Times tried to increase profit share from JOA

The Seattle Times, pleading financial hardship, proposed revising a 4-year-old formula that provides its rival, the Post-Intelligencer, with 40 percent of their merged profit, in an effort to save their joint operating agreement (JOA), according to a Times spokeswoman.

The proposal, one part of winterlong negotiations between Times Publisher Frank Blethen and officials of New York-based Hearst Corp., would have rolled back the P-I owner's share of the JOA profit to 32 percent in return for continuing the operating agreement. That is the same amount the P-I received when the Seattle JOA was first approved in 1983.

The P-I profit share was raised to 40 percent in 1999 in a deal that gave The Times the right to switch from afternoon publication and go head-to-head against its morning rival which has a smaller circulation.

Hearst apparently rejected the proposal, and the negotiations ended in what Times officials late last week called "an impasse." The stalemate triggered a warning from Blethen that The Times was prepared to start procedures that could shut down the P-I within 18 months from that point.

Times officials said they have not yet moved on the warning. But Hearst is expected to file a lawsuit today challenging The Times' claim that it has logged three consecutive years of losses, a condition that can trigger moves leading to negotiations over a date to close the P-I.

Times spokeswoman Kerry Coughlin said Hearst specifically challenged Blethen's claim of large losses from a 49-day strike against the paper in late 2000 and early 2001.

Since the start of 2002, The Times has hired 71 full- and part-time news staffers to bring the paper to just under existing staffing levels at the end of the strike. It also spent money on a limited remodeling of its newsroom and expanded zone coverage and extra coverage of subjects like wine and prep sports.

Blethen defends the spending, saying it was necessary to retain the paper's reader base.

In a memo to The Times staff late Saturday, Blethen accused Hearst of following a strategy "to bleed The Seattle Times until we are forced out of business, presumably through a forced sale to Hearst."

Both Hearst and The Times have declined to disclose whether Hearst has made an offer to buy The Times. Newspaper brokers say if the P-I were shut down, The Times could fetch as much as $1.4 billion in today's market.

Hearst spokesman Paul Luthringer said his company would have no comment on the JOA negotiations or Blethen's charge. Roger Oglesby, the P-I's publisher, also declined comment.

Hearst has said it plans to continue to publish the P-I and that there is no basis for ending the JOA.

Under the operating agreement, one of a dozen functioning in U.S. cities, The Times handles production, circulation and advertising for both papers. The papers maintain separate news and editorial staffs and publish separately, dividing their pooled revenues after the non-news bills are paid.

In recent months, Times officials have said the paper has been struggling to maintain advertising revenue because of the lingering slowdown in the local economy. Blethen warned recently of possible layoffs at The Times.

The Seattle Times Co., which owns the Seattle paper and seven other papers in Washington and Maine, recently put several parcels of real estate on the block to raise cash.

Coughlin declined to say whether the privately held Seattle Times Co. lost money last year. The company is controlled by the Blethen family, which owns 50.5 percent of its stock. San Jose, Calif.-based Knight Ridder owns the remaining 49.5 percent.

Tony Ridder, Knight Ridder's chief executive and a member of The Times Co. board, did not return a request for comment.

In his memo, Blethen said he spent months talking to Hearst about ways to restructure the JOA. He said it was "very disappointing" to learn Hearst had a lawsuit already prepared.

Coughlin said Blethen was not available for comment yesterday.

Blethen said in his memo Hearst "has a history of forcing out competitors and shutting down newspapers." He cited Hearst's closure of its own San Antonio Light in 1993 after it bought the competing San Antonio Express-News from Rupert Murdoch's News Corp.

In San Francisco, Hearst sold off its own paper, the Examiner, after buying the larger San Francisco Chronicle during the dissolution of that city's JOA in 1999.

U.S. District Court Judge Vaughn Walker rejected a legal challenge to that shutdown, but in his ruling called the deal "malodorous" and said he did not believe the testimony of top Hearst officials in the case.

Bill Richards is a free-lance writer hired on a special contract by The Seattle Times to cover events involving the joint operating agreement with the Seattle Post-Intelligencer. He can be reached at brichards@seattletimes.com.