.
4 Q. BY WHOM?
5 A. THERE IS AN AUDITING FIRM THAT -- IN THE INDUSTRY THERE
6 ARE TWO, BASICALLY TWO AUDITING FIRMS. THERE'S THE AUDIT
7 BUREAU CIRCULATIONS, WHICH WE'VE TALKED ABOUT, WHICH AUDITS
8 PAID DAILY NEWSPAPERS. NONPAID, NONDAILY NEWSPAPERS ARE
9 AUDITED BY A FIRM CALLED VERIFIED AUDIT CIRCULATIONS OR VAC,
10 AND THEY ARE BASED OUT OF LOS ANGELES, CALIFORNIA.
11 Q. AND IS THAT THE COMPANY THAT AUDITS YOUR CIRCULATION?
12 A. YES. THEY AUDIT US BASICALLY EVERY YEAR.
13 Q. AND IS THAT FOR THE BENEFIT OF THE ADVERTISERS?
14 A. YES, BASICALLY.
15 Q. ARE YOUR CURRENT PAPERS ZONED?
16 A. YES, THEY ARE ZONED.
17 Q. HOW MANY ZONES ARE THERE?
18 A. WE HAVE 12 DIFFERENT EDITORIAL EDITIONS, ALTHOUGH THERE
19 ARE 11 DIFFERENT ADVERTISING ZONES.
20 Q. AND WHEN YOU SAY "DIFFERENT EDITORIAL EDITIONS," HOW DO
21 THEY VARY FROM ONE TO THE OTHER?
22 A. WELL, THEY ARE BASICALLY -- WE'RE A COMMUNITY OR
23 NEIGHBORHOOD NEWSPAPER, SO BASICALLY WE ZONE BY NEIGHBORHOOD.
24 AND IN THE CITY OF SAN FRANCISCO, YOU KIND OF ZONE IT ACCORDING
25 TO THE DIFFERENT NEIGHBORHOODS.
2062
FANG - DIRECT / BALABANIAN
1 IN SAN MATEO COUNTY THE NEIGHBORHOODS ARE MORE
2 DEFINED BY THEIR CITIES. SO IN SAN MATEO COUNTY WE ZONE OUR
3 DIFFERENT EDITORIAL EDITIONS TO THE DIFFERENT CITIES. THERE
4 ARE FIVE EDITORIAL ZONES IN SAN FRANCISCO, SEVEN EDITORIAL
5 ZONES IN SAN MATEO COUNTY.
6 Q. CAN YOU GIVE THE COURT SOME EXAMPLES OF THE KIND OF
7 DIFFERENCE THAT ONE MIGHT FIND IN THE EDITORIAL CONTENT OF
8 PAPERS DISTRIBUTED IN DIFFERENT ZONES?
9 A. YEAH. I THINK THAT, FOR EXAMPLE SAN FRANCISCO, I THINK
10 NEWSPAPER READERS IN SAN FRANCISCO KIND OF EXPECT A DIFFERENT
11 KIND OF NEWSPAPER THAN THE NEWSPAPER READERS IN SAN MATEO
12 COUNTY. SO, FOR EXAMPLE, IN SAN FRANCISCO, YOU KNOW, OUR MAIN
13 COLUMNIST IS A GENTLEMAN NAMED WARREN HINCKLE WHO TENDS TO
14 WRITE VERY CONTROVERSIAL ARTICLES.
15 SAN MATEO COUNTY PEOPLE ARE NOT THAT INTERESTED IN
16 SUCH MUCKRAKING TYPE OF ARTICLES, AND SO HIS COLUMN IS NOT RUN
17 IN SAN MATEO COUNTY AND WE HAVE A DIFFERENT MAIN COLUMNIST
18 WHOSE NAME IS JERRY FUKES. HE ALSO WRITES ABOUT POLITICAL
19 GOINGS ON IN SAN MATEO COUNTY BUT IN A MUCH MORE SUBDUED
20 MANNER.
21 Q. MR. FANG, SEVERAL WITNESSES HAVE TESTIFIED ABOUT
22 PAGINATION BUT I DON'T THINK ANYBODY HAS EVER EXPLAINED TO THE
23 COURT WHAT IT IS. WOULD YOU DO SO?
24 A. PAGINATION IS BASICALLY A METHOD WHEREBY ARTICLES ARE NOW
25 PUT TOGETHER ELECTRONICALLY INSTEAD OF MANUALLY, AND I CAN GO
2063
FANG - DIRECT / BALABANIAN
1 THROUGH THAT PROCESS IF YOU'D LIKE, OR NOT.
2 Q. BRIEFLY PERHAPS.
3 A. OKAY. WELL, IN THE TRADITIONAL METHOD OF PUTTING TOGETHER
4 PAGES, AFTER A REPORTER WRITES A STORY, IT WILL GO TO THE
5 TYPESETTER WHO TYPES IT.
6 AFTER THEY TYPESET IT, THEY HAVE TO PRINT IT OUT.
7 AFTER THEY PRINT IT OUT, THE STORY HAS TO BE DUMMIED
8 ON THE PAGE, WHERE IT'S GOING TO GO ON THE PAGE.
9 AFTER IT'S DUMMIED ON THE PAGE, THERE'S A PASTE-UP
10 PERSON WHO TYPES THE COLUMNS AND PASTES IT UP ON THE PIECE OF
11 PAPER.
12 AFTER IT'S PASTED ON THAT PIECE OF PAPER, THAT
13 CAMERA-READY ART IS THEN TAKEN TO THE CAMERA ROOM. THEN THE
14 CAMERA ROOM SHOOTS A NEGATIVE OF IT.
15 AFTER THE CAMERA ROOM SHOOTS A NEGATIVE OF IT,
16 THERE'S A PERSON CALLED THE STRIPPER WHO PUTS THE NEGATIVES
17 TOGETHER, PUTS THE PAGES TOGETHER SO ALL THE PAGES COME OUT IN
18 THE RIGHT ORDER.
19 AFTER THE STRIPPER PUTS THE NEGATIVES TOGETHER, THEN
20 YOU BURN A PLATE.
21 AND SO THERE ARE BASICALLY SEVEN OR EIGHT DIFFERENT
22 STEPS IN THE OLD WAY OF DOING IT.
23 UNDER ELECTRONIC PAGINATION, THE REPORTER WILL ENTER
24 HIS STORY INTO A COMPUTER. THEN ONE PRODUCTION PERSON WILL
25 TAKE THAT STORY AND FORMAT IT ONTO THE PAGE -- FORMAT IT ONTO
2064
FANG - DIRECT / BALABANIAN
1 THE PAGE WITH THE RIGHT TYPE WITH THE RIGHT SIZE.
2 AND THEN RATHER THAN -- AND THEN ELECTRONICALLY SEND
3 IT OVER THE TELEPHONE WIRE TO THE CAMERA ROOM. INSTEAD OF THE
4 CAMERA ROOM HAVING TO TAKE A NEGATIVE OR TAKE ANOTHER PICTURE
5 OF IT, IT GOES DIRECT TO A NEGATIVE OR THE NEW TECHNOLOGY IT
6 GOES DIRECT TO THE PLATE.
7 SO THE ELECTRONIC PAGINATION IS REDUCING THOSE EIGHT
8 MANUAL STEPS INTO ONE STEP THAT'S JUST DONE ON A COMPUTER
9 SCREEN IN THE NEWSROOM.
10 Q. ARE SUBSTANTIAL ECONOMIES ACHIEVED AS A RESULT?
11 A. YEAH, ABSOLUTELY. AGAIN, YOU HAVE EIGHT DIFFERENT STEPS
12 REDUCED DOWN TO ONE. THERE'S A LOT OF ECONOMIES.
13 Q. DO YOU KNOW, SIR, WHETHER THE CURRENT EXAMINER IS
14 PAGINATED?
15 A. I BELIEVE THE CURRENT EXAMINER IS NOT PAGINATED.
16 Q. IS THE INDEPENDENT PAGINATED?
17 A. THE INDEPENDENT IS NOT YET FULLY PAGINATED. WE HAVE
18 INVESTED IN ALL THE EQUIPMENT NECESSARY TO DO FULL PAGINATION.
19 WE ARE SCHEDULED TO GO TO FULL PAGINATION IN JULY OF THIS YEAR.
20 WE CURRENTLY ARE ABOUT 80 PERCENT OF THE WAY THERE.
21 Q. IS THE INDEPENDENT PROFITABLE?
22 A. YES, IT IS.
23 Q. HOW MANY PRESSES DO YOU HAVE AT THE PRESENT TIME?
24 A. WE BASICALLY HAVE 25 UNITS OF PRESS WITH THREE DIFFERENT
25 FOLDERS.
2065
FANG - DIRECT / BALABANIAN
1 Q. FOLDERS?
2 A. YES. UNITS OF PRESS ARE DETERMINED HOW MANY PAGES YOU CAN
3 PRINT, AND THE FOLDERS ARE BASICALLY LIKE THE OUTPUT DEVICES.
4 Q. WERE YOU PRESENT WHEN ONE OF PLAINTIFF'S EXPERTS TESTIFIED
5 THAT YOU HAVE ONLY 12 PRESSES?
6 A. YES, I WAS.
7 Q. HOW LONG HAS IT BEEN SINCE YOU HAD ONLY 12 PRESSES?
8 A. BEFORE WE STARTED THE INDEPENDENT, WE ACTUALLY HAD FIVE
9 PRESSES AND THEN WE UPGRADED TO ABOUT 20, AND NOW WE HAVE 25.
10 AND SO I'M NOT SURE WHERE HE GOT THAT NUMBER OF 12.
11 Q. COULD YOU RUN THE NEW EXAMINER ON YOUR CURRENT PRESSES?
