Black and white (or is it red?) all over

Is The Seattle Times on the rebound or still on the skids?

Last month, The New York Times proclaimed Seattle'ꀙs remaining ink-on-paper daily 'ꀜresurgent'ꀝ since its print rival, the Post-Intelligencer, folded in March. In an Aug. 10 article, the New York paper'ꀙs media reporter Richard Perez-Pena quoted Seattle Times Publisher Frank Blethen saying, 'ꀜOn a month-to-month basis we are starting to operate in the black.'ꀝ

Blethen'ꀙs carefully hedged statement was widely cited as a hopeful sign in the floundering newspaper industry. The Seattle Times itself ran Perez-Pena'ꀙs article six days after it originally appeared, noting it 'ꀜsparked dialogue in the continuing conversation about the future of newspapers and journalism.'ꀝ

Like almost every other newspaper in the country, the Times is struggling. Under withering pressure from the economy'ꀙs collapse and the migration of readers and advertisers from print to the Internet, the Times'ꀙ workforce now stands at 1,284, down almost 25 percent from five years ago. Earlier this year, Blethen told state legislators the paper was 'ꀜliterally holding on by our fingertips" and needed a B&O tax break to help it survive.

He got his tax break, but determining whether the Seattle paper is clawing its way back to the black may not be quite as easy.

On July 20, just three weeks before The New York Times article appeared, Seattle Times Co. President Carolyn Kelly sent a memo to the paper'ꀙs staffers saying the company had revised the Times' projected advertising revenue downward several times this year and calculated the paper'ꀙs total 2009 ad revenue would fall 30 percent below that of 2008. By the end of this year, Kelly said, the Seattle Times will have lost 'ꀜa staggering 45 percent'ꀝ of its total ad revenue in two years.

The Times revenue projection tracks fairly closely with ad revenue declines across the newspaper industry. Nonetheless, Kelly wrote, 'ꀜThe stunning drop in revenue due to the 'ꀘGreat Recession'ꀙ has exceeded even our greatest fears.'ꀝ The paper'ꀙs only financial bright spot was a jump in circulation revenue, due to a transfer of some 90,000 P-I subscribers to the Times rolls after the P-I'ꀙs shutdown.

Perez-Pena told Crosscut this week he could not recall whether he saw Kelly'ꀙs memo. Blethen did not offer details on how the Times'ꀙ June profit was calculated, he said.

So which is it: Is the Times resurgent or headed for still harder times?

Spokeswoman Jill Mackie said Blethen was not claiming the Times is now profitable 'ꀜin an unqualified way.'ꀝ Mackie explained in an email to Crosscut that although operating revenue in June exceeded the company'ꀙs operating expenses, 'ꀜThis does not mean our revenue exceeds expenses every month. It means there are signs of improvement.'ꀝ

One of the most promising signs for the Times, according to Mackie, has been the paper'ꀙs ability to hold on to former P-I subscribers. Under their joint operating agreement, the Times managed subscription chores for both papers. When the P-I closed in March, Times circulation officials automatically switched some 90,000 P-I subscribers to their own rolls, a move that immediately boosted the Times total circulation from about 200,000 to 290,000.

Perez-Pena said Times officials told him that by June the paper'ꀙs daily circulation was slightly over 260,000, still up by about 60,000, or 30 percent, from the Times'ꀙ circulation before the P-I'ꀙs shutdown. The good news for the Times, Mackie said, was that about 84 percent of the former P-I subscribers elected to re-up with the Times when their P-I subscriptions lapsed. Mackie did not disclose, however, how many P-I subscriptions were included in the 84 percent figure and how many had still not lapsed by June. It was also not clear how much new revenue the P-I crossovers added to the Times bottom line. In general, industry officials say circulation accounts for about 20 percent of a newspaper'ꀙs revenue base. However, there'ꀙs an extended effect — good or bad — because advertising, which accounts for most of the paper'ꀙs revenue, is sold based on circulation numbers.

The bad news is that just three months after the P-I closed, a third of the former P-I subscribers had defected from the Times. Some 10,000 of them held subscriptions with both papers and dropped off when the P-I shut. The rest of the defections, Mackie speculated, were primarily due to vacation cancellations and the summer shutdown of the Times'ꀙ school-distribution program.

So depending on who is counting, circulation at the Seattle Times in June was either up 30 percent, with former P-I readers switching to the Times in droves, or off by 30,000, as P-I subscribers defected en masse. More reliable circulation numbers should be available at the end of this month, when the newspaper trade group, Audit Bureau of Circulations, issues its six-month totals.

Another critical number is how much further the Times can cut its spending if needed. Last month, Blethen told NPR that the Times Co. had slashed $89 million in two years — an enormous cut for a company its size. According to Mackie, spending cuts at the paper have kept pace with its revenue loss over the past two years. But with a 30 percent projected advertising revenue shortfall for this year the Times could be hard-pressed to cut deeper.

'ꀜWe'ꀙre about at the floor of what we feel we can have and still put out a Seattle Times we can be proud of,'ꀝ Times Executive Editor David Boardman told Perez-Pena. The Times'ꀙ news staff has been cut 40 percent in five years, Boardman said, thinning its coverage. 'ꀜLess,'ꀝ he acknowledged, 'ꀜis less.'ꀝ

The Times got a hefty gift from its own employees last March when, under pressure from management, they agreed to give up 12 percent of their benefits until the end of 2010. Liz Brown, administrative officer for the Pacific Northwest Newspaper Guild, the Times'ꀙ largest union, said the Guild does not anticipate any further demands for concessions by the Times'ꀙ management.

Missing too from Blethen'ꀙs monthly accounting are several other major elements of the Times Company'ꀙs financial picture. They include the cash from the sale of the company'ꀙs Blethen Maine newspaper chain in June — between $30 million and $40 million according to people involved in the sale — and the continuing cost of debt service on what remains of the $233 million the Times borrowed a decade ago to buy the chain. Similarly, the Times Company continues to carry unfunded pension obligations for hundreds of Blethen Maine employees and must make up about $40 million in the next few years to fully fund its own pension plan.

Bottom line: While Blethen and other Seattle Times officials have been crowing that the Times'ꀙ June numbers suggest it has turned the corner, some big financial holes remain. A better indicator of the company'ꀙs fortunes may be McClatchy Co., which owns 49.5 percent of the Times (Blethen'ꀙs family owns the rest.) Last December, McClatchy wrote its Times Co. stake down to zero, noting in a filing to the Securities and Exchange Commission that it wouldn'ꀙt start reporting on its Times holding until the Seattle-based company is once again profitable. As of Aug. 5, in its latest quarterly filing with the SEC, McClatchy was still mum on the Times.