Most days when newspaper publisher Frank Blethen tries to visualize the future of media in Seattle, he sees his family's Seattle Times alone and the

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Pulp Friction

Seattle Times publisher Frank Blethen is about to start a newspaper war with Hearst, and his family intends to win.

Most days when newspaper publisher Frank Blethen tries to visualize the future of media in Seattle, he sees his family's Seattle Times alone and the Seattle Post-Intelligencer the stuff of nostalgia. Over the past 20 years, Blethen has seen the P-I as both a competitor and a business partner under a federally sanctioned arrangement that has the Times in charge of the noneditorial functions of both newspapers. Today he sees it more as a monkey on the Times' back. He calls the Times' responsibilities for P-I advertising and circulation a "subsidy" and says the P-I, as a product, is getting harder and harder to sell. For Blethen, the vision of a future without the P-I is not so fanciful as it is necessary to keep the Times in the hands of the heirs of Alden J. Blethen, who founded the newspaper more than a century ago. As Frank Blethen, his family's chosen leader, comes into his 17th year as publisher of the Times, that future seems not so far away. The biggest obstacle to bringing it about is the P-I's owner, the powerful Hearst Corp., with its cash-heavy treasury and its daunting battalions of lawyers.

The prospect of the Times being "the last man standing" after a century of Seattle newspaper battles rests in part on getting out of the arrangement that for 20 years has entwined the fate of the Times with that of the older but smaller P-I. The Times could move to terminate the so-called joint operating agreement (JOA) with the P-I in coming months. Hearst has had little to say publicly, but indications are that it might fight any effort to dump the deal. For the P-I staff, in a separate, modern newsroom overlooking Myrtle Edwards Park on the waterfront, this is a return to the uncertainty of the pre-JOA days.

Over in the South Lake Union neighborhood, the Times has been laying the groundwork for terminating the JOA. Blethen already has announced that the paper completed a third consecutive year of losses in 2002, the only basis for terminating the agreement. The Times has nine months from Jan. 1, 2003, to file for termination, which would trigger a U.S. Justice Department review and negotiations with Hearst. If the government certifies the Times' losses, Hearst would have the choice of folding the P-I and collecting 32 percent of Times profits for the next 80 years or relaunching the paper with its own business and production capabilities as a solo venture. A possibility that hasn't been mentioned could have Hearst agreeing to JOA terms more favorable to the Times.

Blethen was the thirtysomething vice president of marketing for the Times in 1981 when the JOA deal was done, making his family's newspaper both the landlord for the P-I and its salvation. Since 1983, the Times has run advertising, circulation, and production for both papers, which have kept their news and editorial operations separate and competitive. He believes the Seattle JOA has been "one of the most successful in the country." But today he sees the P-I as dead weight. "When you have to tie up your production facilities, press time, and capacity with two separate products, you have to go through significant redundant expenses in your delivery system," he says.

"And then on the marketing side, when you've got to provide these sales subsidies increasingly with every six months that goes by, it costs us more and more to find ways to subsidize P-I subscriptions. People just don't want them, and they don't stick even when we sell them, and they don't have the retention of the Times." Since the Times moved to the morning market, its daily circulation has stabilized at about 225,000, while the P-I's has eroded from about 190,000 to 169,000 at last count.

Blethen hated the JOA when it was first negotiated and wished that the Times had, instead, slugged it out in the marketplace with the P-I. Among other things, it left the Times chained to the afternoon. Although it was one of the few afternoon newspapers in the country that had a dominant market position against a morning newspaper, readership trends suggested that wasn't going to last, and industry experts considered Seattle an anomaly.

From the vantage point of two decades, Blethen is now glad that the Times didn't opt for a winner-take-all battle with the deep pockets of Hearst. Grinning at his then-youthful bravado, the 55-year-old publisher and chairman of the Seattle Times Co. says: "Now that I am older and wiser and more experienced, that probably would have been a mistake."