12 A. YES, WE COULD.
13 Q. WHAT'S THE CURRENT SIZE OF YOUR TOTAL PAYROLL AT THE
14 INDEPENDENT?
15 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
16
17
18
19
20
21
22
23
24
25
2066
FANG - DIRECT / BALABANIAN
1 A. I THINK THE CURRENT SIZE OF THE CURRENT PAYROLL AT THE
2 INDEPENDENT IS ABOUT -- ABOUT 9 TO $10 MILLION.
3 Q. I'M SORRY, THE -- I REALLY MEANT THE NUMBER OF THE PERSONS
4 ON THE PAYROLL. I'M SORRY.
5 A. WE HAVE ABOUT -- ABOUT 200 PEOPLE ON THE PAYROLL.
6 Q. DO YOU CURRENTLY OUTSOURCE ANY FUNCTIONS OF THE
7 INDEPENDENT?
8 A. YES, WE DO.
9 Q. PLEASE TELL THE COURT WHAT THEY ARE.
10 A. WE OUTSOURCE OUR DISTRIBUTION FUNCTIONS. WE ALSO
11 OUTSOURCE OUR AD-COMPOSING FUNCTIONS, AND THEN WE OUTSOURCE
12 SOME OF OUR -- SOME OF OUR PRINTING IS ALSO OUTSOURCED.
13 Q. MR. FANG, WHY DON'T YOU JUST START A NEW DAILY OR TURN THE
14 INDEPENDENT INTO A DAILY?
15 A. WELL, I THINK THAT EVEN WITH THE INDEPENDENT, THERE ARE
16 GREAT BARRIERS TO ENTRY INTO THE DAILY NEWSPAPER MARKET. ONE
17 OF THE BIGGEST BARRIERS IS THAT IT REQUIRES A SIGNIFICANT
18 FINANCIAL INVESTMENT AND, IN MY OPINION, AN INVESTMENT ON THE
19 MAGNITUDE OF $66 MILLION OR SO.
20 ADDITIONALLY, THERE IS AN ISSUE WITH NAME
21 RECOGNITION. PEOPLE RECOGNIZE THE INDEPENDENT AS A FREE,
22 HOME-DELIVERED NEWSPAPER. THEY DO NOT RECOGNIZE IT AS A PAID
23 SUBSCRIBER VEHICLE, SUCH AS THE EXAMINER.
24 AND SO FOR THE NAME RECOGNITION AND THE FINANCIAL
25 INVESTMENT, I THINK THOSE ARE TWO REASONS WHY WE DON'T.
2067
FANG - DIRECT / BALABANIAN
1 Q. ANY OTHER REASONS?
2 A. ALSO THE -- THE INDEPENDENT UNDER ITS CURRENT STRUCTURE
3 ATTRACTS A CERTAIN KIND OF ADVERTISER WHICH, IF WE WERE TO
4 SWITCH THAT TO A DAILY NEWSPAPER, WE WOULD RISK LOSING OUR
5 CURRENT ADVERTISING BASE IN AN ATTEMPT TO ATTRACT A NEW
6 ADVERTISING BASE. AND SO WE DON'T WANT TO DO THAT.
7 THE COURT: WHAT'S THE DIFFERENCE BETWEEN THE
8 ADVERTISING BASE WHICH THE INDEPENDENT NOW ENJOYS AND THE
9 ADVERTISING BASE THAT YOU ENVISION A DAILY NEWSPAPER WOULD
10 HAVE?
11 THE WITNESS: I THINK ONE WAY OF DESCRIBING IT IS
12 THAT THE INDEPENDENT, AGAIN, IS DELIVERED TO HOMES THROUGHOUT
13 SAN FRANCISCO AND SAN MATEO COUNTY. BASICALLY, EVERY HOME GETS
14 ONE. AND SO THERE ARE CERTAIN RETAILERS, ADVERTISERS, THAT
15 WISH TO REACH BASICALLY EVERYBODY.
16 THE MOST OBVIOUS OR RECOGNIZABLE OF THOSE KINDS OF
17 ADVERTISERS ARE GROCERY STORES AND DRUGSTORES BECAUSE EVERYBODY
18 BUYS GROCERIES. EVERYBODY BUYS ASPIRIN OR SHAMPOO. AND SO
19 THESE TYPES OF ADVERTISERS WISH TO REACH AS MANY PEOPLE AS
20 POSSIBLE, AND SO THEY LIKE TO ADVERTISE IN THE INDEPENDENT.
21 AND, IN FACT, IF THEY WERE TO ADVERTISE IN THE DAILY
22 NEWSPAPERS, THE CHRONICLE AND THE EXAMINER, WHICH DELIVERS TO
23 HALF -- LESS THAN HALF AS MANY HOMES AS THE INDEPENDENT, THEY
24 WOULD NOT REACH ALL OF THEIR CUSTOMERS.
25 CONVERSELY, THERE ARE ADVERTISERS THAT WISH TO REACH
2068
FANG - DIRECT / BALABANIAN
1 A TARGETED GROUP OF -- OF PEOPLE, NAMELY, NEWSPAPER
2 SUBSCRIBERS. AND THESE ARE LARGELY LIKE DEPARTMENT STORES,
3 NATIONAL ADVERTISERS THAT WISH TO REACH A TARGETED GROUP OF
4 SUBSCRIBER -- NEWSPAPER SUBSCRIBERS.
5 ALSO THERE ARE ADVERTISERS, AGAIN, SUCH AS, SAY,
6 MACY'S DEPARTMENT STORE, WHICH LIKES TO RUN ONE-DAY SALES,
7 WHITE FLOWER DAY SALES, OR SPECIFICALLY TIMED SALES. YOU
8 CANNOT DO THAT WITH THE INDEPENDENT. YOU CAN DO THAT WITH THE
9 DAILY NEWSPAPER.
10 SO THOSE ARE SOME OF THE EXAMPLES OF THE DIFFERENT
11 KINDS OF ADVERTISERS.
12 THE COURT: THANK YOU, SIR.
13 BY MR. ROSCH:
14 Q. TO FOLLOW ON THAT, MR. FANG, IS THERE ANY OVERLAP BETWEEN
15 THESE TWO GROUPS OF ADVERTISERS?
16 A. YES, THERE IS OVERLAP OF THESE DIFFERENT KINDS OF GROUPS
17 OF ADVERTISERS.
18 Q. COULD YOU GIVE ME AN EXAMPLE?
19 A. YES. ONE EXAMPLE IS, FOR EXAMPLE, IN THE SUNDAY PAPER YOU
20 OFTEN WILL FIND THESE COUPON INSERTS WHICH IN THE INDUSTRY WE
21 CALL THEM FSI'S. THEY ARE BASICALLY COUPONS FOR GROCERY STORE
22 ITEMS OR DRUGSTORE ITEMS.
23 Q. CAN YOU TELL THE COURT WHAT "FSI" STANDS FOR?
24 A. "FSI" STANDS FOR FREE-STANDING INSERT.
25 AND THESE COUPON INSERTS ARE MORE ALIGNED WITH, SAY,
2069
FANG - DIRECT / BALABANIAN
1 THE GROCERY STORE AND THE DRUGSTORE ADVERTISING. BUT THEY WISH
2 TO ADVERTISE IN THE SUNDAY -- IN THE SUNDAY PAID SUBSCRIBER
3 VEHICLES.
4 Q. IF YOU ARE PERMITTED TO ACQUIRE THE EXAMINER, IS IT YOUR
5 INTENTION TO KEEP PUBLISHING THE INDEPENDENT?
6 A. YES, IT IS.
7 Q. WHY?
8 A. AGAIN, I THINK THAT BOTH FROM THE READER'S STANDPOINT, THE
9 INDEPENDENT PROVIDES A DIFFERENT KIND OF NEWS COVERAGE, THE
10 KIND OF NEIGHBORHOOD COMMUNITY COVERAGE THAT A DAILY NEWSPAPER
11 DOESN'T DO. AND FROM AN ADVERTISER'S STANDPOINT WE SERVE THE
12 ADVERTISER WITH DIFFERENT WAYS.
13 Q. LET'S TURN TO THE NEW EXAMINER. HOW OFTEN WILL IT COME
14 OUT?
15 A. I PLAN ON PUBLISHING THE EXAMINER AS A DAILY, BASICALLY,
16 FIVE DAYS A WEEK PLUS A WEEKEND PUBLICATION.
17 Q. WILL IT BE PUBLISHED IN THE MORNING OR IN THE AFTERNOON?
18 WILL IT BE DISTRIBUTED IN THE MORNING OR THE AFTERNOON?
19 A. IT WILL BE PUBLISHED IN THE MORNING.
20 Q. MR. FANG, WHY, IN YOUR OPINION, HAVE AFTERNOON NEWSPAPERS
21 BECOME UNSUCCESSFUL?
22 A. I THINK THERE ARE A COUPLE OF REASONS. ONE HAS TO DO WITH
23 THE NEWS CYCLE AND THE CYCLE FOR GATHERING NEWS, AND IT HAS TO
24 DO WITH THE ELECTRONICS. YOU KNOW, ONE OF THE SLOGANS THAT
25 AFTERNOON NEWSPAPERS LIKE TO USE IS THAT A LOT CAN HAPPEN
2070
FANG - DIRECT / BALABANIAN
1 BETWEEN 9:00 AND 5:00.
2 WELL, THE REALITY IS THAT WHATEVER HAPPENS BETWEEN
3 9:00 AND 5:00 FIRST GETS REPORTED ON YOUR 6:00 O'CLOCK NEWS.
