Hearst and Times exchange JOA jabs

The Hearst Corp. said yesterday that it had offered Seattle Times Publisher Frank Blethen more than $50 million and a larger share of revenue from The Times' joint-operating agreement (JOA) with Hearst's Post-Intelligencer as "an upfront inducement payment" to settle Seattle's long-running newspaper war.

The offer came, a Hearst spokesman said, during back-channel negotiations between executives of the two companies while their lawyers were battling it out in court. Those negotiations reached an impasse in January, according to a Times spokeswoman.

"The bottom line," Hearst spokesman Paul Luthringer said, "was that Mr. Blethen rejected all our proposals, and he's been unwilling up to now to alter his primary objective of forcing the P-I out of business."

Times spokeswoman Kerry Coughlin said Hearst "did make an offer approximating that" but that it came attached with strings that "were designed to disadvantage The Times and give Hearst control of the paper."

For example, she said, one of several offers Hearst made involved the New York-based company getting half The Times' assets.

"There was never a genuine offer to get to the place where The Times could even be minimally profitable," Coughlin said.

"If they're offering us in excess of $50 million and a 68 percent-32 percent split with no strings attached," Coughlin said, "we'll take it." She said Blethen told her he would "be on the phone to the family and the board immediately" if that offer were on the table.

The Blethen family owns 50.5 percent of The Seattle Times Co. voting stock, and San Jose, Calif.-based Knight Ridder owns the rest.

Under the JOA, the two papers pool their advertising and circulation revenue. After The Times is paid for handling nonnews functions for both, the two split the remainder, with 60 percent going to The Times and 40 percent to Hearst.

Hearst and The Times traded verbal shots yesterday following a plea by an ad hoc citizens' group for both sides to drop their 14-month legal battle and allow a mediator to resolve their differences.

"Our goal is to save both newspapers, and a costly, lengthy court battle could tip the scale against survival of either newspaper," said Anne Bremner, co-chairwoman of The Committee for a Two-Newspaper Town.

The group, which was granted intervenor status in the court battle between Hearst and The Times, said it had sent letters to both papers urging them to mediate their dispute.

Yesterday, both companies said they were willing to negotiate but were less eager to have a mediator step in.

"We'd need to know what a third party would bring to the table," said Coughlin. "We don't have enough specifics."

The committee said it had also asked both the U.S. Justice Department and the state Attorney General's Office to intervene in the lawsuit Hearst filed against The Times in April 2003 and to make public the findings of their yearlong investigation into the Seattle JOA.

In a letter sent recently to U.S. Attorney General John Ashcroft, Bremner and co-chairman Phil Talmadge urged the Justice Department to intervene "to address antitrust implications" stemming from a 1999 renegotiation of the JOA that allowed The Times to shift from afternoon to morning publication.

In April last year, Blethen notified Hearst that, under a JOA formula, The Times had lost money in 2000, 2001 and 2002. The notification triggered a JOA provision requiring negotiations that could lead either to an end to the JOA or a shutdown of the P-I.

Either way, Hearst says, the P-I would close. Without the JOA, the P-I wouldn't have the infrastructure for nonnews operations, including printing, distribution and marketing, all of which are handled by The Times.

On the day before Blethen's loss notification, Hearst filed its lawsuit in King County Superior Court to block The Times from invoking the JOA provision.

In March of this year, the state Court of Appeals overturned a Superior Court decision favoring Hearst on one part of the case. Washington's Supreme Court is expected to decide later this year whether to hear the case.

The Justice Department and state attorney general began their investigation last year. Since then, federal and state attorneys have interviewed and deposed dozens of people, ranging from Blethen to law professors.

Representatives of both the Justice Department and the state Attorney General's Office said yesterday they had no plans to intervene in the legal case here.

"Our investigation is ongoing," said a Justice Department spokeswoman. "They are asking us to intervene to look at something we are already investigating."

Yesterday's public-relations jousting broke a long silence by both Hearst and The Times on rumored negotiations, but the exchange appeared to resemble more schoolyard baiting than a prelude to more meaningful conversations.

Both spokespeople, for instance, were vague about exactly what strings were attached to which offers.

"There were a lot of different proposals made," said Coughlin, who said she couldn't recall whether Hearst's $50 million offer included a quid pro quo of The Times giving up some of its ownership.

Luthringer also sidestepped questions about what the company was asking in return for its proposals.

"Mr. Blethen rejected all our proposals because he was unwilling to provide Hearst any say in the operations of the JOA," he said.

Neither company would disclose what was contained in the last proposal in their negotiations, one made by The Times in January. Coughlin said Hearst has not replied to that proposal.

Asked to comment on The Times' offer to accept $50 million and a 68-32 split with no strings attached, Luthringer said: "They know who to contact to continue negotiations."

Bill Richards is a freelance 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.