JERRY GAY
JERRY GAY
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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.
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