4 SO WHEN YOU GET HOME, YOU CAN SEE THAT ON THE T.V.
5 THE SECOND PLACE WHERE THAT NEWS GETS REPORTED IS IN
6 YOUR NEXT DAY -- NEXT MORNING'S MORNING NEWSPAPER. AND SO THAT
7 NEWS IS THEN IN THE MORNING NEWSPAPER.
8 THE LAST PLACE THAT IT GETS REPORTED IS ACTUALLY IN
9 THE NEXT DAY'S AFTERNOON NEWSPAPER.
10 SO FROM A NEWS-GATHERING PERSPECTIVE, AFTERNOON
11 NEWSPAPERS ARE IN A GREAT DISADVANTAGE AS FAR AS REPORTING THE
12 NEWS.
13 Q. WHAT IS LEFT FOR THEM TO REPORT?
14 A. FOR ONE --
15 THE COURT: SAY AGAIN?
16 BY MR. ROSCH:
17 Q. WHAT'S LEFT FOR THEM TO REPORT?
18 A. I THINK THE ONE THING THAT AFTERNOON NEWSPAPERS DO IS THE
19 STOCK -- THE CLOSING STOCK TABLES AND YOU CAN GET THAT IN AN
20 AFTERNOON NEWSPAPER. YOU CAN'T -- SOONER THAN YOU CAN GET IN
21 THE DAILY NEWSPAPER.
22 I THINK THERE IS ANOTHER IMPORTANT REASON WHY
23 AFTERNOON NEWSPAPERS HAVE DECLINED, WHICH IS THAT ADVERTISERS
24 ARE GETTING MUCH MORE SOPHISTICATED THESE DAYS ABOUT TRACKING
25 THEIR ADVERTISING AND THEIR RESULTS. AND WHEN AN ADVERTISEMENT
2071
FANG - DIRECT / BALABANIAN
1 APPEARS IN AN AFTERNOON NEWSPAPER, YOU MIGHT GET SOME PEOPLE
2 COMING INTO THE STORE THAT EVENING AND SOME THE NEXT MORNING.
3 BUT WHEN YOU ADVERTISE IN A MORNING NEWSPAPER, YOU CAN BE SURE
4 THAT YOU CAN GET RESULTS THAT VERY SAME DAY. AND SO FROM AN
5 ADVERTISING PERSPECTIVE, I THINK THEY ALSO LIKE THE A.M.
6 NEWSPAPER MUCH BETTER THAN THE AFTERNOON.
7 Q. DO THESE TRENDS REPRESENT CHANGE OVER THE SITUATION THAT
8 MAYBE EXISTED TEN YEARS AGO?
9 A. YES. THERE HAS BEEN DRAMATIC CHANGE IN THAT.
10 Q. AND AS A RESULT OF WHAT?
11 A. AND THAT'S A RESULT OF THESE NEW -- LIKE, THE PAGINATION
12 THINGS THAT I HAVE BEEN TALKING ABOUT, THE USE OF INTERNET, THE
13 USE OF ALL OF THESE KINDS OF THINGS HAVE MADE IT A VERY
14 DIFFERENT SITUATION.
15 Q. IS THAT BECAUSE THEY ENABLE -- IT'S NOW POSSIBLE FOR THE
16 MORNING NEWSPAPER TO PICK UP THE PREVIOUS DAY'S NEWS?
17 A. YES, THE MORNING NEWSPAPER CAN PICK UP THE PREVIOUS DAY'S
18 NEWS.
19 Q. WHAT IS THE INITIAL -- WHAT DO YOU EXPECT WILL BE THE
20 INITIAL CIRCULATION OF THE NEW EXAMINER?
21 A. WE ANTICIPATE BETWEEN 50 AND 100,000 CIRCULATION FOR THE
22 NEW EXAMINER.
23 Q. WILL IT BE HOME DELIVERED OR ONLY SINGLE COPY SALES?
24 A. WE ARE PROJECTING BETWEEN 50 AND 70 PERCENT OF THE
25 CIRCULATION TO BE SUBSCRIPTION BASED AND THE REMAINDER TO BE
2072
FANG - DIRECT / BALABANIAN
1 SINGLE COPY SALES.
2 Q. AND IT WILL BE A PAID NEWSPAPER, CORRECT?
3 A. YES, IT WILL BE PAID.
4 Q. WHERE WILL THE NEW EXAMINER BE DISTRIBUTED?
5 A. WE ARE GOING TO HAVE A PRIMARY FOCUS IN THE CITY AND
6 COUNTY OF SAN FRANCISCO, MAY DISTRIBUTE AS WELL IN SAN MATEO
7 COUNTY, AND THEN POSSIBLY IN MARIN COUNTY.
8 Q. HOW DID YOU PICK THOSE AREAS?
9 A. WELL, SAN FRANCISCO IS OUR PRIMARY TARGET BECAUSE IF YOU
10 LOOK AT ALL OF THE OTHER BAY AREA CITIES AND COUNTIES, EACH ONE
11 OF THEM HAS A LOCAL DAILY NEWSPAPER. SAN FRANCISCO IS THE ONLY
12 ONE THAT DOES NOT HAVE THAT. SO IT MAKES IT THE MOST OBVIOUS
13 AND PRIME CANDIDATE FOR A LOCAL DAILY NEWSPAPER.
14 SAN MATEO COUNTY IS ALSO A STRONG POSSIBILITY, ONE,
15 BECAUSE THEIR LOCAL DAILY NEWSPAPER IS NOT VERY STRONG AND,
16 TWO, BECAUSE WE HAVE EXISTING OPERATIONS IN SAN MATEO COUNTY
17 WHICH ARE VERY STRONG.
18 AND WE ARE THINKING ABOUT MARIN SIMPLY BECAUSE THAT
19 IS THE THIRD STRONGEST AREA OF THE CURRENT EXAMINER'S
20 CIRCULATION BASE.
21 Q. WHAT DOES THE TERM "PENETRATION" MEAN AS USED IN
22 CONNECTION WITH THE CIRCULATION OF A NEWSPAPER?
23 A. "PENETRATION" REFERS TO A NUMBER OF HOUSEHOLDS THAT
24 RECEIVE THE NEWSPAPER. FOR EXAMPLE, I MENTIONED THAT
25 70 PERCENT OF ALL THE HOUSEHOLDS IN SAN FRANCISCO AND SAN MATEO
2073
FANG - DIRECT / BALABANIAN
1 COUNTY RECEIVE THE INDEPENDENT. WE HAVE A 70 PERCENT
2 PENETRATION.
3 Q. ARE ADVERTISERS INTERESTED IN -- MORE INTERESTED IN
4 CIRCULATION, TOTAL CIRCULATION, OR PENETRATION?
5 A. I THINK THEY ARE INTERESTED IN BOTH. BUT, AS THE NEW KIND
6 OF COMPUTER, SCIENTIFIC ANALYSIS TOOLS HAVE BECOME AVAILABLE,
7 PENETRATION IS BECOMING MORE AND MORE IMPORTANT.
8 BEFORE, FOR EXAMPLE, AN ADVERTISER WOULD CHOOSE TO
9 ADVERTISE IN ONE NEWSPAPER AND GET THE ENTIRE CIRCULATION. NOW
10 AN ADVERTISER CAN TARGET A STORE -- IF I CAN GIVE YOU AN
11 EXAMPLE?
12 Q. PLEASE.
13 A. THERE IS A SEARS STORE IN SAN BRUNO WHICH IS, I THINK, THE
14 LARGEST SEARS STORE IN THE ENTIRE CHAIN. AND WHAT THEY DO IS
15 THEY ANALYZE THEIR TOP 12 OF 15 ZIP CODES. AND FOR THAT STORE
16 IN THE TOP 15 ZIP CODES, I THINK ABOUT EIGHT OF THEM ARE IN SAN
17 FRANCISCO AND ABOUT SEVEN OF THEM ARE IN SAN MATEO COUNTY. SO
18 THEY DON'T WANT TO ADVERTISE, SAY, AN ENTIRE CIRCULATION OF THE
19 CHRONICLE/EXAMINER. THEY WOULD LIKE TO ADVERTISE JUST IN THOSE
20 ZIP CODES THAT ARE MOST IMPORTANT TO THEM.
21 AND SO WHEN THEY PICK THEIR TOP REVENUE-PRODUCING
22 ZIP CODES, THEN THEY GO AND THEY LOOK AT WHICH NEWSPAPERS HAVE
23 THE HIGHEST PENETRATION FOR THOSE ZIP CODES, AND THEY LIKE TO
24 PICK THOSE NEWSPAPERS WHICH HAVE THE HIGHEST PENETRATION IN THE
25 ZIP CODES THAT THEY MOST CARE ABOUT. AND THAT'S WHY
2074
FANG - DIRECT / BALABANIAN
1 PENETRATION IS SO IMPORTANT THESE DAYS.
2 Q. WOULD AN ADVERTISER LIKE THAT GAIN ANY ECONOMIC ACTIVITY
3 FOR PAPERS SOLD IN THE EAST BAY?
4 A. FOR STORES LIKE SEARS, YES, BECAUSE THEY HAVE A STORE IN
5 THE EAST BAY OR WHATEVER. BUT STILL THE WAY THAT THESE MAJOR
6 RETAILERS ARE LOOKING AT THEIR BUDGETS THESE DAYS, THEY LOOK AT
7 THEM STORE BY STORE. SO EACH STORE HAS AN ADVERTISING BUDGET.
8 SO EVEN IF THERE IS SOME USE IN THE EAST BAY, THAT IS ALLOCATED
9 TO SOMEBODY ELSE.
10 AND, AGAIN, IF THEY BUY ALL OF SAN FRANCISCO, THE
11 NORTHERN ZIP CODES OF SAN FRANCISCO ARE GOING TO HAVE NO USE TO
12 THAT SEARS STORE IN SAN BRUNO.
13 Q. IN YOUR OPINION, WHAT IS MORE IMPORTANT FOR THE SUCCESS OF
14 THE NEW EXAMINER, INCREASING ITS CIRCULATION OR INCREASING
15 PENETRATION?
16 A. WELL, I THINK THE CIRCULATION -- THE OVERALL CIRCULATION
17 NUMBER OF THE EXAMINER IS -- IS NOT BAD AT ALL. THERE ARE MANY
18 NEWSPAPERS THAT ARE SUCCESSFUL WITH MUCH SMALLER CIRCULATIONS,
19 AND THE CURRENT CIRCULATION OF THE EXAMINER I THINK IS JUST
20 OVER 100,000 RIGHT NOW.
21 A CONTINUING MAIN PROBLEM WITH THE EXAMINER'S
22 CIRCULATION RIGHT NOW IS THAT IT'S TOO SPREAD OUT. I MEAN, YOU
23 HAVE COPIES OF THE EXAMINER GOING TO HAWAII, OR I UNDERSTAND
24 THEY SEND A LOT OF COPIES TO SAN LUIS OBISPO FOR TRADITIONAL
25 REASONS. BUT THOSE ARE NOT COPIES THAT ARE VERY VALUABLE TO
2075
FANG - DIRECT / BALABANIAN
1 ADVERTISERS. AND SO BOTH ARE IMPORTANT, BUT THE PROBLEM FOR
2 THE EXAMINER IS PENETRATION.
3 Q. WHAT IS THE PENETRATION OF THE OLD EXAMINER IN SAN
4 FRANCISCO?
5 A. IN SAN FRANCISCO, BELIEVE IT OR NOT, THE PENETRATION OF
6 THE EXAMINER IS ONLY ABOUT SIX OR SEVEN PERCENT.
7 Q. I'M SORRY?
8 A. SIX OR SEVEN PERCENT.
9 Q. WHAT IS THE PENETRATION OF THE INDEPENDENT IN SAN
10 FRANCISCO?
11 A. THE PENETRATION OF THE INDEPENDENT IS 70 PERCENT --
12 70 PERCENT, TEN TIMES AS MUCH.
13 Q. WHAT PENETRATION DO YOU EXPECT FOR THE NEW EXAMINER?
14 A. WE ARE SHOOTING FOR AN INITIAL PENETRATION OF ABOUT 10 TO
15 15 PERCENT OF THE HOUSEHOLDS IN SAN FRANCISCO.