The JOA contract was written to last 50 years. The two newspapers were to divide revenues that remained after the Times paid all expenses of the joint operation. The Times' share was 66 percent, and Hearst got 34 percent. Each company then paid its own news and editorial costs from its share. Then, in 1999, came a change that allowed the Times to abandon the afternoon and compete head-to-head with the P-I for morning readers. In exchange, the Times dropped its administrative fees and agreed to boost the Hearst share of JOA revenue to 40 percent. The new arrangement was extended through 2083.

ESTABLISHMENT GADFLY

Blethen settles into his chair at the small, polished conference table in his corner office on the second floor of The Seattle Times building. The wall facing the corridor has panels of tasteful art-deco stained glass, and the interior is a close space, with a warm clutter of Times memorabilia. He has a wary cordiality and a smile wreathed in a neatly trimmed white beard under pink cheeks. But he quickly warms to the topic—the future of the Times and the Blethen family. In agreeing to an unusual and lengthy interview with Seattle Weekly last week, Blethen insisted that he would not respond to questions directly related to the Times' plans or decision on whether to file for termination of the JOA, but ultimately he did. He was most keen, however, to talk about his commitment to the Blethen "legacy" and family commitment to journalism.

Blethen's belief in the legacy drives many of the decisions that guide the Times. And his own experiences, some of them painful, account for some of the passions that form the values and editorial emphasis of the newspaper. He often has spoken, for example, of a passion for inclusion and diversity, and the Times has been cited often for its minority recruiting and development programs. In part, that focus arises from Blethen's feelings of separateness in his own life. "Everyone's on a lifelong diversity journey," he says. "The early part of my journey was driven by my own sense of personal discrimination of growing up without a father who rejected me and struggling through school with learning differences and ADD (attention deficit disorder), which I didn't understand until I was in my 40s."

There also is a separateness in Blethen's relationship with Seattle's establishment, which seems to have been tweaked in the pages of the Times more often in the past 20 years than ever before. Blethen says he doesn't mind being viewed as an outsider, particularly if it helps maintain the Times' independence. Indeed, targets of tough stories have included some of the newspaper's biggest advertisers—Nordstrom among them—and some of the city's most august institutions, including Boeing. Blethen sees this and future generations of Blethens as "stewards" of the Times and independent journalism. It is, he says, what drives him.

"We have a business model that I introduced a few years ago at one of my department-head retreats," he says. "It has three elements—stewardship, journalistic excellence, business excellence. Stewardship in this sense also means family ownership." Ownership and inheritance is structured so that no Blethen can get rich off the company stock (they receive dividends). "Each generation, including the second, third, fourth, and now fifth, inherited their stock with the understanding that there would not be a marketplace value and the stock would be passed on to the lineal descendants of Alden Blethen, thus retaining family control and stewardship," he says. "This essentially removes the opportunity individual family members have for significant personal wealth. But it also ensures that the stewardship will be passed on."

Blethen cites the investment that his fourth generation of the family has made in the newspaper and believes the Times and Seattle are better for it. He says that neither the Times nor the P-I were particularly good newspapers at the end of the 1970s. Advertisers too often used their clout to head off undesirable publicity. The Boeing Co. was covered with uncritical reverence. The University of Washington and its athletic department were high on the list of sacred cows. "I'm not going to judge those people at that point in time and the journalistic standards of the day," Blethen says of his predecessors. "I would hope that that would not happen today. To me, one of the embarrassments of this newspaper was not being a critical watchdog on the whole WPPSS fiasco." Joel Connelly of the P-I, then an investigative reporter and now a veteran columnist, had been hammering the misbegotten nuclear-power construction program of the Washington Public Power Supply System for years before the Times finally began to cover the story critically. Blethen was determined not to be embarrassed again.

"When I first became publisher and we were building the convention center, what I told Mike (Fancher, then managing editor) is, especially because we were editorially in favor of it, I don't ever want anybody in this community to say that on your watch and my watch that the critical questions about this convention center were never asked.

