Would this Hearst save San Francisco's newspaper?

He is a grandson of the legendary newspaper mogul. Yet, William Randolph Hearst III, 59 (left), is a partner in the Silicon Valley investment firm that backed a late-1990s start-up, Google -- now one of the industry's biggest threats. The money-losing paper is The San Francisco Chronicle, which his family-controlled Hearst Corp. bought eight years ago, just as the technology bubble popped, and the industry tumbled into a rapid decline.

Hearst Corp. has lost more than $330 million in San Francisco, no end in sight, despite multiple rounds of cost cuts. Northern California papers got hit early and hard by Google, plus Craigslist and other local start-ups. Smack in the middle: long-time Gannett executive Frank Vega, Chronicle publisher since 2005, and his top editor for the past year, another GCI lifer, Ward Bushee.

Now, with today's news that Hearst is suddenly abandoning the Seattle Post-Intelligencer, a big shake-up in its top executive ranks last June may be playing out across the New York-based media giant's newspaper division -- and possibly right up to the Chronicle's Mission Street front door here in San Francisco.

Last month, Hearst's newspaper division president, George Irish, announced his retirement. That followed the sudden departure in June of Hearst Corp. CEO Victor Ganzi. (Replacing Ganzi: former CEO Frank Bennack.) Published reports said Ganzi clashed with Hearst family members -- including Hearst III.

Since 1995, Hearst has been a partner at Kleiner Perkins Caufield & Byers. The venture-capital firm is an hour south of San Francisco in Silicon Valley's Millionaire Mile -- Sand Hill Road in Menlo Park, where he would be immersed in tech start-ups paving the way for whatever replaces the traditional newspaper industry.

Same city, different paper
The Hearst family's wealth is rooted in San Francisco newspapering and the West. But that doesn't mean Hearst III necessarily has any sentimental attachment to the traditional printed version. For one thing, it was a different paper, the San Francisco Examiner, that his famous grandfather (left) leveraged to build the first modern media empire in the 1890s -- and his palatial Hearst Castle, along California's central coast, at San Simeon.

By 2000, however, the Examiner was the smaller partner in a joint operating agreement, where the stronger, morning Chronicle was owned by descendants of the local de Young family. Hearst Corp. decided to sell the Examiner and buy the Chronicle, in a three-way deal that required Sen. Dianne Feinstein's intervention.

Hearst chose perhaps the worst possible year, 2000, to buy the Chronicle: It paid $660 million that July, which seems astonishing today, after eight years of the industry's rapid decline. (How much did Hearst overpay? That price is nearly a third of Gannett's current total market capitalization, $1.96 billion -- including USA Today! -- based on this afternoon's closing stock price, $8.59 a share.)

The deep recession that began more than a year ago only added to Hearst losses here that have averaged nearly $800,000 a week since mid-2000. I'm left with two broad questions:

• Will Hearst cut its newspaper losses further, and make the Chronicle web-only, with a much smaller staff -- as it's apparently considering in Seattle?
• And what role might Hearst III play?
  

Vega in the house
To be sure, going fully digital now would seem crazy: The Chronicle is scheduled to outsource printing this year to a new production plant being built by Transcontinental Inc. The company, Canada's biggest printer, will own the presses under a 15-year contract Hearst signed two years ago.

Even so, I've wondered whether San Francisco would be the first major U.S. city to go web-only. And maybe it still will: The Gannett-controlled Detroit Media Partnership took only a partial step in that direction last month, saying it would end home delivery on all but three days of the week, probably starting this spring. Chronicle publisher Vega (left) knows Detroit well. He was CEO of the Detroit JOA before the current occupant: Dave Hunke.

Vega surprised Gannett a year ago by luring away Bushee, who was then top editor at The Arizona Republic. Vega and Bushee have been tinkering on the paper ever since -- with plenty of help from old Gannett acquaintances. (Wink!)

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[Images: today's front pages, Newseum]