16 Q. YOU MIGHT MOVE THE MICROPHONE AP LITTLE CLOSER?
17 A. (INDICATING).
18 Q. THANK YOU.
19 NOW, WHAT WILL THE SIZE OF THE NEW EXAMINER BE, THE
20 NUMBER OF PAGES?
21 A. WE ARE PROJECTING THE SIZE OF THE EXAMINER, THE NEW
22 EXAMINER, TO BE BETWEEN 40 AND 48 PAGES.
23 MR. BALABANIAN: YOUR HONOR, MAY I APPROACH THE
24 WITNESS?
25 THE COURT: YES, YOU MAY.
2076
FANG - DIRECT / BALABANIAN
1 BY MR. BALABANIAN:
2 Q. MR. FANG, I HAVE HANDED YOU WHAT I REPRESENT TO BE A COPY
3 OF THE NEW YORK TIMES NATIONAL EDITION FOR THE DAY BEFORE
4 YESTERDAY, AS DISTRIBUTED TO MY HOME.
5 CAN YOU TELL ME HOW MANY PAGES ARE IN IT?
6 A. IT HAS A TOTAL OF 48 PAGES.
7 Q. THAT IS THE NUMBER OF PAGES YOU PROJECT FOR THE NEW
8 EXAMINER?
9 A. YES, IN THAT RANGE.
10 THE COURT: THIS IS THE SATURDAY EDITION, IS IT NOT?
11 MR. BALABANIAN: SATURDAY EDITION.
12 I DON'T INTEND TO OFFER IT IN EVIDENCE, BUT I --
13 SOLELY FOR DEMONSTRATIVE PURPOSES.
14 THE COURT: OKAY.
15 BY MR. BALABANIAN:
16 Q. PERHAPS, MR. FANG, YOU COULD HAND IT TO THE COURT SO THE
17 COURT COULD GET SOME SENSE OF THE SUBSTANTIALITY OF A 48-PAGE
18 NEWSPAPER.
19 THE COURT: THE COURT READS A LOT OF NEWSPAPERS,
20 MR. BALABANIAN, SO THAT'S NOT NECESSARY.
21 BY MR. BALABANIAN:
22 Q. IS THE NEW EXAMINER GOING TO HAVE THE SAME CONTENT AS THE
23 NEW YORK TIMES?
24 A. NO, I THINK THE CONTENT WILL BE VERY DIFFERENT.
25 Q. IS THERE A BAY AREA NEWSPAPER, MR. FANG, WITH WHICH THE
2077
FANG - DIRECT / BALABANIAN
1 COURT MIGHT BE FAMILIAR WHICH MORE CLOSELY RESEMBLES THE PAPER
2 THAT YOU ARE PLANNING TO PUBLISH?
3 A. I THINK THERE HAVE BEEN ANOTHER -- A NUMBER OF NEWSPAPERS
4 THAT HAVE BEEN MENTIONED IN THE COURT -- IN THIS PROCEEDING,
5 SUCH AS THE MARIN INDEPENDENT JOURNAL, THE HAYWARD DAILY
6 REVIEW, THE SAN MATEO COUNTY TIMES. THOSE ARE MORE ALONG THE
7 LINES OF THE NEWSPAPER THAT I ENVISION THE NEW EXAMINER TO BE
8 FROM THE SENSE OF BEING LOCALLY ORIENTED, AGAIN, MORE SAN
9 FRANCISCO NEWS AS OPPOSED TO, SAY, MARIN NEWS BUT MORE ALONG
10 THOSE LINES.
11 Q. TALKING ABOUT THE LOCAL PAPERS, HOW DO THEIR ADVERTISING
12 RATES, THE OTHER DAILIES, THE OTHER DAILIES IN THE BAY AREA,
13 COMPARE WITH THE ADVERTISING RATES OF THE CHRONICLE AND THE
14 EXAMINER?
15 A. THEY'RE MUCH LOWER.
16 Q. WHAT IS TO KEEP AN ADVERTISER WHICH WISHES TO SAVE MONEY
17 IN THE BAY AREA FROM JUST PIECING TOGETHER AN AD PROGRAM USING
18 ALL OF THE LOCAL DAILIES, SUCH AS THE OAKLAND TRIBUNE AND THE
19 MARIN IJ?
20 A. WELL, ONE OF THE DIFFICULTIES OF DOING A REGIONAL
21 ADVERTISING BUY IN THE BAY AREA -- AND THE SAN FRANCISCO BAY
22 AREA IS ONE OF THE MOST DIFFICULT REGIONS IN THE COUNTRY TO BUY
23 ADVERTISING IN -- IS BECAUSE ON A REGIONAL BASIS YOU CAN BUY --
24 YOU CAN PIECE TOGETHER ALL OF THESE LITTLE, WHAT I -- ALL OF
25 THESE LOCAL DAILY NEWSPAPERS, SUCH AS MARIN AND HAYWARD AND THE
2078
FANG - DIRECT / BALABANIAN
1 CONTRA COSTA AND SAN MATEO AND PUT TOGETHER A REGIONAL BUY.
2 BUT BECAUSE THERE IS NO LOCAL DAILY IN SAN FRANCISCO, THERE
3 IS -- AND I THINK YOU MIGHT HAVE BEEN DESCRIBING THESE
4 PROCEEDINGS AS A HOLE IN THE DONUT. YOU CANNOT BUY SAN
5 FRANCISCO. THE ONLY WAY TO BUY SAN FRANCISCO IS BY BUYING THE
6 SAN FRANCISCO CHRONICLE/EXAMINER COMBINATION. AND WHEN YOU BUY
7 THE SAN FRANCISCO CHRONICLE/EXAMINER COMBINATION, YOU ARE
8 FORCED TO BUY THE ENTIRE CIRCULATION OF THE CHRONICLE/EXAMINER.
9 AND SO THEN IT BECOMES VERY UNECONOMICAL IF YOU HAVE TO BUY ALL
10 OF THE CHRONICLE/EXAMINER'S CIRCULATION PLUS ALL OF THE
11 REGIONAL LOCAL DAILY NEWSPAPERS TO MAKE UP YOUR REGIONAL BUY.
12 Q. WILL THE NEW EXAMINER CHANGE THAT SITUATION?
13 A. YES. THE NEW EXAMINER WILL BE THE NEW DAILY THAT FILLS
14 THAT HOLE IN THE DONUT SO THAT ADVERTISERS NOW WILL HAVE A
15 CHOICE. THEY CAN EITHER BUY THE HEARST-OWNED CHRONICLE AND GET
16 THE REGIONAL BUY OR THEY COULD BEGIN TO START PUTTING TOGETHER
17 NETWORKS OF ALL THE LOCAL DAILIES TO OFFER THE SAME KIND OF
18 REGIONAL BUY AND IN MANY CASES, I THINK, BETTER PENETRATION
19 THAN OTHERS THAT MIGHT BE OFFERED BY OTHERS.
20 Q. WILL THAT CREATE COMPETITION FOR THE CHRONICLE THAT NOW
21 EXISTS?
22 A. YES, THAT WILL CREATE REGIONAL COMPETITION THAT DOES NOT
23 NOW EXIST.
24 Q. WILL THE NEW EXAMINER COMPETE DIRECTLY WITH THE CHRONICLE
25 FOR ADVERTISERS?
2079
FANG - DIRECT / BALABANIAN
1 A. YES.
2 Q. DO YOU EXPECT TO OBTAIN ADVERTISING FROM THE SAME TYPE OF
3 ADVERTISERS WHO CURRENTLY USE THE CHRONICLE AND THE OLD
4 EXAMINER?
5 A. YES.
6 Q. ARE THOSE ADVERTISERS, THE ONES WHO CURRENTLY USE THE
7 CHRONICLE AND THE EXAMINER -- WILL THEY BE CONTRACTUALLY BOUND
8 TO THE CHRONICLE AFTER HEARST ACQUIRES IT?
9 A. NO.
10 Q. HOW DO YOU KNOW THAT?
11 A. BECAUSE I HEARD TESTIMONY FROM STEVE FALK, WHO I BELIEVE
12 IS THE CEO OF THE NEWSPAPER AGENCIES, WHO SAID THOSE CONTRACTS
13 WILL BE TERMINATED BECAUSE THEY APPLY ONLY TO THE CHRONICLE AND
14 EXAMINER RIGHT NOW.
15 Q. HOW DO THE AD RATES OF THE -- THE ADVERTISING RATES OF THE
16 CHRONICLE AND THE EXAMINER TODAY COMPARE WITH THOSE CHARGED BY
17 OTHER DAILY NEWSPAPERS AROUND THE COUNTRY?
18 A. THE AD RATES -- THE AD RATES OF THE CHRONICLE AND EXAMINER
19 ARE AMONG THE HIGHEST IN THE COUNTRY.
20 Q. HOW WILL YOU COMPETE -- HOW WILL THE NEW EXAMINER COMPETE
21 WITH THE CHRONICLE FOR ADVERTISERS?
22 A. I THINK WE'LL COMPETE IN A LOT OF DIFFERENT WAYS. ONE
23 WAY, FOR EXAMPLE, OF -- AND, AGAIN, IF WE GO BACK TO THE
24 DIFFERENT TYPES OF ADVERTISERS, THE TYPES OF ADVERTISING THAT
25 ADVERTISE IN DAILY NEWSPAPERS AND THE TYPES OF ADVERTISERS THAT
2080
FANG - DIRECT / BALABANIAN
1 TRADITIONALLY DON'T. GROCERY STORES, SUCH AS SAFEWAY, RUN
2 THEIR PRIMARY -- PRIMARY WEEKLY PREPRINTED INSERTED
3 ADVERTISEMENT WITH THE INDEPENDENT. BUT THEY ALSO RUN SOME
4 SUPPLEMENTAL ADVERTISING IN -- ON THE WEEKENDS TO GET A SALES
5 BOOST ON THE WEEKENDS. BUT THOSE WEEKEND ADVERTISEMENTS ONLY
6 OCCUR IN PAID DAILY NEWSPAPERS, AND SO CURRENTLY THE
7 INDEPENDENT IS NOT ABLE TO ATTRACT THOSE KINDS OF ADVERTISING.
8 BUT WITH THE NEW EXAMINER, WE WILL BE ABLE TO
9 ATTRACT THOSE KINDS OF ADVERTISERS.
10 Q. HAVE YOU MADE ANY APPROACHES TO THE CURRENT ADVERTISERS IN
11 THE CHRONICLE AND THE EXAMINER?
12 A. YES, AS FAR AS THOSE DAILY -- DAILY ADVERTISING TYPE OF
13 CUSTOMERS, WE HAVE APPROACHED THEM, AS WELL.
14 Q. WITH RESPECT TO THE POSSIBILITY OF ADVERTISING IN THE NEW
15 EXAMINER?
16 A. THAT'S CORRECT.
17 Q. HOW WOULD YOU CHARACTERIZE THE RESPONSE?
18 A. THE RESPONSE HAS BEEN VERY FAVORABLE BECAUSE -- FOR A
19 COUPLE OF REASONS. ONE IS THAT THEY ARE CONCERNED -- YOU KNOW,
20 WE HAVE HEARD TALK ABOUT THE -- WHAT WOULD HAPPEN TO THE
21 CIRCULATION OF THE CHRONICLE WHEN THE EXAMINER -- IF THE
22 EXAMINER WERE TO GO TO MY OWNERSHIP. AND THERE IS SOME DEBATE
23 ON WHETHER OR NOT THE CHRONICLE CIRCULATION WOULD DECLINE OR
24 NOT.
25 BUT WHETHER OR NOT THE CHRONICLE CIRCULATION
2081
FANG - DIRECT / BALABANIAN
1 DECLINES BECAUSE OF THAT, OVER THE LAST FIVE OR TEN YEARS THE
2 CIRCULATION OF THE CHRONICLE HAS DECREASED DRAMATICALLY, HAS
3 LOST OVER 120,000. AND SO ADVERTISERS ARE LOOKING FOR WAYS TO
4 MAKE UP THAT CIRCULATION AND I THINK WILL LOOK TO THE NEW
5 EXAMINER AS ONE OF THE WAYS TO MAKE UP THAT CIRCULATION.
6 THEY HAVE ALSO SPECIFIED TO ME THAT THEY ARE
7 INTERESTED IN THE NEW EXAMINER BECAUSE THEY FEEL THAT IT WILL
8 BRING PRICE PRESSURE TO THE NEW CHRONICLE. AND THEY ALSO HAVE
9 HEARD THAT THE CHRONICLE MAY NOT LOWER ITS ADVERTISING RATES
10 UNDER THE NEW SCENARIO, AND THEY ARE HOPING THAT THE NEW
11 EXAMINER -- THEY WILL BE ABLE TO LEVERAGE THE NEW EXAMINER TO
12 GET BETTER ADVERTISING RATES.
13 MR. ALIOTO: YOUR HONOR, I ASSUME THAT THIS EVIDENCE
14 IS FOR THE PURPOSE OF THE WITNESS' UNDERSTANDING. OTHERWISE, I
15 MOVE TO STRIKE IT AS HEARSAY.
16 THE COURT: I ASSUME THAT'S THE REASON IT'S BEING
17 OFFERED?
18 MR. BALABANIAN: CORRECT, YOUR HONOR.
19 THE COURT: ALL RIGHT. ON THAT BASIS YOU MAY
20 PROCEED.
21 BY MR. BALABANIAN:
22 Q. HAVE YOU HAD ANY EXPERIENCE, EVEN AT THE INDEPENDENT, WITH
23 COMPETING WITH THE CHRONICLE AND EXAMINER FOR ADVERTISING?
24 A. YES, WE HAVE HAD.
25 Q. CAN YOU GIVE US AN EXAMPLE?
2082
FANG - DIRECT / BALABANIAN
1 A. YES. ONE EXAMPLE IS FOR THESE COUPON INSERTS THAT I
2 MENTIONED BEFORE, THEY TRADITIONALLY, AGAIN, ADVERTISE ONLY IN
3 THE PAID DAILY NEWSPAPERS. THEY MADE AN EXCEPTION THAT
4 RECEIVED NATIONWIDE ATTENTION IN 1998 WHEN THEY DROPPED OUT OF
