Between the Lines

THE FUTURE OF SEATTLES two daily newspapers, which have competed to report the news and set the civic agenda for more than a century, could turn on an answer to a question of contract law. King County Superior Court Judge Greg Canova says he will issue a ruling on Thursday, Sept. 25, in the matter of Hearst Communications v. the Seattle Times Co. For the Hearst-owned Seattle Post-Intelligencer, founded in 1863, and The Seattle Times, founded by the local Blethen family in 1896, Canovas decision could mean all the marbles in a battle for control of the citys paid-circulation newspaper market. The Times Co. in April served notice to Hearst that it had taken three consecutive years of losses and would seek either to close the P-I or terminate the two companies 22-year, federally sanctioned joint operating agreement (JOA), the legal monopoly under which both have been able to survive for two decades. Hearst sued to block the move, saying it thinks the arrangement is sustainable, that the losses are anomalous, and that, without its own printing presses, the P-I couldnt otherwise continue to publish.

Canova is considering what attorneys on both sides agree could be the biggest question in the lawsuit: whether the Times loss in 2000 should count in the three-year calculation, because it was due to a 49-day strike that drove both newspapers into the red that year. Hearst says the strike was what the JOA terms a force majeurean unexpected, uncontrollable factor that should exclude 2000 if the Times wishes to invoke the three-year loss clause. In a phrase that has practically become a clich頍 in the thousands of pages of documents filed in court, the Times contends that a loss is a loss for the purposes of ending the JOA.

Ordinarily, two private corporations wouldnt expect to have to air their soiled linen in public, but once this dispute landed in court, file drawers full of internal memos, e-mails, and other records became subject to discovery by the opposing parties. Seattle Weekly requested copies of depositions from the parties in the suit and received them after initial resistance from the Times. Those and other documents dont reveal any smoking guns about the conduct of either company in managing the monopoly with which the public has entrusted them, but there is much revealed about the deterioration of relations between Times Publisher Frank Blethen and Hearst executives over the past few years.

The war of attrition between the P-I and the Times has historic roots, with the courtroom only the latest battleground. The companies have fought for control of the Seattle newspaper market ever since Hearst bought the P-I in 1921. Glimpses inside that increasingly bitter struggle shed light on how it came to be that the future of Seattle journalism hinges on the arguments of corporate attorneys.

Changes in Attitude

The papers 1981 JOA was amended in 1999. The Times, then an afternoon paper on weekdays, got the right to switch to morning publication, and it did so in 2000. For Hearst, the new agreement provided long-term protection by guaranteeing a share of Times profits through 2083 should the P-I close. But when the Times Co. said in April that it had lost money in 2000, 2001, and 2002, and that it wanted to negotiate closure of the P-I as set forth in the agreement, Hearst said it wanted to continue to publish the P-I and filed the lawsuit.

Why wouldnt Hearst simply agree to close the P-I and collect checks for the next 80 years? An oft-repeated theme over the past year in Blethens public comments is his belief that Hearsts goal is to hold the Times in a marginally profitable JOA to bleed Blethen family assets until it is forced to sell its controlling interest. (The Knight-Ridder newspaper chain owns the other shares of the Seattle Times Co.) If the Blethens decide to sell, Hearst has the right of first refusalthat was a condition of renegotiating the JOA to allow the Times into the morning marketa right for which Hearst paid $10 million.

That 1999 revision not only changed the media landscapeP-I circulation plummeted when the Times switched to the same morning publication scheduleit changed the tenor of the partnership as well. An internal memo, written last January for the Blethen familys holding company, notes the deteriorating relationship between the Seattle Times Co. and Hearst. Hearst behavior changed almost immediately, the memo says. From a relationship which they touted and which they bragged about us being the countrys best Agency to a contentious, adversarial and accusatory demeanor. Behavior that we believe has been intended to harm the Agency and punish the Blethens in an attempt to force us to sell out to them. (Agency refers to the joint operation as managed by the Times.) At that point, the books were being closed on 2002, and the memo makes it clear that a declaration of three consecutive years of losses would present the Times with an opportunity it couldnt afford to pass up. If we dont use the stop loss language to force Hearst to move to one newspaper and, possibly for us to renegotiate the JOA on much more favorable terms, we will probably never have the chance again until it is too late to save the franchise, the memo says.