"In fact, I remember Jim Ellis bitching and moaning all the time because [reporter Eric Nalder] kept calling him at 5 a.m. because that was the only time he could get hold of him." (Ellis is the highly respected attorney who has been a key promoter of some of the Seattle area's biggest public-works projects. He headed the convention center authority during the construction phase. Nalder, then the Times' ace investigative reporter and co-winner of two of the newspaper's Pulitzer Prizes, left the paper in the aftermath of the bitter 2000 newspaper strike and now works in Seattle for the San Jose Mercury News.)

IMPROVED NEWSPAPERS

As Frank Blethen's generation assumed their roles in the company, change came at a rapid pace. In 1980, the Times launched a morning edition to compete with the P-I on newsstands. The Blethens were worried about the ability of Hearst to underwrite the P-I's red ink and slowly bleed the Times in the marketplace. The Times would at least drop the first shoe in a potential competitive war of survival—a morning street edition. Meanwhile, news staffs at neither paper were aware that the Blethens and Hearst were involved in intense negotiations to bring about joint operation.

Faced with what seemed to be a stalemate, the two sides finally agreed and the deal was announced in 1981. But opposition from groups of journalists, including a significant number of P-I staffers, Seattle Weekly founding editor David Brewster, suburban publishers, and readers, forced a Justice Department hearing and trial in federal court before the JOA commenced in 1983.

Although he has come to accept the need to enter the JOA back in 1981, Blethen still believes that the Newspaper Preservation Act of 1970, which made the joint operating agreement between the Times and the P-I possible, is "a lousy law that never should have been enacted."

"What it really did," Blethen goes on, "was it helped perpetuate some really inept owners." The act was passed during the Nixon administration after heavy lobbying from some of the most powerful newspaper companies in the country. Supporters included the Knight Ridder chain of newspapers, which today holds not quite half of Seattle Times Co. voting shares, and Hearst. There were about two dozen JOAs operating in cities around the U.S. by the beginning of the 1980s. Seattle was to join them.

Blethen looks back on the JOA process somewhat ruefully. Yes, the P-I was the "failing" newspaper, as defined by the law. But it was far from certain that it would close. "Hearst is an $8 billion corporation," he says, recalling the issues that Times negotiators were dealing with 20 years ago. "They've got these huge, deep pockets and we're this small struggling independent newspaper. We're looking at a situation where they are possibly willing to spend and operate at a loss for years until they drive us out of business."

The P-I staff, meanwhile, has been constantly buffeted over the years by uncertainty over the future of the newspaper. In both pre-JOA days and later, they reveled in their underdog status and, on days when they could, beat the Times in covering breaking news. And they did so without adequate resources from Hearst. Many of the P-I staffers who opposed the JOA in 1981 find themselves today supporting it as the likely last, best hope of keeping the paper alive. Blethen points to the improvements the Times has made in news and editorial content, as well as its production capacity and business growth.

THE CONTENT OF both papers has improved. David Horsey won the P-I's first Pulitzer Prize in 1999 for political cartooning. But it is the Times that has shown the most dramatic improvement over its former image as the bland, gray "Fairview Fanny," which refers to the street on which it sits. Before the JOA, the Times had won two Pulitzers—in 1950 and in 1975. But since the onset of the JOA, the paper has won five Pulitzers, in 1982, 1984, 1990, and two in 1997, a rare event for a regional newspaper.

One of the 1997 Pulitzers went to Times aerospace writer Byron Acohido for coverage of Boeing 737 safety issues. About a year earlier, Blethen received a phone call from a Boeing official asking that Acohido be taken off the aerospace beat because he was becoming such a nuisance. Acohido stayed where he was. It is a case often cited as a prime example of the Times' modern independence. Asked about that incident, Blethen responds: "Rather than single out Boeing, I would just tell you that I think we've had a full range of coverage that has solicited at various times some really strong pressure from powerful businesses and other entities."

IN 1999, Columbia Journalism Review ranked The Seattle Times as the 14th-best newspaper in America, ahead of such notables as Newsday, the Miami Herald, the Atlanta Journal-Constitution and Minneapolis-St. Paul's Star-Tribune.