5 THE CHRONICLE/EXAMINER AND WENT INTO THE INDEPENDENT. AND SO
6 THEY CAME INTO THE INDEPENDENT, BUT THEY ACTUALLY ONLY STAYED
7 IN THE INDEPENDENT FOR ONE YEAR BECAUSE WHAT HAPPENED WAS THAT
8 WHILE THEY WERE PAYING RATES OF ABOUT $47 PER THOUSAND PRIOR TO
9 THEM COMING INTO THE INDEPENDENT, AFTER THEY CAME INTO THE
10 INDEPENDENT THEY WERE ABLE TO LEVERAGE THE INDEPENDENT AND GOT
11 A RATE OF ABOUT $25 THAT THEY CURRENTLY PAY WITH THE
12 CHRONICLE/EXAMINER RIGHT NOW. SO THAT'S LIKE ONE DAILY -- TYPE
13 OF DAILY NEWSPAPER ADVERTISER THAT I HAVE HAD INTERACTION WITH.
14 ANOTHER ONE WOULD BE, FOR EXAMPLE, THE MOVIE STUDIOS
15 WHICH TRADITIONALLY, AGAIN, ONLY ADVERTISE IN THE PAID DAILY
16 NEWSPAPERS. ABOUT A YEAR AND A HALF AGO MY ADVERTISING STAFF
17 BEGAN CONTACTING THE MAJOR MOTION PICTURE STUDIOS ABOUT
18 ADVERTISING IN THE INDEPENDENT. AND, AGAIN, ALTHOUGH IT IS NOT
19 THEIR CUSTOM, 12 OUT OF THE TOP 12 MAJOR STUDIOS ARE ALL
20 PLACING SMALL ADVERTISING SCHEDULES NOW WITH THE INDEPENDENT.
21 AND SO NOT ONLY DO I KNOW THESE ADVERTISERS, BUT I ALSO KNOW
22 WHAT THEY WOULD BE LOOKING FOR IN A DAILY NEWSPAPER. AND
23 SPECIFICALLY I KNOW THAT ONE OF THEIR CONCERNS WITH THE
24 CHRONICLE IS THAT CURRENTLY THE MOVIE LISTINGS -- OR THEY CALL
25 IT THE "MOVIE CLOCK" OR THE LISTING OF WHERE THE MOVIES ARE
2083
FANG - DIRECT / BALABANIAN
1 PLAYING OR WHAT TIME THE MOVIES ARE PLAYING, THOSE LISTINGS,
2 CURRENTLY THE CHRONICLE CHARGES FOR ALL OF THOSE LISTINGS. AND
3 THEY'RE THE ONLY NEWSPAPER IN THE BAY AREA THAT CHARGES FOR
4 THEM. AND THE STUDIOS ARE VERY UNHAPPY WITH THAT, BUT THEY
5 CAN'T DO ANYTHING ABOUT IT BECAUSE IT'S THE ONLY WAY TO GET
6 YOUR MOVIES LISTED IN SAN FRANCISCO.
7 AND SO I THINK THAT WE WILL BE ABLE TO OFFER THEM
8 SOME SERVICES THAT THEY AREN'T CURRENTLY GETTING WITH THE NEW
9 EXAMINER.
10 Q. DO YOU EXPECT TO PROVIDE PRICE COMPETITION TO THE NEW --
11 I'M SORRY.
12 WILL THE NEW EXAMINER PROVIDE PRICE COMPETITION TO
13 THE CHRONICLE?
14 A. YES.
15 Q. ON ADVERTISING?
16 A. YES, WE WILL.
17 Q. DO YOU EXPECT ANY ADVERTISING SYNERGIES BETWEEN THE NEW
18 EXAMINER AND THE INDEPENDENT?
19 A. YES, WE DO.
20 Q. IF YOU HAD SOMEWHAT DIFFERENT ADVERTISING BASES, HOW CAN
21 THOSE SYNERGIES BE OBTAINED?
22 A. WELL, AS I GAVE ONE EXAMPLE BEFORE ABOUT, SAY, SAFEWAY
23 THAT, AGAIN, ADVERTISES WITH US, WE WILL BE ABLE TO, I HOPE,
24 GET SOME EXTRA ADVERTISING WITH THE -- OUR NEW PAID DAILY
25 PRODUCT.
2084
FANG - DIRECT / BALABANIAN
1 ANOTHER EXAMPLE IS CLASSIFIED ADS, FOR EXAMPLE. IF
2 YOU BUY AN AD IN THE INDEPENDENT, WE WILL BE ABLE TO SAY --
3 TELL PEOPLE THAT YOU CAN PICK UP YOUR AD IN THE NEW EXAMINER
4 FOR AN EXTRA DOLLAR A DAY OR TWO DOLLARS A DAY OR SOME VERY
5 ATTRACTIVE RATE. AND SO THERE ARE SYNERGIES THERE.
6 AND THEN I THINK WE WILL BE ABLE TO USE SOME OF THE
7 TECHNOLOGIES THAT WE HAVE AT THE INDEPENDENT, AS FAR AS
8 ADVERTISING TECHNOLOGIES, TO INCREASE REVENUE IN THE NEW
9 EXAMINER.
10 Q. MR. FANG, WILL THE NEW EXAMINER COMPETE WITH THE CHRONICLE
11 FOR READERS?
12 A. YES, WE WILL.
13 Q. WE HEARD MR. FALK TESTIFY THAT FOR ONLY 60 PERCENT OF
14 THE -- THAT FOR 60 PERCENT OF ITS CURRENT READERS THE EXAMINER
15 IS ONLY A COMPLEMENT TO THE CHRONICLE. DO YOU KNOW WHY THAT
16 IS? WHY DO MOST --
17 A. I -- I THINK THE MOST OBVIOUS REASON IS BECAUSE ONE IS A
18 MORNING PAPER AND ONE IS AN AFTERNOON PAPER. SO YOU CAN BUY
19 BOTH, AS OPPOSED TO WITH THE NEW EXAMINER THEY WILL BOTH BE
20 MORNING NEWSPAPERS SO PEOPLE WILL CHOOSE BETWEEN ONE OR THE
21 OTHER.
22 Q. DO YOU THINK THE NEW EXAMINER WILL BE A MORE EFFECTIVE
23 SUBSTITUTE FOR THE CHRONICLE THAN THE OLD EXAMINER?
24 A. YES, I DO.
25 Q. LET'S TALK ABOUT THE CONTENT OF THE NEW EXAMINER. WHAT
2085
FANG - DIRECT / BALABANIAN
1 KIND OF NEWS WILL IT INCLUDE?
2 A. IT WILL FOCUS ON LOCAL NEWS, BUT IT WILL ALSO INCLUDE
3 NATIONAL AND INTERNATIONAL NEWS.
4 Q. WILL YOU HAVE NEWS BUREAUS TO GATHER NATIONAL AND
5 INTERNATIONAL NEWS?
6 A. WE -- I DON'T ANTICIPATE US HAVING OUR OWN NEWS BUREAUS,
7 BUT I HAVE ALREADY BEGUN TALKING TO NEWS SERVICES FOR HAVING
8 BUREAUS, SAY, IN SACRAMENTO AND WASHINGTON, D.C.
9 Q. DOES THE -- DOES NEW TECHNOLOGY HAVE ANY IMPACT ON NEWS
10 GATHERING?
11 A. YES, NEW TECHNOLOGY HAS A LOT OF IMPACT ON NEWS GATHERING.
12 AND, YOU KNOW, ONE OF MY -- ONE OF THE THINGS THAT WE HOPE TO
13 DO WITH THE INDEPENDENT IS TO CREATE NEW STRATEGIC ALLIANCES
14 WITH INTERNET COMPANIES. AND BECAUSE -- PARTICULARLY IN SAN
15 FRANCISCO, WHICH IS, LIKE, THE MULTI-MEDIA CAPITAL OF THE
16 WORLD, THERE ARE A LOT OF INTERNET COMPANIES THAT SPECIALIZE IN
17 CONTENT, AND WHETHER IT BE BUSINESS NEWS OR ENTERTAINMENT NEWS
18 OR SPORTS. AND WE HOPE TO FORM STRATEGIC ALLIANCES WITH THESE
19 KINDS OF ORGANIZATIONS TO HELP PROVIDE SOME NEWS, AS WELL.
20 Q. I THINK YOU SAID "INDEPENDENT." DID YOU MEAN THE
21 EXAMINER?
22 A. I MEANT THE NEW EXAMINER. I'M SORRY, SIR.
23 Q. WILL THE NEW EXAMINER CARRY SYNDICATED COLUMNS?
24 A. YES, WE WILL, COMIC STRIPS, FEATURES.
25 Q. DO YOU EXPECT TO CARRY ANY THAT ARE -- THAT WILL APPEAR IN
2086
FANG - DIRECT / BALABANIAN
1 THE CHRONICLE?
2 A. WE MAY. ONE OF THE THINGS THAT WE HAVE NEGOTIATED IN OUR
3 PURCHASE AGREEMENT WITH THE HEARST CORPORATION IS WHAT I
4 BELIEVE TO BE ONE OF THE MOST PRO-COMPETITIVE CLAUSES IN THE
5 ENTIRE COUNTRY FOR NEWSPAPERS BECAUSE, TRADITIONALLY, WHEN ONE
6 NEWSPAPER GETS A SYNDICATED COLUMN OR A COMIC STRIP, THE OTHER
7 NEWSPAPER IS NO LONGER ABLE TO GET THAT COMIC STRIP OR FEATURE.
8 AND WHAT HAPPENS TOO OFTEN IS THAT THE LARGER
9 NEWSPAPER -- THE PRICE FOR THESE FEATURES OR THESE COMIC STRIPS
10 ARE BASED ON CIRCULATION. SO WHAT HAPPENS IS THAT THE LARGER
11 NEWSPAPER CAN AFFORD TO PAY A LARGER PRICE AND SO THE SMALLER
12 NEWSPAPER NEVER GETS ANY OF THE BETTER FEATURES OR THE BETTER
13 COMIC STRIPS. BUT WE HAVE A CLAUSE IN THE AGREEMENT WITH THE
14 HEARST CORPORATION THAT THEY WILL NOT USE EXCLUSIVITY ON ANY
15 FEATURE OR COMIC STRIP SO THAT WE CAN BOTH HAVE THOSE AND BOTH
16 OFFER THEM INTO THE PUBLIC.
17 Q. IS THAT A NEGOTIATED TERM OF YOUR AGREEMENT WITH HEARST?
18 A. YES. IT WAS ONE OF THE MORE DIFFICULT NEGOTIATING POINTS.
19 Q. HOW WILL THE LOCAL COVERAGE OF THE NEW EXAMINER COMPARE
20 WITH THE OLD ONE?
21 A. AGAIN, I THINK THAT THE NEW EXAMINER WILL EMPHASIZE LOCAL
22 NEWS COVERAGE MORE THAN THE OLD EXAMINER DID. AGAIN, I THINK
23 WE HAVE HEARD TALK THROUGH THIS TRIAL THAT -- YOU KNOW, THAT
24 HEARST IS TRYING TO PRESERVE THEIR POSITION TO TAKE OVER THE
25 CHRONICLE'S POSITION, SO THEY HAD TO -- WHILE THEIR CIRCULATION
2087
FANG - DIRECT / BALABANIAN
1 WAS DECLINING, WHILE THEY WERE LOSING MONEY, THEY STILL HAD TO
2 KEEP UP THE FACADE OF BEING A METROPOLITAN DAILY NEWSPAPER AND
3 SO KEPT BEEFING UP THEIR NEWSPAPER AND BEEFING UP THEIR
4 NEWSPAPER.
5 AND WE ARE NOT GOING TO MAKE ANY PRETENSE OF BEING A
6 METROPOLITAN DAILY NEWSPAPER BUT, RATHER, A LOCAL DAILY
7 NEWSPAPER.
8 Q. WE HEARD MR. FALK SAY THAT THE SUNDAY NEWSPAPER DOES NOT
9 CARRY ONE INCH OF LOCAL NEWS BECAUSE THE EXAMINER DOES NOT HAVE
10 A LOCAL NEWS BUREAU.
11 WILL THE NEW EXAMINER CARRY ONE INCH OF LOCAL NEWS?
12 A. YES.
13 Q. MORE THAN ONE INCH?
14 A. FAR MORE THAN ONE INCH.
15 Q. MR. FANG, I -- I THINK I REFERRED TO THE INDEPENDENT'S
16 STYLE OR TONE AS "MUSCULAR." WILL THE -- WILL AS MUCH MUSCLE
17 BE SHOWING IN THE NEW EXAMINER?
18 A. NO.
19 Q. WHY NOT?
20 A. WELL, AGAIN, I THINK THAT IT HAS TO DO WITH THE DIFFERENT
21 KINDS OF PUBLICATIONS IS THAT IT WILL BE AS A DAILY AND THE
22 INDEPENDENT CURRENTLY IS AS A NON-DAILY.
23 WHEN YOU ARE A NON-DAILY NEWSPAPER AND YOU ARE
24 TRYING TO FILL YOUR NEWS PAGES, WHAT YOU NEED TO DO IS YOU NEED
25 TO TAKE, BASICALLY, THE WEEK'S EVENTS AND TRY TO CHOOSE THOSE
2088
FANG - DIRECT / BALABANIAN
1 ISSUES OR EVENTS THAT YOU THINK ARE MOST IMPORTANT AND THEN PUT
2 THEM ON THE FRONT PAGE OF YOUR NEWSPAPER.
3 NOW, QUITE OFTEN THOSE WILL ALREADY HAVE BEEN
4 REPORTED IN THE DAILY NEWSPAPERS SO NON-DAILIES DON'T HAVE THE
5 CURRENCY TO SELL OF THOSE -- OF ITS NEWS COVERAGE SO YOU
6 SOMEHOW TRY TO ATTRIBUTE MORE IMPORTANCE OR CREATE DIFFERENT
7 ANGLES. AND SOME PEOPLE WOULD CHARACTERIZE IT AS A MORE
8 SENSATIONALIST APPROACH, BUT YOU HAVE A DIFFERENT WAY AND A
9 DIFFERENT NEED OF COVERING NEWS WITH NON-DAILIES THAN WHEN YOU
10 ARE A DAILY NEWSPAPER.
11 Q. AND THAT -- YOU BELIEVE THAT WILL BE -- THAT ABILITY TO
12 OFFER CURRENCY RATHER THAN SENSATIONALISM WILL AFFECT THE
