The California Steam Navigation Company was formed in 1854 to consolidate competing steamship companies in the San Francisco Bay Area and on the Sacramento and San Joaquin Rivers. It was successful in this effort and established a profitable near-monopoly which it maintained by buying out or bankrupting new competitors. In response to the Fraser Canyon gold rush and economic growth in the Pacific Northwest, the company expanded to ocean routes from San Francisco north to British Columbia. Similarly, as California's economy grew, the company offered service from San Francisco south to San Pedro and San Diego. It exited these markets in 1867 when competition drove prices to unprofitable levels. While the California Steam Navigation Company was successful throughout its life in suppressing steamboat competition on its core Bay Area and river routes, it could not control the rise of railroads. These new competitors reduced the company's revenue and profit. Finally, in 1871, the company's assets were purchased by the California Pacific Railroad, and the corporation was dissolved.
Early history
In the 1840s and 1850s road and rail networks in the Bay Area and inland California were primitive. Steamboats and the barges they towed played an important part in moving people, agricultural commodities, and other goods around the region. Numerous wharves and depots sprang up in San Francisco Bay, San Pablo Bay, and Suisan Bay. Steamers also ascended the rivers that emptied into these bays, notably the Sacramento River and San Joaquin River. The Sacramento River was navigable for 250 miles and in periods of high water even further upstream. The Feather River, a tributary of the Sacramento, was navigable beyond Marysville during portions of the year. The San Joaquin was navigable year-round as far as Stockton and in periods of high water, steamers could reach into Fresno County, about 200 miles from the river's mouth.
In 1848 there were but two steamers on the Sacramento River. You could travel from San Francisco to Sacramento for $30 with a cabin, or for $20 on deck. As the California gold rush began, the number of ships sailing on the Sacramento River shot to sixteen in just eighteen months, all of them built in eastern shipyards and sailed around Cape Horn. By 1851 fares had dropped to $1 as all the new ships fought for customers. To make matters worse for the shipping companies, they ordered additional steamers during the boom times and they began to arrive. With loans to pay, the ship owners had no choice but to put them into service, despite the already ruinous level of competition. By 1853 there were 25 steamers running the Sacramento River alone.
The steamboat owners ended their unprofitable competition by combining almost all the vessels that served the inland trade. On February 22, 1854 the California Steam Navigation Company was incorporated under the laws of California. The company's initial shareholders included Richard Chenery, Captain James Whitney, jr., Marshall Hubbard, John Bensley, and Major Samuel J. Hensley. All five men served as president of the company at various times.
Inland competition
The new California Steam Navigation Company moved quickly to retire excess capacity: 23 ships were idled. The combination effectively eliminated competition on the Sacramento and San Joaquin Rivers. This allowed the company to raise rates and profitability returned for the company's owners. This profitability lured new competitors, just as it did in 1850. Individual boats such as Surprise and Martin White began service in 1855. Rates from San Francisco to Sacramento fell as low as $0.25 per passenger as the California Steam Navigation Company sought to eliminate the thinly-capitalized newcomers.
In their outrage at freight rates that were raised to $40/ton after the consolidation, Marysville merchants formed the Citizens' Steam Navigation Company to compete with the company in 1854. It's competitive steamer, Enterprise, carried the freight for $12/ton. Not content to have any competition, the California Steam Navigation Company lowered its rate to $1/ton. Citizens' Steam Navigation Company built a larger ship, Queen City, but at the low prices they had to charge to compete, it lost money on every load. Citizen's Steam Navigation could not find sufficient financing to continue operations under these circumstances. On October 1, 1855 it signed a contract giving the California Steam Navigation Company control over its ships, effectively reinstating the company's monopoly on transportation to Marysville.