Hearst argues it two ways

Seattle's two warring newspapers say they settled their long-running dispute in an agreement that will allow Hearst Corp.'s Seattle Post-Intelligencer to continue publishing for at least 10 more years. The deal, which was announced as attorneys for both Hearst and the Seattle Times Co. were about to begin a binding, winner-take-all arbitration today, means The Seattle Times will end its four-year quest to shut down the crosstown rival until at least 2016. In return, Hearst agreed to drop its lawsuit to block the Times from shutting down the P-I. The two papers have been jointly published under a federally sanctioned joint operating agreement (JOA) since 1983, with the Times overseeing all business functions. The P-I has control over its own news content. Under the agreement, which was finalized by telephone Sunday, April 15, Hearst will pay the Times $25 million to continue the JOA and defer any move by the Times to shut down the P-I until 2016. Under the JOA, if the Times made such a move, the earliest the P-I would close would be 2017. The Seattle Times Co. will pay Hearst $49 million for Hearst's pledge to settle all JOA litigation. Hearst will also give up its right under the JOA to get 32 percent of Seattle Times profit until 2083, should the Times move to close the P-I after 2016. (Under the JOA, the Times can move to shut the P-I within 18 months after the Times demonstrates it has had three consecutives money losing years.) In effect, the agreement moves both papers back to where they were four years ago, when the Times began its efforts to close the P-I and end the JOA – only now Hearst will receive $24 million from the Times. Other elements of the agreement, according to a Times news release, are aimed at fostering a renewed constructive business relationship between the two parties, include a provision to name a senior circulation executive dedicated to monitoring P-I circulation and efforts to try to slow or arrest the circulation decline of the P-I. The settlement also calls for all current litigation and claims to be dropped and specifies that any future issues will go to binding arbitration. An issue for Hearst was its belief that the Times had mishandled circulation and promotion of the P-I in managing the business. "I honestly believe this is a good settlement for everyone," P-I Publisher Roger Oglesby said. "It preserves a 144-year-old newspaper, saves a lot of jobs and continues to give Seattle two daily newspapers." "We are happy to have found common ground," Times Publisher and Times Co. CEO Frank Blethen said in a statement. Times Co. President Carolyn Kelly called the settlement "a positive development for the people of this region, for our readers and advertisers, and for our employees." Hearst has been fighting through Washington courts since 2003 to block Times Co. efforts to end the federally sanctioned joint operating agreement (JOA), under which The Seattle Times also publishes the separately edited P-I. The Times Co. has been saying two newspapers, even with their business functions merged, cannot make money in Seattle, and it wanted to cease publishing the smaller paper. The two parties agreed to binding arbitration last year to settle Hearst's lawsuit in King County Superior Court. The arbitration was to begin today and last four weeks, with retired King County Superior Court Judge Larry Jordan to decide the arbitration by June 7. The proceedings were to be private but the decision was to be made public. The legal battle has taken a toll on the smaller, privately held Seattle Times Co., the controlling interest of which is owned by the Seattle-area Blethen family. The Times Co. owns The Seattle Times, the Yakima Herald-Republic, the Walla Walla Union-Bulletin, and, in Maine, the Portland Press-Herald and Sunday Maine Telegram, the Kennebec Journal in Augusta, and the Morning Sentinel in Waterville – plus weeklies, Web sites, real estate, and Rotary Offset Press in Kent, Wash. Hearst is a multibillion-dollar media company that owns newspapers, magazines, and television stations, among other holdings. Wrote Blethen and President Carolyn Kelly in a memo this morning to department heads at the Times: Serious market challenges remain. Ultimately, advertising revenue and readership will determine our success and whether this market can continue to support two daily publications. Both parties want to preserve multiple metro newspaper voices in this market, but there are no guarantees. Going forward, our ability at the Times to adapt to marketplace changes, to innovate and to manage the business effectively will be critical to returning this paper to stability and profitability.