Then came the 2000 strike, driving that year's balance sheets into the red. The seven-week walkout ended in January 2001, and the Times that year was looking forward to the Christmas season's advertising revenue to put it back into the black. Instead, the economy was drubbed by the terrorist aerial assault on New York's twin towers. The next year, 2002, was to have seen a turnaround in the economy. But it never happened.

The Times spent considerable money restaffing during 2002, giving rise to the suspicion by some that it had spent itself into the red to set up a third year of losses and termination of the JOA. Blethen vehemently denies it. "The economy is what put us into the red," says Blethen. "This is something everybody misses. Everybody lives in the moment and forgets what it was like a year ago. A year ago, when we were in the process of refinancing our debt and putting together these reinvestment and redevelopment plans, everybody in the newspaper industry and every economist around was saying there was going to be a significant turnaround in the third or fourth quarter." He says it will be market forces that decide the outcome of the newspaper war in Seattle.

"It could be in a few months, it could be in a few years," he says. "The marketplace has clearly made the choice. The real issue here, what the community really needs to be concerned about is, is it going to be a locally owned private company that has a family that has the kind of caring and the roots we have in this community? Or is it going to be an $8 billion corporation?"

Does Blethen see termination of the JOA as crucial to the long-term survival of the Times? "I don't know if crucial is the right word," he says. "It's certainly important.

"My generation has not only brought this to a whole new high in terms of business excellence and journalism, but in terms of our willingness to invest in the company and forgo any kind of personal wealth," he says. "And then to go through what we've been through the last three years . . . this community should be asking itself the question, 'When have these guys had enough? How stupid are they to not take offers approaching a billion dollars and go through the headaches that they're going through?'

"What happens if we throw in the towel? Whoever the owner is, you can bet your bottom dollar that it will be very quick until they figure out a way to get this down to one newspaper. And it will be very quick until they cut back on investment and reduce employment. That's the model of the chains."

Blethen's outspokenness has been something of an annoyance to Hearst, whose internal operations have long been shrouded in a secrecy seen by many as unusually tight, even for a family-owned corporation. On the fate of the Seattle JOA, the company has been typically tight-lipped, except for a very terse statement issued last October by Hearst spokesperson Paul Luthringer: "Our position has been that the Hearst Corp. has been publishing the Post-Intelligencer since 1921 and intends to continue to do so. We do not believe either party has a basis for terminating the Seattle joint operating agreement." A somewhat more combative posture was exhibited by an unidentified Hearst executive quoted in an article last week in the newspaper-industry journal Editor & Publisher: "Hearst is not going to be chased out of Seattle. I think there could be a prolonged struggle if there is an effort to dissolve the JOA." Neither Hearst nor the P-I responded to requests for comment for this article.

'THE FIFTH EDITION'

If Hearst indeed plans to fight dissolution of the JOA or closure of one paper, the Blethens have done much to strengthen family unity in hopes of facing down that big corporation, starting with the transition from the third generation to the fourth. That began under the late Jerry Pennington in the mid-1970s, Frank Blethen says. (Pennington died in a boating accident in 1985, and Frank Blethen replaced him as publisher.) Until then, the Blethen family holding company was run exclusively by Blethens. Pennington, with the support of family members, restructured the board of the Blethen Co. to include outside directors.

"Typically, a family corporation has only one fiduciary responsibility—to maximize profits and asset value," says Blethen. "Our holding company looks more like a trust than it does a traditional corporation. We have—and this is part of the governing documents—equal responsibility for perpetuating the family ownership and for practicing independent journalism.

"We negotiated some changes which included the criteria for independent, outside directors who were people who had strong business backgrounds. Jerry Pennington was the guy who led us down this path.

"The theory was that if a family business was to be professionally managed and succeed, you had to make sure that the board of directors and senior management wasn't just a sandbox for family members. But family members still needed to be represented."

Blethen studied the literature on other family businesses and found that in the ones that didn't work, family members weren't treated fairly. The outside directors would, among other things, see to it that such a rift would not tear apart the Blethen clan and endanger their ownership of The Seattle Times.