13 EDITORIAL STYLE AND TONE OF THE EXAMINER?
14 A. WELL, I DIDN'T SAY THAT I AM OFFERING ANY SENSATIONALISM
15 AT ALL. BUT THE NEW EXAMINER WILL BE A MUCH MORE TRADITIONAL
16 DAILY NEWSPAPER WITH THE KIND OF NEWS THAT IT COVERS.
17 AND, AGAIN, I THINK WITH -- DAILY NEWSPAPERS ARE A
18 MORE TRADITIONAL VEHICLE. THEY HAVE THEIR DIFFERENT
19 SECTIONS -- A NEWS SECTION, A BUSINESS SECTION, A SPORTS
20 SECTION, A LIFE-STYLE SECTION. THE NEW EXAMINER WILL BE MORE
21 TRADITIONAL IN THAT VEIN.
22 Q. WILL -- LET'S TALK ABOUT FORMAT.
23 DO YOU AGREE WITH THE PLAINTIFF'S EXPERT WHO
24 TESTIFIED THAT SHIFTING THE EXAMINER TO TABLOID WAS ESSENTIAL
25 OR THE ONE WHO SAID IT WOULD BE FATAL?
2089
FANG - DIRECT / BALABANIAN
1 A. I THINK THAT -- I THINK THE ANSWER LIES PROBABLY SOMEWHERE
2 MORE IN BETWEEN.
3 NOW, MY INTENTIONS AT THIS POINT ARE TO KEEP THE
4 EXAMINER IN ITS BROAD-SHEET FORMAT AND TO NOT SWITCH IT INTO A
5 TABLOID FORMAT.
6 Q. HOW WILL YOU -- DO YOU PLAN ANY CHANGES IN THE FORMAT?
7 A. YES, WE DO.
8 Q. HOW WILL YOU DECIDE ON THOSE CHANGES?
9 A. WELL, ONE OF THE ADVISERS THAT WE HAVE CONTACTED AND THAT
10 WE ARE WORKING WITH IS A GENTLEMAN NAMED ROGER BLACK, AND
11 MR. BLACK IS ONE OF THE PREEMINENT NEWSPAPER DESIGNERS IN THE
12 COUNTRY, HAS REDESIGNED THE EXAMINER IN THE PAST WHEN WILL
13 HEARST WAS THE PUBLISHER, IS CURRENTLY IN THE PROCESS OF
14 REDESIGNING THE LOS ANGELES TIMES. AND HE IS GIVING US ADVICE
15 ON REDESIGNING THE EXAMINER.
16 BUT, AGAIN, WE PROBABLY WILL KEEP IT IN THE
17 BROAD-SHEET FORMAT.
18 Q. DO YOU HAVE ANY IDEA WHAT KIND OF FORMAT CHANGES ARE UNDER
19 CONSIDERATION?
20 A. I THINK THAT WE ARE GOING TO MAKE BETTER USE OF COLOR,
21 PROBABLY USE MORE PHOTOS, TRY TO MAKE THE NEWSPAPER MORE A
22 PLEASANT READ THAN JUST THE KIND OF VERTICAL FORMATTING THAT
23 THE EXAMINER CURRENTLY HAS.
24 Q. YOU HAVE MENTIONED MR. BLACK AS ONE OF YOUR ADVISERS.
25 AGAIN, HIS LINE OF -- HIS EXPERTISE IS IN WHAT AREA?
2090
FANG - DIRECT / BALABANIAN
1 A. HIS EXPERTISE IS IN NEWSPAPER DESIGN.
2 Q. WHAT IS HIS RELATIONSHIP WITH THE NEW EXAMINER?
3 A. HE IS CURRENTLY ONE OF THE PEOPLE THAT IS ADVISING ME.
4 Q. DO YOU ANTICIPATE ANY ROLE FOR HIM IN THE NEW EXAMINER?
5 A. YES. WE HAVE TALKED TO HIM ABOUT PLACING HIM ON THE BOARD
6 OF DIRECTORS FOR THE NEW EXAMINER.
7 Q. DO YOU ANTICIPATE MAKING ANY USE OF NEW TECHNOLOGY AT THE
8 NEW EXAMINER?
9 A. YES. WE ANTICIPATE MAKING MANY DIFFERENT USES OF NEW
10 TECHNOLOGY AT THE EXAMINER.
11 Q. OKAY. WE HAVE ALREADY TALKED ABOUT PAGINATION. IS THAT
12 ONE OF THEM?
13 A. THAT IS ONE OF THEM.
14 Q. ARE THERE OTHERS?
15 A. YES, THERE ARE.
16 Q. WOULD YOU PLEASE TELL THE COURT WHAT OTHER CHANGES IN
17 TECHNOLOGY YOU HAVE IN MIND?
18 A. WELL, FOR EXAMPLE, WITH ADVERTISING, WITH CLASSIFIED
19 ADVERTISING, IF SOMEBODY WANTS TO, FOR EXAMPLE, SELL THEIR CAR
20 OR SOMETHING LIKE THAT, RIGHT NOW ALL THEY REALLY CAN DO IN A
21 NEWSPAPER IS CALL UP AND, YOU KNOW, HAVE A FEW LINES OF
22 DESCRIBING THEIR CAR.
23 WITH THE NEW TECHNOLOGY, YOU CAN PUT THE PHOTO OF
24 THE CAR INTO THE ADVERTISEMENT.
25 IN A SIMILAR VEIN FOR HELP WANTED ADS OR REAL ESTATE
2091
FANG - DIRECT / BALABANIAN
1 ADS, YOU CAN PUT THE LOGO OF THE COMPANY THAT IS SELLING THE
2 HOUSE OR THE LOGO OF THE COMPANY THAT IS SELLING -- THAT HAS
3 BEEN TRYING TO TRACK THE EMPLOYEE.
4 AND THOSE ARE KINDS OF THINGS THAT YOU COULD NOT DO
5 BEFORE BECAUSE YOU HAVE TO, YOU KNOW, GET THE LOGO AND
6 REPRODUCE IT, BUT NOW YOU CAN BASICALLY DO IT WITH THE TOUCH OF
7 A BUTTON. SO THAT'S ANOTHER AREA WHERE I THINK WE WILL TAKE
8 ADVANTAGE OF THE NEW TECHNOLOGY.
9 Q. MR. FANG, YOU HAVE TESTIFIED THAT YOU COULD PRINT THE NEW
10 EXAMINER ON YOUR EXISTING PRESSES. IS THAT YOUR PLAN?
11 A. NO, IT IS NOT.
12 Q. HOW DO YOU PLAN TO PRINT THE NEW EXAMINER?
13 A. WE PLAN TO -- IN THE SHORT TERM WE PLAN TO OUTSOURCE THE
14 PRINTING OF THE EXAMINER TO EXISTING COMMERCIAL PRINTERS.
15 Q. AND IN THE LONG TERM?
16 A. IN THE LONG TERM WE ARE INVESTIGATING PURCHASING NEW PRESS
17 EQUIPMENT OR CREATING LONG-TERM FAVORABLE CONTRACTS WITH THESE
18 COMMERCIAL PRINTERS.
19 Q. THERE HAS BEEN TESTIMONY THAT THERE IS NO COMMERCIAL
20 PRINTING -- NEWSPAPER PRINTING CAPACITY AVAILABLE ANYWHERE IN
21 THE BAY AREA. IS THAT CORRECT?
22 A. THAT'S JUST WRONG.
23 Q. HOW DO YOU KNOW THAT?
24 A. BECAUSE I WENT OUT AND LOOKED FOR COMMERCIAL PRINTING
25 CAPACITY AND FOUND AT LEAST TWO COMMERCIAL PRINTERS THAT HAVE
2092
FANG - DIRECT / BALABANIAN
1 CONFIRMED TO ME PRESS AVAILABILITY AND PRESS CAPACITY TO PRINT
2 THE NEW EXAMINER.
3 MR. ALIOTO: AGAIN, DEPENDING UPON THE PURPOSE, YOUR
4 HONOR, I MOVE TO STRIKE AS BEING HEARSAY.
5 THE COURT: AGAIN, THIS IS ALL OFFERED FOR THE
6 WITNESS' STATE OF MIND. IS THERE ANY OTHER BASIS UPON WHICH
7 THIS IS OFFERED?
8 MR. BALABANIAN: NO, YOUR HONOR. IT GOES TO HIS
9 INTENTIONS AND HIS BASES FOR HIS BELIEF THAT HE CAN SUCCEED.
10 THE COURT: ALL RIGHT. SO WITH THE UNDERSTANDING
11 THAT THIS IS ALL STATE-OF-MIND EVIDENCE, IT WILL BE RECEIVED.
12 BY MR. BALABANIAN:
13 Q. THIS PRINTING CAPACITY THAT YOU TALK ABOUT, IS IT CLOSE
14 ENOUGH TO THE BAY AREA TO ALLOW PAPERS TO BE DELIVERED IN THE
15 MORNING?
16 A. YES. THERE ARE BOTH -- ONE IS IN THE EAST BAY AND ONE IS
17 ON THE PENINSULA, AND THEY ARE BOTH ABOUT 30 MINUTES AWAY IN
18 NON-RUSH-HOUR TRAFFIC OR LESS.
19 Q. WELL, WHERE IS THE WALL STREET JOURNAL PRINTED THAT WE GET
20 HERE IN SAN FRANCISCO?
21 A. IT'S CURRENTLY PRINTED IN PALO ALTO, WHICH IS FURTHER THAN
22 ANY OF THE COMMERCIAL PRINTERS THAT I AM LOOKING AT RIGHT NOW.
23 Q. WHERE IS THE NEW YORK TIMES PRINTED THAT WE GET IN SAN
24 FRANCISCO?
25 A. THE NEW YORK TIMES IS PRINTED ON THE PRESSES OF THE CONTRA
2093
FANG - DIRECT / BALABANIAN
1 COSTA TIMES, WHICH IS ALSO FURTHER THAN EITHER OF THE
2 COMMERCIAL PRINTERS THAT I AM THINKING ABOUT.
3 Q. WAS THERE ANY AVAILABLE PRINTING CAPACITY IN THE BAY AREA
4 BACK IN 1988, THE DATE MR. INGRAM, ONE OF PLAINTIFFS'S EXPERTS,
5 SAID HE CHECKED AND COULDN'T FIND ANY?
6 A. YES. I KNOW THAT THERE WAS PRESS CAPACITY AT THAT TIME.
7 Q. HOW DO YOU KNOW THAT?
8 A. BECAUSE, AS I SAID, AT THAT TIME THE INDEPENDENT IN
9 DECEMBER OF 1988 WAS EXPANDING AND WE NEEDED TO EXPAND IN A
10 SIX-DAY WINDOW. AND SO WE FOUND PRESS CAPACITY IN PITTSBURGH,
11 CALIFORNIA WHERE WE BEGAN PRINTING THE INDEPENDENT WHEN IT
12 FIRST STARTED, AND I KNOW THOSE PRESSES WERE COMPLETELY IDLE,
13 AND IN FACT THEY WERE SO IDLE THAT EVENTUALLY THEY GOT MOVED TO
14 TEXAS.
15 Q. MR. FANG, HAVE YOU PREPARED A BUSINESS PLAN FOR THE NEW
16 EXAMINER?
17 A. NO.
18 Q. WHY NOT?
19 A. BECAUSE I THINK A BUSINESS PLAN IS SOMETHING THAT YOU USE
20 WHEN YOU ARE LOOKING TO SELL A BUSINESS OR LOOKING FOR
21 INVESTORS OF A BUSINESS.
22 Q. ARE YOU DOING EITHER?
23 A. NO, I AM NOT.
24 Q. WELL, HAVE YOU -- IF YOU HAVE NOT PREPARED A BUSINESS
25 PLAN, HAVE YOU PREPARED PLANS FOR THE NEW EXAMINER'S BUSINESS?
2094
FANG - DIRECT / BALABANIAN
1 A. YES, I HAVE PREPARED A LOT OF PLANS FOR THE BUSINESS.
2 MR. ALIOTO: MAY I HAVE THAT AGAIN? EXCUSE ME.
3 (PAUSE IN THE PROCEEDINGS.)
4 MR. BALABANIAN: WOULD YOU LIKE IT READ BACK,
5 MR. ALIOTO?
6 MR. SHULMAN: HERE IT IS.
7 (RECORD READ AS FOLLOWS: "Q. WELL, HAVE YOU --
8 IF YOU HAVE NOT PREPARED A BUSINESS PLAN, HAVE
9 YOU PREPARED PLANS FOR THE NEW EXAMINER'S
10 BUSINESS?")
11 MR. BALABANIAN: YOU HEARD IT, MR. ALIOTO?
12 MR. ALIOTO: I OBJECT ON THE GROUND IT'S VAGUE. I
13 HAVE NEVER MADE THAT OBJECTION IN TRIAL BEFORE BUT I AM GOING
14 TO.
15 THE COURT: I THINK I UNDERSTAND THE QUESTION.
16 MR. BALABANIAN: YOUR HONOR, I WOULD LIKE TO BEGIN
17 LOOKING AT SOME DOCUMENTS, WITH THE COURT'S PLEASURE TO TAKE A
18 BREAK AT THIS POINT.
19 THE COURT: I TAKE IT YOU DO NOT WANT AN ANSWER TO
20 YOUR QUESTION?
21 MR. BALABANIAN: I THOUGHT I GOT AN ANSWER.
22 BY MR. BALABANIAN:
23 Q. MR. FANG, PLEASE ANSWER THE QUESTION.
24 A. YES, I HAVE MADE A LOT OF PLANS FOR THIS NEW BUSINESS.
25 THE COURT: HE HAS MADE A LOT OF PLANS BUT THERE IS
2095
FANG - DIRECT / BALABANIAN
1 NO BUSINESS PLAN.
2 MR. BALABANIAN: THERE IS NOT A DOCUMENT CALLED A
3 BUSINESS PLAN FOR THE REASON THAT HE STATES.
4 THE COURT: IF THIS IS A CONVENIENT TIME TO TAKE A
5 BREAK, THEN WE WILL DO THAT. LET'S RESUME AT 10:15.
6 (RECESS TAKEN AT 10:00 A.M.)
7 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2096
FANG - DIRECT / BALABANIAN
1 (PROCEEDINGS RESUMED AT 10:25 A.M.)
