Challenges
Circulation has fallen precipitously since the heyday of the dot-com boom from 1997 to 2001. The Chronicle's circulation dropped by 16.6% between 2004 and 2005 to 400,906; in 2006, daily circulation dropped to 373,805. In response, the newspaper has cut back on local news coverage and takes many national and international stories from the Associated Press instead of relying on Chronicle correspondents. There have also been major cutbacks in staff, with one fourth of the newsroom being let go in 2007. At the same time, the online edition has continued its growth and in 2006 SFGate was fifth among U.S. newspaper Web sites with 5.2 million unique users per month.
On February 24, 2009, the Hearst Corporation released a statement that the Chronicle's financial position necessitated sharp and immediate reductions in operating costs. In a joint statement Frank A. Bennack Jr., Hearst vice chairman and chief executive, and Steven R. Swartz, president of Hearst Newspapers, said that the paper, with a circulation of 312,000, had sustained losses in every year since 2001, lost more than $50 million in 2008 and faced an even gloomier 2009. The statement read in part, "Without the specific changes we are seeking across the entire Chronicle organization, we will have no choice but to quickly seek a buyer for The Chronicle or, should a buyer not be found, to shut the newspaper down." Media reports in late February speculated that the paper might be required to slash its workforce by half to remain in business. Hearst recently took the same course with the Seattle Post-Intelligencer, and if the Chronicle is closed San Francisco would be America's largest city without a full-service English-language daily newspaper.
On October 26, 2009, the Audit Bureau of Circulations reported that the Chronicle had suffered a 25.8% drop in circulation for the six-month period ending September 2009, to 251,782 subscribers, the largest percentage drop in circulation of any major newspaper in the United States. The Chronicle publisher, Frank Vega, said in response that the drop was expected as the paper moved to a business model that focused less on advertising, and hence less on high numbers of subscribers, and more on increased subscription fees. The paper claimed that the new strategy had produced significantly improved financial results.
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