Suicide Pact

The Times and P-I set the stage to put one of them out of business.

RARELY HAS BAD news been served up with such enthusiasm. Employees of The Seattle Times cheered last Tuesday when informed that the venerable evening paper would switch to morning publication within two years. Across downtown, at the rival Seattle Post-Intelligencer, nobody was cheering, although that paper's official spin was immediately apparent: Competition is good!

"Two pretty damn good newspapers are going to publish head-to-head in the morning market," says P-I publisher J.D. Alexander. He argues that the P-I's smaller but scrappier staff will prove a formidable opponent for its sleepy afternoon competitor.

Maybe so, but it's hard to look at the financial provisions of the latest Times/P-I deal and forecast a rosy future for the Post-Intelligencer. Business operations at the two papers were combined in 1983 under a Joint Operating Agreement (JOA), with the then-struggling P-I assigned 32 percent of the total profits. The Times, which operated a short- lived morning edition in the early 1980s, agreed to retreat to the afternoon time slot. Despite ceding control of its business operations and giving up its Sunday edition, the P-I's morning monopoly proved the most valuable element of the deal.

Evening newspapers are a dying breed in American journalism. With a daily circulation of 227,715, the Times is the largest evening paper to hold the top spot in its market. Of the top 100 US dailies, five publish only evening editions (seven publish in both morning and evening). Two of the five, the Detroit News and the San Francisco Examiner, are junior partners in joint operating agreements controlled by their morning competitors. As cir- culation has flowed to morning papers nationwide, Seattle's JOA has stayed remarkably balanced—the Times' numbers are held down by its publication schedule, while the P-I's circulation (196,271 daily) is boosted by its morning slot. "Up until [the announcement], you could have argued that the Times and P-I had the last successful JOA in the country," says Doug Underwood, a former Times reporter who now teaches journalism at the University of Washington.

The evening Times also struggled with distribution challenges posed by gridlocked roads and the arrival of new residents used to getting their newspaper in the morning. It's no wonder that the P-I's owner, the Hearst Corp., was able to wring an impressive set of concessions this time around for amending the JOA and throwing open the morning-newspaper market. The changes lengthen the term of the agreement (it now expires in 2083), give the P-I a bigger cut of the profits (40 percent), and grant the junior paper the right to operate a full Internet site. Hearst also gets first crack at purchasing the Blethen family's 51 percent ownership of the Times' voting stock, if it ever goes on the market (the Knight-Ridder newspaper chain owns the other 49 percent).

Under the amended agreement, if the P-I folds, Hearst continues to receive 32 percent of the Times profits until 2083. The two companies can petition to close either paper if it loses money in three consecutive years. The chance to zero out its expenses while collecting a third of the profits of a monopoly daily likely will prove irresistible to one or the other publisher.

"The temptation is enormous, particularly for Hearst," says Underwood, who cited the precarious position of the chain's fading San Francisco Examiner. "Hearst may be deciding it's slowly going out of the newspaper business."

Peter Horvitz, president of King County Journal Newspapers, publisher of the Eastside Journal and South County Journal suburban morning dailies, predicts that Seattle will be a one-newspaper town as soon as the P-I can string together three money-losing years. "I maintain that both the Times and Hearst would make more money if they stopped publishing the P-I and they had one newspaper—the Times—in the morning," he says. "If they eliminated the newsroom at the P-I, that would be pure savings. Basically, the Times would write [Hearst] a check every year."

The P-I's Alexander replies that such predictions ignore the competitive spirit of the journalism business. "I don't think there's a draconian plot here to put one newspaper out of business, despite what Mr. Horvitz thinks."

ALTHOUGH THE SUNNY tone of the P-I's editorial on the JOA changes seems a bit overstated, the switch may well bring many short-term benefits to readers. The P-I has pledged to spend an additional $1 million this year on "additional staff, space, and content improvements," although circumstances dictate that part of the money will go to catching up with the already well-established Times Web site and bolstering sports coverage to protect morning newsstand sales, traditionally most influenced by the quality of a newspaper's sports pages. The Times is expected to respond in kind.

Times staffers say the major benefits of the switch will be internal. The current evening publishing schedule imposes odd deadlines and has split the staff into day and night crews. Now, the paper is largely assembled by night staffers, who often have little contact with the regular writers. "Many of the key daily decisions are made by people without normal lives," notes one Times newsroom employee.

The Times is also due for a culture change from its current emphasis on long-range projects and multipart series. Given the quality and depth of the Times news staff, Alexander's gibe to a meeting of P-I staffers, that "when they discover news, they will be confused," qualifies as wishful thinking. Yet the Times would benefit from setting aside its tendency to stash its best writers on investigative teams, and challenge the P-I's superior frontline reporters.

From an advertising standpoint, this newspaper war is destined to be remarkably bloodless. Comparisons to Denver, where the battle for the morning market between The Denver Post (formerly an evening paper) and The Rocky Mountain News led to sharp cuts in advertising prices, are irrelevant given the artificial monopoly created by the JOA. The Times already controls advertising sales for both papers, and, like most JOA operations, has drawn up its ad rates with deep discounts for advertisers who use both. The vast majority of current daily newspaper advertisers buy space in both papers to take advantage of the "combo rate." Gordon Bryson, president of the Eastside media buyer KSL Media, says the combo rate should continue to be an attractive option for advertisers as long as there is little duplication in the two papers' readership. However, if the circulation of either paper drops sharply, advertisers may choose to place their ads only in the stronger publication.

Most of the speculation surrounding the P-I's demise revolves around major circulation drops—which simply haven't taken place in the first 15 years of the JOA. Of all nine JOAs that contain at least one top-100 newspaper, all but Seattle and Detroit feature circulation splits of at least 2-to-1 in favor of the dominant paper. Factor in the plummeting circulation of the Detroit papers, and Seattle seems the most likely city to host a JOA that actually works—but only, says Underwood, as long as the economy keeps growing. "My guess is, the first major economic blows that come to these papers . . . that's when the real soul searching will begin."

 
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