One day in 1985, after succeeding the late Jerry Pennington as publisher of The Seattle Times, Frank Blethen paused in the newsroom to chat with a reporter. The subject of the joint operating agreement (JOA) with the Hearst-owned Post- Intelligencer arose.
“If I had my way, we never would have signed the deal,” said Blethen, then just 40. “We would have driven the P-I into the ground.”
And they may yet. The Times is considering its options under the current agreement—among them the termination of the joint operation and, with it, closure of the P-I. Blethen, now a white-bearded 57, has long resented the arrangement that trapped The Seattle Times in the afternoon position, which few newspapers with morning competitors had survived. So when the Seattle JOA was renegotiated in 1999 to allow the Times to move to mornings, speculation was rampant that it was the beginning of the end of the P-I. Both Times and P-I executives denied that was the goal or necessarily the inevitable outcome. It can only invigorate the competition between the two papers, they said.
For one thing, instead of a 68-32 split of revenues after all non-news expenses were deducted from the combined revenues of the two newspapers, the P-I would now receive 40 percent. That additional money would help the P-I beef up its staff for the morning battle.
But soon after the 1999 amendments, the steam began to come out of the overheated economy. In 2000, the newspapers were hit with their first strike in half a century. The 2001 retail-advertising market was clobbered by the terrorist attacks. And in 2002, economic recovery has been slow in coming.
The 49-day strike, in particular, delivered a gut shot to Blethen, who had come to think of his employees, particularly his much-awarded news staff, as the “Times family.” He took it personally when employees whom he thought had been well treated were suddenly carrying picket signs in front of the Times building. The Times had made striking improvements under Blethen’s stewardship. Four of the newspaper’s seven Pulitzer Prizes had come during his tenure as publisher. More resources were poured into the news product, Democrats got more editorial endorsements, and coverage of local institutions was more penetrating and skeptical. But with Frank, you get the sour with the sweet. His belligerence during the Newspaper Guild strike alienated many of his union employees and prolonged the peacemaking process.
ALMOST TWO YEARS later, it is getting a bit easier for Blethen to drop in on the newsroom to chat with the troops. It was during one of those visits last month that a reporter asked him about the financial health of the newspaper. According to witnesses, Blethen said that when 2002 is done, the newspaper will have lost money for three consecutive years. He was considering invoking the clause in the contract that would lead to termination of the joint operation with the P-I.
Under the agreement, either party can trigger a termination process after three straight years of red ink. The contract allows complete dissolution of the joint operation, or it would let the arrangement continue with closure of the P-I and with the Times continuing to pay Hearst 32 percent of revenue through 2083. Once the termination process is initiated, the parties have 18 months to agree on terms.
IT DIDN’T TAKE LONG for Blethen’s remarks to get around town, and the Times did little to dampen their impact. Times spokesperson Kerry Coughlin clearly had the go-ahead to confirm that JOA termination was very much on the table. “It is increasingly likely that our market will not continue to support two newspapers,” she told Editor & Publisher, a newspaper-industry journal.
Inquiries to the offices of P-I publisher Roger Oglesby were deflected to Hearst corporate spokesperson Paul Luthinger in New York. The Hearst response was typically bland and brief: “The Hearst Corporation has been publishing the Post-Intelligencer in Seattle since 1921 and intends to continue to do so. We do not believe either party has a basis for terminating the Seattle joint operating agreement.”
The Newspaper Guild has been closely tracking implementation of the amended agreement. “Ever since 1999, we’ve had our eyes on three years out,” said the union’s executive director, Liz Brown. “We tried to get the Justice Department interested in reviewing the revised JOA, but they showed very little interest.” Brown said the Guild established a task force to keep the amended agreement under scrutiny. But she said nobody is certain how to respond to a termination process until it actually happens.
The joint operation, under which the Times manages all non-news functions of both newspapers, is a creature of the Newspaper Preservation Act, which was passed during the Nixon administration after heavy (some say heavy-handed) lobbying by Hearst and several of the country’s other media conglomerates, including Knight Ridder. (Knight Ridder owns 49.5 percent of the voting stock in the parent Seattle Times Co. Blethen and Knight Ridder CEO Tony Ridder openly despise one another.) The justification for the act was to preserve the “editorial voices” of newspapers that otherwise would fail by granting antitrust exemptions to joint operations like that of the Times and P-I.
The act has its critics, who sometimes refer to it derisively as the “Publisher Preservation Act.” A longtime opponent of JOAs is Stephen R. Barnett, a professor of law at the University of California who wrote a decade ago in the Columbia Journalism Review: “The economic point of a JOA is to let the two publishers set their prices jointly and thus maximize their revenues—at the expense not only of advertisers and readers but also of weeklies, suburban papers, and other competing media.” Indeed, when the Times and P-I applied to the Department of Justice in 1981 for approval of their proposed JOA, among those who tried to block the agreement were weeklies (including this one), suburban papers, and other competing media. They were joined by a group of P-I staffers and the Newspaper Guild. The late, legendary attorney Bill Dwyer took the case for JOA opponents, working without compensation. But the publishers prevailed, and the JOA commenced in May 1983.
FOR NEARLY TWO DECADES, the JOA seemed to live up to its promise to keep the editorial voice of the P-I alive in Seattle.
“Looking over the past 20 years, it’s been one of the most successful JOAs in the country,” said Coughlin, noting that the news competition between the two newspapers has been lively. John Morton, a newspaper-industry analyst who testified in support of the JOA at the Seattle hearings back in 1981, said he believed the Seattle JOA would last at least 50 years. “I became even more sure of that when they amended the agreement to allow both newspapers to publish mornings,” he said this week.
But the amended JOA has not been kind to the P-I. Since 1999, P-I circulation has dropped from 194,000 to 164,000, despite substantial efforts by Hearst to beef up the news staff. Meanwhile, the Times, at about 228,000 on weekdays, is up slightly. But more important, it has secured its morning position at the expense of the P-I.
Owning and operating The Seattle Times, one of the last independent, family-owned daily newspapers of any size left in America, is something that has given five generations of Blethens a mission and stature. It is a mission that Frank Blethen believes in, heart and soul, and one that guides any long-range planning within the company. It also means that some decisions are inspired less by hard-nosed, bottom-line thinking than by Blethen’s passion for preserving and enhancing the family legacy. The most striking example of that was the Times’ purchase of a chain of four newspapers in Maine—because that was the birthplace of Blethen’s great-grandfather. Tony Ridder was said to be outraged, considering it a waste of money.
The JOA gives Hearst the right of first refusal should the Blethens ever consider selling the Times. That provision of the agreement says much about the loathing Blethen has for Knight Ridder. During his talk with the Times news staff last month, Blethen referred to Tony Ridder as an “asshole,” according to several in attendance.
Given the apparent certainty that the Blethens will never sell, why doesn’t Knight Ridder simply give up and sell its shares back to the Blethens? A call to Knight Ridder brought no response. But about two years ago, Tony Ridder was quite candid with The Wall Street Journal. “Who would want to buy 49.5 percent of a company that is so poorly managed that last year it made $1 million and where the 50.5 percent doesn’t pay any attention to the 49.5 percent?” Ridder asked.
Well, maybe nobody. Meanwhile, the Blethens seem to enjoy holding the Knight Ridder investment hostage as they plan for the fifth generation to take over the Times, with or without the P-I as a competitor.
Former reporter and editor Dick Clever is the owner of Sound Research, which provides investigative services to attorneys and businesses. He worked for both The Seattle Times and the Seattle Post-Intelligencer.