2 THE COURT: VERY WELL, MR. BALABANIAN, YOU MAY
3 CONTINUE YOUR EXAMINATION OF MR. FANG.
4 MR. BALABANIAN: THANK YOU, YOUR HONOR.
5 BEFORE DOING SO, I JUST WANT TO MAKE SURE THAT MY
6 POSITION IS CLEAR WITH REGARD TO THE EVIDENTIARY POINT THAT HAS
7 BEEN RAISED.
8 I BELIEVE THAT ALL OF MR. FANG'S TESTIMONY THIS
9 MORNING WAS ADMITTED FOR ITS TRUTH WITH THE EXCEPTION ONLY OF
10 THE TWO ISSUES AS TO WHICH MR. ALIOTO MADE A MOTION TO STRIKE;
11 THE FIRST BEING THE RESPONSE OF ADVERTISERS TO THE INQUIRIES
12 WHICH MR. FANG HAS MADE OF THEM, AND THE SECOND BEING THE
13 AVAILABILITY OF PRINTING CAPACITY IN THE BAY AREA.
14 I THINK THOSE ARE THE ONLY TWO SUBJECTS AS TO WHICH
15 MOTION TO STRIKE WAS MADE AND THOSE ARE THE ONLY TWO AREAS
16 WHERE THE TESTIMONY HAS BEEN OFFERED ONLY FOR THE WITNESS'
17 STATE OF MIND.
18 THE COURT: WELL, WITH THOSE EXCEPTIONS, AS I
19 UNDERSTAND IT, THE TESTIMONY IS ESSENTIALLY OF THE WITNESS'
20 PLANS FOR THE EXAMINER IF HE ACQUIRES IT.
21 MR. BALABANIAN: WELL, THERE WAS ALSO TESTIMONY AS
22 TO THE HISTORY OF THE PUBLICATIONS, HIS EXPERIENCE AND THE
23 SUCCESS OF HIS EFFORTS TO DATE. I BELIEVE THE ONLY TWO AREAS
24 AS TO WHICH --
25 THE COURT: WELL, BUT I DON'T THINK THOSE MATTERS,
2097
FANG - DIRECT / BALABANIAN
1 THOSE LATTER TWO MATTERS THAT YOU REFERRED TO, ARE IN DISPUTE;
2 ARE THEY, MR. ALIOTO?
3 MR. ALIOTO: I UNDERSTOOD THEM TO BE INTRODUCTORY,
4 YOUR HONOR, AND AS A CONSEQUENCE. BUT, NONETHELESS, LATER ON
5 IT GOT TO BE JUST STATEMENTS OF THIRD PARTIES OUT OF COURT THAT
6 HE WAS TESTIFYING TO, AND I WANTED TO BE CLEAR THAT THOSE
7 STATEMENTS OF THIRD PARTIES OUT OF COURT TO THIS WITNESS AND
8 RECOUNTING THEM IS HEARSAY AND NOT OFFERED FOR THE TRUTH.
9 THE COURT: ALL RIGHT. I THINK THAT'S CLEAR.
10 MR. BALABANIAN: THANK YOU.
11 MAY I JUST BRIEFLY, THEN, ADDRESS THOSE TWO ISSUES
12 IN ANOTHER WAY? WE HAVE DESIGNATED MR. FANG AS AN EXPERT.
13 INDEED, I BELIEVE THAT WAS THE ONLY EXPERT DESIGNATION FILED IN
14 THIS CASE THAT COMPLIED WITH THE COURT'S DIRECTIVE. AND I
15 WOULD LIKE TO ASK MR. FANG TO ADDRESS THESE TWO MATTERS AS AN
16 EXPERT BASED ON HIS 13 YEARS OF EXPERIENCE IN THE BAY AREA
17 NEWSPAPER COMMUNITY. I'LL BE VERY BRIEF, YOUR HONOR.
18 THE COURT: ALL RIGHT.
19 BY MR. BALABANIAN:
20 Q. MR. FANG, DO YOU HAVE AN OPINION AS TO THE LIKELY REACTION
21 OF BAY AREA ADVERTISERS TO THE AVAILABILITY OF A DAILY
22 NEWSPAPER OFFERING LOWER ADVERTISING RATES?
23 A. YES, I DO.
24 Q. WHAT IS THAT OPINION?
25 A. ADVERTISERS ARE LOOKING FORWARD TO SUCH A POSSIBILITY.
2098
FANG - DIRECT / BALABANIAN
1 Q. AND AS AN EXPERT IN NEWSPAPER PRINTING IN THE BAY AREA, DO
2 YOU HAVE AN OPINION AS TO THE AVAILABILITY OF PRINTING
3 CAPACITY, COMMERCIAL PRINTING CAPACITY, FOR NEWSPAPERS IN THE
4 BAY AREA?
5 A. YES, I DO.
6 Q. AND WHAT IS THAT OPINION, SIR?
7 A. THERE IS PLENTY OF NEWSPAPER PRINTING CAPACITY IN THE BAY
8 AREA.
9 Q. THANK YOU.
10 MR. FANG, LET'S LOOK AT EXHIBIT 133. I HAVE PLACED
11 AT YOUR -- AT THE WITNESS STAND THERE A BOOK CONTAINING SOME OF
12 THE DOCUMENTS I'D LIKE TO REVIEW WITH YOU.
13 MR. BALABANIAN: YOUR HONOR, I HAVE PREPARED ONE FOR
14 THE COURT IF IT WOULD PREFER TO RECEIVE IT.
15 THE COURT: THAT WOULD BE FINE. THANK YOU.
16 BY MR. BALABANIAN:
17 Q. EXHIBIT E-133, MR. FANG, HAVE YOU FOUND THAT IN YOUR BOOK?
18 A. YES, I HAVE.
19 Q. CAN YOU PLEASE TELL THE COURT WHAT THAT IS?
20 A. THIS IS OUR PROJECTIONS FOR THE NEW SAN FRANCISCO EXAMINER
21 FOR THE FIRST SIX YEARS.
22 MR. BALABANIAN: YOUR HONOR, THIS DOCUMENT IS NOT
23 YET IN EVIDENCE, AND AT THIS TIME I WOULD MOVE THAT IT BE
24 ADMITTED INTO EVIDENCE.
25 MR. ALIOTO: MAY I JUST ASK ONE OR TWO VOIR DIRE
2099
FANG - DIRECT / BALABANIAN
1 QUESTIONS ABOUT THIS DOCUMENT, YOUR HONOR? IT'S NEW TO US.
2 THE COURT: VERY WELL.
3 MR. BALABANIAN: IT WAS PRODUCED WELL OVER TWO WEEKS
4 AGO.
5 MR. ALIOTO: I'M NOT SAYING -- IF COUNSEL SAYS IT
6 WAS PRODUCED TWO WEEKS AGO, OKAY; BUT WE DIDN'T HAVE IT AT THE
7 TIME OF THE DEPOSITION I DON'T THINK.
8 MR. BALABANIAN: THAT'S CORRECT.
9 MR. ALIOTO: OKAY. IF YOU HAVE -- MAY I, YOUR
10 HONOR?
11 THE COURT: YES, YOU MAY.
12 MR. ALIOTO: OKAY. DIRECTING YOUR ATTENTION TO
13 EXHIBIT 133 THAT IS IN FRONT OF YOU, WHEN WAS THIS PREPARED?
14 THE WITNESS: A FEW WEEKS AGO OR A MONTH AGO.
15 MR. ALIOTO: WAS IT PREPARED BEFORE OR AFTER THE
16 AGREEMENT WITH THE HEARST CORPORATION?
17 THE WITNESS: AFTER.
18 MR. ALIOTO: SO YOU DID NOT RELY UPON THIS DOCUMENT
19 AT ALL WITH REGARD TO YOUR AGREEMENT WITH HEARST?
20 THE WITNESS: NOT THIS DOCUMENT.
21 MR. ALIOTO: THEN I OBJECT TO IT BEING IRRELEVANT.
22 MR. BALABANIAN: YOUR HONOR, IT'S BEING OFFERED WITH
23 REGARD TO THE REASONABLENESS OF HIS BUSINESS PLANS FOR THE NEW
24 EXAMINER, WHICH I UNDERSTAND IS AN ISSUE IN DISPUTE.
25 THE COURT: THE OBJECTION WILL BE OVERRULED AND
2100
FANG - DIRECT / BALABANIAN
1 EXHIBIT 133 ADMITTED.
2 (DEFENDANTS' EXHIBIT E-133
3 RECEIVED IN EVIDENCE)
4 BY MR. BALABANIAN:
5 Q. DOES THIS DOCUMENT, EXHIBIT 133, DEAL WITH ANTICIPATED
6 REVENUE OF THE NEW EXAMINER, ANTICIPATED EXPENSE OR BOTH?
7 A. THIS DEALS WITH REVENUE ONLY.
8 Q. AND IS THIS ONE OF THE PLANS FOR THE EXAMINER'S BUSINESS
9 TO WHICH YOU REFERRED BEFORE THE BREAK?
10 A. YES. IT IS ONE OF THE MORE CONSERVATIVE REVENUE
11 PROJECTIONS WE HAVE.
12 Q. DID YOU -- WHO PREPARED THIS DOCUMENT?
13 A. I PREPARED IT WITH THE ASSISTANCE OF ONE OF MY ADVISORS,
14 DAYTON PIERSON, AND VARIOUS MEMBERS OF THE INDEPENDENT'S
15 CURRENT ADVERTISING STAFF.
16 Q. WHO IS MR. PIERSON?
17 A. MR. PIERSON IS ONE OF MY ADVISORS. HE OWNS A COMPANY
18 CALLED PIERSON MARKETING. HE HAS ABOUT 40 YEARS OF NEWSPAPER
19 EXPERIENCE, 20 YEARS WITH THE HAYWARD DAILY REVIEW, ABOUT FIVE
20 YEARS WITH THE SAN FRANCISCO PROGRESS AND ABOUT 10 YEARS WITH
21 THE INDEPENDENT NEWSPAPER.
22 Q. AND DID YOU RECEIVE ANY OTHER ASSISTANCE IN CREATING THESE
23 REVENUE PROJECTIONS FROM SOMEONE OTHER THAN MEMBERS OF YOUR
24 STAFF?
25 A. IT WAS PRIMARILY MR. PIERSON AND I ALSO WENT OVER THESE
2101
FANG - DIRECT / BALABANIAN
1 WITH MR. JOE NIEHAUS.
2 Q. WHO IS MR. NIEHAUS?
3 A. MR. NIEHAUS IS A PARTNER IN THE INVESTMENT BANKING FIRM OF
4 HELLMAN AND FRIEDMAN. HE IS THE PARTNER THERE THAT SPECIALIZES
5 IN THEIR NEWSPAPER INVESTMENTS AND CONSULTATION PROJECTS.
6 Q. DO YOU HAVE ANY KNOWLEDGE OF THE EXTENT OF HIS EXPERIENCE
7 IN THE NEWSPAPER BUSINESS?
8 A. I HAVE SOME KNOWLEDGE, YES.
9 Q. WOULD YOU PLEASE SHARE IT WITH THE COURT?
10 A. EARLIER ON THEY DID CONSULTATION PROJECTS AND IN THE '80'S
11 DID A MAJOR CONSULTING PROJECT WITH THE MC CLATCHY NEWSPAPER
12 GROUP WHICH RUNS THE SACRAMENTO BEE AND THE MINNEAPOLIS STAR
13 TRIBUNE. IN THE '90'S THEY DID A CONSULTING PROJECT WITH THE
14 CHRONICLE PUBLISHING COMPANY.
15 THEY HAVE SINCE STOPPED DOING CONSULTATION PROJECTS
16 AND ARE IN THE -- ONLY DO INVESTMENTS AND PURCHASES OF
17 NEWSPAPER ORGANIZATIONS. THEY HAD A NEWSPAPER DEAL RECENTLY
18 WITH CONRAD BLACK, AMONG OTHERS.
19 Q. WHEN YOU SAY "THEY," TO WHOM ARE YOU REFERRING?
20 A. THE FIRM HELLMAN AND FRIEDMAN.
21 Q. ALL RIGHT. LET'S LOOK AT THE FIRST LINE, IF WE MAY,
22 PARAGRAPH A. YOU FIND THERE THE STATEMENT:
23 "ALL REVENUE NUMBERS WERE DERIVED FROM THE
24 HISTORY OF THE EXAMINER ADVERTISING ACCOUNTS
25 FROM 1998 AND 1999."
2102
FANG - DIRECT / BALABANIAN
1 IS THAT A TRUE STATEMENT?
2 A. YES, SIR.
3 Q. HOW DID YOU OBTAIN THAT INFORMATION?
4 A. WE OBTAINED SOME ADVERTISING RECORDS, BOOKS AND RECORDS,
5 FROM THE SAN FRANCISCO NEWSPAPER AGENCY THROUGH THE HEARST
6 CORPORATION.
7 Q. PARAGRAPH B STATES:
8 "REVENUE BY CATEGORY WAS DETERMINED BY PRIOR
9 KNOWLEDGE OF THE MARKET, THE HISTORY OF KEY
10 MAJOR ADVERTISERS AND THE PERFORMANCE OF
11 ADVERTISING AND CIRCULATION REVENUE OF OTHER
12 DAILY NEWSPAPERS WITH LIKE CIRCULATION AND
13 DEMOGRAPHICS."
14 FROM WHAT SOURCE DID YOU DERIVE THAT INFORMATION?
15 A. FROM A VARIETY OF SOURCES.
16 Q. CAN YOU BRIEFLY STATE WHAT THEY ARE?
17 A. YEAH. SO PRIOR KNOWLEDGE OF THE MARKET WAS PRIOR
18 KNOWLEDGE BY MR. PIERSON, MYSELF AND OTHER MEMBERS OF MY
19 ADVERTISING STAFF WHO HAVE BEEN WORKING IN THIS MARKET FOR MANY
20 YEARS.
21 THE HISTORY OF KEY MAJOR ADVERTISERS WAS PARTIALLY
22 FROM OUR OWN KNOWLEDGE AND PARTIALLY FROM THE RECORDS SUPPLIED
23 BY THE HEARST CORPORATION.
24 AND THE PERFORMANCE OF ADVERTISING AND CIRCULATION
25 REVENUE FOR OTHER DAILY NEWSPAPERS WAS OBTAINED THROUGH LOOKING
2103
FANG - DIRECT / BALABANIAN
1 AT WHAT OTHER NEWSPAPERS -- LOCAL DAILY NEWSPAPERS OF LIKE SIZE
2 IN THE BAY AREA MARKET ARE DOING.
3 Q. PARAGRAPH D STATES:
4 "YEAR ONE RETAIL ADVERTISING RATES ARE BASED
5 ON $22 PER COLUMN INCH. THIS RATE IS VERY LOW
6 AND COMPETITIVE FOR A DAILY NEWSPAPER WITH
7 45,000 PAID CIRCULATION."