Thursday of last week happened to be the day of the "winter meeting" of what Blethen refers to as the "Fifth Edition"—those of the fifth generation of Blethens eligible for participation—called together for their semiannual orientation on the company. "Our loose criteria is two years of college, age 21, and an expressed interest in participating," says Blethen. "And by participating, we don't mean as a career professional—just interest in the values of the place and perpetuating it."

No Blethen can expect to rise in the company just because of whose son or daughter he or she might be, says the publisher. "There is a process that insulates, to the degree most humanly possible, to the kind of family dynamics that are so harmful elsewhere, where people are selected because of who their dad was instead of what their own performance and merit is," Blethen says. "I see my biggest challenge with the Fifth Edition is to get them completely inculcated and invested in the notion of independent journalism and stewardship and watchdog [journalism], along with the notion of family harmony and inclusion as the key tools to perpetuating family ownership."

It is not clear what recourse Hearst would have if the Times can show to the satisfaction of the Justice Department that it has, in fact, had three consecutive years of red ink, from 2000 to 2002. Under the agreement, that's the basis for termination, should the Times decide to pursue it. While Blethen continues to say that the Times has yet to decide what action to take, all signs point in the direction of termination. There wouldn't be any point, of course, if there wasn't a new generation to take over from Frank Blethen's.

info@seattleweekly.com

Former reporter and editor Dick Clever is the owner of Sound Research, which provides investigative services to attorneys and businesses. He worked for the Seattle Post-Intelligencer from 1970-1975 and again from 1988-1996. He worked for The Seattle Times from 1980-1987 and covered the original JOA process.

The Fifth Generation

The fourth generation of the Blethen family runs the Seattle Times Co. today. They are Frank, who is publisher and CEO; Bob, who is vice president for marketing at The Seattle Times; Will, who is treasurer of the Seattle Times Co.; John; and Alden.

The fifth-generation Blethen family heirs and what they're doing:

Christine Blethen Farrey, 32, daughter of Bob. Extended maternity leave; has worked at the Times and the Hartford Courant.

Ryan Blethen, 30, son of Frank. Staff writer, Portland Press Herald and Maine Sunday Telegram.

Rob Blethen, 29, son of Bob. Advertising new-business development manager, Portland Press Herald and Maine Sunday Telegram.

James Blethen, 28, son of Frank. Online news production assistant, The Seattle Times.

Trace Blethen, 26, son of Will. New-media product specialist, The Seattle Times.

Cal Blethen, 23, son of Bob. Snohomish County news intern, The Seattle Times.

Kerry Blethen, 23, daughter of Alden. Employed outside the company in New York.

Courtney Blethen, 21, daughter of Alden. Attending college.

Jessica Blethen, 21, daughter of John. Attending college.

David Blethen, 20, son of Bob. Attending college.

Kelley Blethen, 17, daughter of John. Attending high school.

The Seattle Times Co.

FOUNDER: Maine native Alden J. Blethen, who purchased the Seattle Press-Times in 1896.

OWNERSHIP: Blethen family, 50.5 percent of voting stock; Knight Ridder, 49.5 percent.

HOLDINGS: Washington—The Seattle Times (circulation 225,000 Monday-Saturday, 476,000 Sunday*); Yakima Herald-Republic; Walla Walla Union-Bulletin; Issaquah Press; seattletimes.com, NWsource.com, and NWclassifieds.com; Rotary Offset Press Inc.; Times Distribution Inc.

Maine (purchased in 1998)—Portland Press Herald and Maine Sunday Telegram; Kennebec Journal (Augusta); Morning Sentinel (Waterville); Coastal Journal (Bath); MaineToday.com.

* Sunday circulation includes Seattle Post-Intelligencer subscribers.

THE JOA

Under a federally sanctioned joint operating agreement (JOA), The Seattle Times manages advertising, production, distribution, and marketing of the Seattle Post-Intelligencer (circulation 169,000 Monday-Saturday), which is owned by the privately held Hearst Corp. The Sunday newspaper, which goes to subscribers of both papers, is labeled as a joint edition, but all news content is produced by the Times, with the P-I contributing only its own editorial and opinion pages.

 
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