Hearst Has a Heart

After three costly years of head-butting in court, the Seattle Times Co. and Hearst Corp., owner of the Seattle Post-Intelligencer, are pinning their papers' destiny on an outside arbitrator. But their proposed arbitration agreement depends on a pair of very unstable elements: Hearst's commitment to Seattle and Frank Blethen's ego.

Seattle's dailies, which are yoked under a federally sanctioned monopoly called a joint operating agreement (JOA), want to shift their internecine battle out of the public arena of King County Superior Court. The two closely held companies would prefer to conduct the fight in private, before retired King County Superior Court Judge Larry Jordan. Under the plan, Jordan would decide by May 31, 2007, whether The Seattle Times may legitimately claim three consecutive years of financial losses under the JOA. The P-I challenged that notion in a 2003 lawsuit.

Binding arbitration is a good deal for the Times, which has been seeking closure all along — both to the courthouse battle with Hearst and, literally, of the smaller P-I, which it says is a burden that assures consistent losses under joint operation. The Times handles the business end of things and owns the printing presses in Bothell. If Jordan validates the Times' loss claims, the new agreement gives the company a firm time frame of 12 months to negotiate closure of the P-I.

If Jordan rules against the Times, Hearst says it will continue publishing the P-I under the JOA. What Hearst gains from that outcome is less clear. The P-I would remain the city's second paper, continuing to steadily lose circulation and money, and Hearst would lose the tactical advantage of wearing down the locally controlled Times with protracted litigation. So why the rush to judgment?

Hearst normally ignores questions like that, but in an unusual explanatory note to reporters, the New York-based media conglomerate declared, in effect, that it decided to go the arbitration route because, somewhere deep in its corporate body, it has a heart.

Since the Times has filed loss notices for three different sets of years — 2000-02, 2002-04, and, last week, 2003-05 — Hearst says JOA rules and federal antitrust regulations would force it to immediately put the P-I up for sale. And that, it explained, would create mass angst for P-I staffers and readers.

Under the JOA, Hearst would get 32 percent of Times net profit until 2083 if it agreed to shut the P-I. But before it can do that, Justice Department antitrust regulators require proof that no one else wants the paper. And to meet that requirement, Hearst says, it would have to put the P-I on the block right away. Arbitration, P-I Publisher Roger Oglesby explained in a written statement, "brings a measure of certainty to a situation that has generated a lot of confusion and anxiety for newspaper employees and readers for some time."

Perhaps. But Hearst didn't show much concern about its staff or readers when it put the P-I up for sale after the Times filed its first loss notice three years ago. Hearst was clearly going through the motions, using the offering as a public relations tactic to cast its rival as the heartless bad guy. According to those who read it, Hearst's offering prospectus for the P-I amounted to little more than the rotating globe atop the paper's rented newsroom. Predictably, there were no takers. Hearst whisked the paper back off the market as soon as Superior Court Judge Greg Canova blocked the Times from dismantling the JOA.

Nor does Hearst's history of closing and consolidating newspapers — in San Antonio, Houston, and San Francisco — smack of deep concern for readers or staffers.

A more likely focus of Hearst's interest is the Blethen family and its controlling stake in the Times Co. Before Hearst agreed to amend the JOA in 2000 to let the Times into the morning market to compete directly with the P-I — almost surely dooming the smaller paper — it insisted on a side deal that pays the Blethens $1 million a year for first-refusal rights if they decide to sell.

Since then, Hearst has pumped just enough life into the P-I's news hole to keep it from appearing moribund, while hoping for a sign the younger generation of Blethens will lose interest in the Times and run with their share of the company's estimated $600 million street value.

So far, that sign hasn't appeared. The Times Co. recently moved two fifth-generation Blethens up the management ladder, putting Publisher Frank Blethen's son, Ryan, on the boards of the company's Yakima Herald-Republic and Walla Walla Union-Bulletin and naming Rob Jr., son of Times marketing vice president Robert Blethen, to the board of the Maine newspaper unit.

In any event, rolling the dice on arbitration might not be such a long shot for Hearst. If it loses, the new agreement still gives it the right to continue publishing the P-I online, without any additional investment here, and collect 32 percent of the Times net for the next 77 years.

The arbitration path isn't much of a gamble for the Times Co., either. The state Supreme Court has already validated its 2000 and 2001 loss claims, and Hearst might also have trouble challenging Times JOA loss claims for 2003 to 2005.