8 MY FIRST QUESTION TO YOU, SIR, IS: IS 45,000 YOUR
9 TARGET CIRCULATION?
10 A. NO, IT IS NOT.
11 Q. WHY WAS THAT NUMBER USED IN THIS REVENUE PROJECTION?
12 A. THIS PROJECTION WAS OUR MOST CONSERVATIVE APPROACH TO THE
13 KIND OF REVENUE THAT WE MIGHT BE GENERATING.
14 Q. HOW DOES THE PROJECTED ADVERTISING RATE OF $22 PER COLUMN
15 INCH COMPARE WITH THAT OF OTHER BAY AREA NEWSPAPERS?
16 A. FOR EXAMPLE, IF YOU COMPARE IT WITH THE MARIN INDEPENDENT
17 JOURNAL, WHICH HAS CIRCULATION OF ABOUT 41,000, THEIR
18 ADVERTISING RATE IS ABOUT $38. IF YOU COMPARE IT WITH THE
19 CURRENT ADVERTISING RATE OF THE CHRONICLE/EXAMINER COMBINATION,
20 THEIR ADVERTISING RATE AVERAGES ABOUT $250, I BELIEVE GOES UP
21 TO ABOUT $280.
22 IF YOU COMPARE IT TO THE WAY THE NEWSPAPER AGENCY
23 SELLS ADVERTISING, SAY AN EXAMINER STAND-ALONE, THE EXAMINER AS
24 A STAND-ALONE BUY WOULD BE ABOUT $30 ACCORDING TO THE
25 CHRONICLE/EXAMINER RATE CARD.
2104
FANG - DIRECT / BALABANIAN
1 Q. COMPARING THE RATE USED IN THIS PROJECTION WITH THAT OF
2 THE CURRENT CHRONICLE/EXAMINER, ARE YOU SAYING THEN THAT THE
3 RATE YOU USED FOR THESE PROJECTIONS IS LESS THAN ONE TENTH OF
4 THE CURRENT ADVERTISING PER INCH RATE OF THE
5 CHRONICLE/EXAMINER?
6 A. YES, THAT'S CORRECT.
7 Q. AND, AGAIN, DO YOU REGARD THAT AS AN OPTIMISTIC, REALISTIC
8 OR A CONSERVATIVE ASSUMPTION?
9 A. A CONSERVATIVE ASSUMPTION.
10 Q. LET'S TURN, IF WE MAY, TO PAGE BEARING PRODUCTION NUMBER
11 1449. WHAT IS THAT?
12 A. THIS IS A SUMMARY OF THE REVENUE PROJECTED IN THE THIRD
13 YEAR FOR THE NEW EXAMINER.
14 Q. THE FIRST CATEGORY IS RETAIL DISPLAY ADVERTISING. WOULD
15 YOU PLEASE TELL THE COURT WHAT THAT REFERS TO?
16 A. RETAIL DISPLAY ADVERTISING IS THE ADVERTISING THAT RUNS IN
17 THE NEWSPAPER FROM MOSTLY LOCAL RETAILERS, LOCAL BUSINESSES.
18 Q. NOW, I NOTICE THAT IN THAT DETAIL THERE YOU HAVE SOME
19 CATEGORIES OF RETAILERS BUT ALSO A SPECIFIC -- SOME SPECIFIC
20 ONES, SAFEWAY, FOR EXAMPLE, AND MACY'S. HOW DID YOU DERIVE
21 THOSE NUMBERS?
22 A. AGAIN, WE LOOKED AT WHAT THE STORES WERE CURRENTLY DOING
23 AND TRIED TO MAKE A CONSERVATIVE ESTIMATE OF WHAT WE COULD MOST
24 CONSERVATIVELY EXPECT.
25 Q. LET'S TAKE, FOR EXAMPLE, MACY'S. YOU PROJECT IN THE THIRD
2105
FANG - DIRECT / BALABANIAN
1 YEAR THAT YOU WILL DERIVE REVENUE OF $794,430 FROM MACY'S BASED
2 ON FIVE PAGES PER WEEK. WHERE DOES THAT NUMBER COME FROM?
3 A. THE 794 OR --
4 Q. THE FIVE PAGES PER WEEK, LET'S START THERE.
5 A. THE FIVE PAGES PER WEEK IS A CONSERVATIVE ESTIMATE OF WHAT
6 MACY'S MIGHT RUN IN THE NEW EXAMINER. CURRENTLY, FOR EXAMPLE,
7 I BELIEVE MACY'S RUNS BETWEEN 12 AND 15 PAGES IN THE
8 CHRONICLE/EXAMINER COMBINATION.
9 Q. AND THE DOLLAR FIGURE, BY WHAT MEANS WAS THAT DERIVED?
10 A. THAT'S MULTIPLIED OUT USING THE NUMBER OF PAGES TIMES THE
11 RATE TIMES THE NUMBER OF COLUMNS PER PAGE TIMES FIVE PAGES PER
12 WEEK TIMES 52 WEEKS PER YEAR.
13 Q. LET'S LOOK AT THE LAST PAGE OF THIS EXHIBIT. WHAT IS --
14 I'M SORRY, THE LAST PAGE OF THE EXHIBIT. THIS -- THERE'S A
15 PROBLEM HERE.
16 DOES THIS EXHIBIT THEN SUMMARIZE YOUR REVENUE
17 PROJECTIONS -- PROVIDE DETAILED REVENUE PROJECTIONS FOR EACH
18 YEAR BY CATEGORY OF ADVERTISERS?
19 A. YES, IT DOES.
20 Q. AND DO YOU, WHEN IT WAS POSSIBLE, SPECIFY PARTICULAR
21 ADVERTISERS FROM WHOM YOU EXPECT TO DERIVE ADVERTISING REVENUE?
22 A. YES, SPECIFIC ADVERTISER GROUP USUALLY NAMED WHEN THEY
23 WERE LARGER ADVERTISERS.
24 Q. ALL RIGHT. LET'S LOOK AT EXHIBIT 134, E-134, IN THE BOOK,
25 MR. FANG.
2106
FANG - DIRECT / BALABANIAN
1 A. YES, SIR.
2 Q. WHAT IS THIS EXHIBIT?
3 A. THIS IS A SIX-YEAR FORECAST FOR THE NEW EXAMINER TAKING
4 INTO ACCOUNT REVENUE PROJECTIONS AND EXPENSE PROJECTIONS.
5 MR. BALABANIAN: YOUR HONOR, THIS DOCUMENT IS ALSO
6 NOT IN EVIDENCE AND I WOULD AT THIS TIME MOVE ITS ADMISSION.
7 MR. ALIOTO: MAY I ASK JUST TWO QUESTIONS ON VOIR
8 DIRE?
9 THE COURT: VERY WELL.
10 MR. ALIOTO: DIRECTING YOUR ATTENTION TO WHAT IS
11 MARKED AS E-134 THAT WAS JUST PLACED BEFORE YOU, WHICH IS
12 HEADNOTED "SAN FRANCISCO EXAMINER LONG-TERM FORECAST," WHEN WAS
13 THIS DOCUMENT PREPARED?
14 THE WITNESS: A FEW WEEKS, A MONTH AGO.
15 MR. ALIOTO: BEFORE OR AFTER YOUR DEPOSITION?
16 THE WITNESS: ABOUT THE SAME -- I THINK IT WAS IN
17 PROCESS ABOUT THE SAME TIME AS MY DEPOSITION. IT WASN'T
18 COMPLETED UNTIL AFTERWARDS.
19 MR. ALIOTO: OKAY. SO IT WAS AFTER YOUR DEPOSITION?
20 THE WITNESS: YEAH, A FEW DAYS AFTERWARDS.
21 MR. ALIOTO: AND WAS IT PREPARED AT THE SAME TIME AS
22 EXHIBIT 133 THAT YOU'VE BEEN JUST BEING QUESTIONED ON?
23 THE WITNESS: IT WAS BEING PREPARED AT ABOUT THE
24 SAME TIME IN CONJUNCTION WITH THAT, YES.
25 MR. ALIOTO: IF 133 HAD A FAX DATE OF APRIL 28TH,
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1 THE FRIDAY BEFORE THE BEGINNING OF TRIAL, WOULD THAT ADVISE YOU
2 THAT THAT WAS ABOUT THE DATE THAT THESE DOCUMENTS WERE
3 PREPARED?
4 THE WITNESS: THESE WOULD HAVE BEEN PREPARED, I
5 THINK, SOMEWHAT BEFORE THAT DATE.
6 MR. ALIOTO: IF YOU WERE SERVED -- YOU WERE SERVED
7 WITH A SUBPOENA RIGHT BEFORE YOUR DEPOSITION?
8 THE WITNESS: YES.
9 MR. ALIOTO: AND THESE DOCUMENTS ORDINARILY WOULD
10 HAVE BEEN RESPONSIVE TO THAT SUBPOENA IF THEY HAD BEEN PREPARED
11 AT THAT TIME; WOULDN'T THEY? YOU WOULD HAVE HAD --
12 THE WITNESS: YES. YES.
13 MR. ALIOTO: SO YOU OBVIOUSLY DIDN'T HAVE THEM,
14 OTHERWISE YOU WOULD HAVE BEEN REQUIRED TO GIVE THEM TO US;
15 CORRECT?
16 THE WITNESS: I DID NOT HAVE THESE DOCUMENTS AT MY
17 DEPOSITION.
18 MR. ALIOTO: AND THEY HADN'T BEEN PREPARED --
19 THE WITNESS: THAT'S CORRECT.
20 MR. ALIOTO: -- AT THAT TIME?
21 OKAY. ALL RIGHT. I OBJECT ON THE GROUND THAT IT'S
22 INCOMPETENT IN THE SENSE THAT IT'S PREPARED SOLELY FOR THE
23 LITIGATION AND NOT FOR THE PURPOSE FOR WHICH IT IS INTENDED TO
24 BE OFFERED.
25 BY MR. BALABANIAN:
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1 Q. MR. FANG, WERE THESE DOCUMENTS PREPARED AS PART OF YOUR
2 PREPARATION FOR THE COMMENCEMENT OF OPERATIONS OF THE NEW
3 EXAMINER?
4 A. YES, THEY WERE.
5 Q. HAS YOUR PLANNING FOR THE NEW EXAMINER BEEN AN ONGOING
6 PROCESS FROM THE TIME THAT YOU ENTERED INTO YOUR AGREEMENT WITH
7 HEARST?
8 A. YES, IT HAS BEEN AND CONTINUES TO BE.
9 Q. AND ARE THESE THE LATEST VERSIONS OF YOUR PROJECTIONS AND
10 BUDGETS FOR THE NEW EXAMINER?
11 A. WE CONTINUE TO WORK ON THE BUDGETS AND THE PROJECTIONS.
12 MR. BALABANIAN: OFFER THE DOCUMENT IN EVIDENCE,
13 YOUR HONOR.
14 THE COURT: THE OBJECTION WILL BE OVERRULED AND 134
15 WILL BE ADMITTED.
16 (DEFENDANTS' EXHIBIT E-134
17 RECEIVED IN EVIDENCE)
18 BY MR. BALABANIAN:
19 Q. NOW, MR. FANG, LOOKING AT THE FIRST PAGE OF EXHIBIT E-134,
20 YOU HAVE TOLD US THAT THIS IS A SIX-YEAR FORECAST OF REVENUE
21 AND EXPENSE; IS THAT CORRECT?
22 A. YES, IT IS.
23 Q. AND WHO PREPARED THIS DOCUMENT, THIS PARTICULAR PAGE?
24 A. MR. NIEHAUS AT HELLMAN AND FRIEDMAN DID THIS DOCUMENT.
25 Q. THE TOP ROW OF NUMBERS, WHAT IS THAT?
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1 A. THE REVENUE NUMBERS THERE OR --
2 Q. YES.
3 A. THAT IS THE REVENUE BY YEAR THAT WE ARE PROJECTING.
4 Q. AND WHAT IS THE BASIS FOR THE ASSUMPTIONS THERE REGARDING
5 THE GROWTH OF REVENUE?
6 A. THESE REVENUE NUMBERS ARE DETAILED IN THE EXHIBIT THAT WE
7 JUST LOOKED AT.
8 Q. THAT'S EXHIBIT E-133?
9 A. YES, THAT'S CORRECT.
10 Q. I NOTE THAT THERE IS A COLUMN DOWN THE PAGE CALLED "SHARED
11 SAVINGS." DO YOU SEE THAT?
12 A. YES, I DO.
13 Q. CAN YOU EXPLAIN TO THE COURT WHAT THAT IS?