News Release

April 26, 2003
Kerry Coughlin
Corporate Communications Manager
The Seattle Times
206/464-3318
kcoughlin@seattletimes.com

THE HEARST CORPORATION FILES SUIT AGAINST THE SEATTLE TIMES

The New York-based Hearst Corporation has informed The Seattle Times Company that Hearst plans to file a lawsuit against The Times on Monday. The Times has been talking to Hearst since late last year in hopes of finding a way to restructure the finances and operations of the Joint Operating Agreement (JOA) between The Seattle Times and the Hearst-owned Seattle Post-Intelligencer (P-I) without jeopardizing the survival of The Seattle Times, as the current JOA does.

Talks had moved to an impasse and The Seattle Times told Hearst it was prepared to give notice, if necessary, that it will seek to negotiate to one newspaper, under the terms of the existing JOA. The Times has not yet done so.

"Our goal is not to kill the P-I," said Frank Blethen, publisher of The Seattle Times. "In fact, we believe it is Hearst's strategy to kill The Seattle Times," he said. "We believe they are well aware that the current agreement will yield substantial losses for the foreseeable future. But it is not our intent to let The Hearst Corporation bleed one of the few remaining independent newspapers out of existence."

Since the JOA went into effect in 1983, The Seattle Times Company, publisher of The Seattle Times newspaper, has also handled advertising, production, circulation and marketing for the P-I. The two newspapers have separate and competitive news departments.

According to a clause in the JOA, if either newspaper loses money for three consecutive years, that newspaper can notify the other party and start an 18-month period during which the two papers can come to an agreement on publishing one newspaper. If agreement isn't achieved in this period, the clause says the JOA terminates and Hearst is free to continue publishing the P-I as a stand-alone newspaper.

In January, The Seattle Times acknowledged it had experienced a financial loss in 2002, as defined by the JOA. It was the third year of such losses for The Times. The Hearst Corporation — which owns 12 daily and 14 weekly newspapers, 27 television stations, 17 U.S. magazines and extensive national and international interests in other publications, Internet, cable and real estate — has not said publicly whether its P-I newspaper has lost money.

The Seattle Times is an independent newspaper, locally owned by the Blethen family for 106 years. It has received seven Pulitzer Prizes and, in 1999, was named by the Columbia Journalism Review as one of the top 20 newspapers in the country. The Blethen family maintains a passionate commitment to continued stewardship of The Seattle Times as a public trust, serving its community with independent, quality journalism.

"This JOA has been one of the most, if not the most, successful in the country," said Blethen. "But our marketplace is following the way of the majority of U.S. cities which sustain only a single metropolitan newspaper. Continuing to artificially support two newspapers in a JOA jeopardizes the survival of The Seattle Times. It's draining our ability to remain a thriving newspaper, and good local employer, serving our community as we have for five generations."

Out of 29 JOAs formed around the country, only 12 have survived. Over the last ten years, competition from other print media, broadcast, direct mail, the Internet and other information sources has increased substantially. Since the Seattle JOA was renegotiated in 1999, allowing the then-afternoon Seattle Times to publish in the morning — the same cycle as the P-I — Seattle Times circulation has steadily increased and P-I circulation has continued to decline.

"The P-I was a failing newspaper in the early 1980s and for 20 years we have preserved it under the JOA," said Blethen. "But the boom of the 90s masked the inefficiencies of producing two newspapers. With major shifts in the economy and the market — shifts that appear to be long-term, not cyclical — we simply can't afford the duplicated operation we have now," he said. "We have serious production and distribution limitations which hamper us in the marketplace and keep us from generating new advertising revenue. These problems along with the very costly redundancies throughout the process to support the P-I, and the long-term losses that are projected threaten the survival of The Seattle Times," Blethen said. "It impedes our ability to invest in enhanced content and service for our readers. As an independent, locally owned newspaper that's something we are deeply committed to."

Carolyn Kelly, president of The Seattle Times, said The Times has been struggling with the deep recession, and what appear to be lasting changes in the economy, that hit advertising-based businesses like newspapers especially hard. "The changes in the airline industry that have severely hurt Boeing, the bursting of the dot-com bubble and the loss of more than 100,000 jobs in this region have had a tremendous impact on our business," said Kelly. "All along, the JOA structure — which creates an artificial situation to perpetuate a second newspaper that is not making it on its own — has been terribly inefficient. In the new economy, it's devastating."

Kelly said The Seattle Times has completed an audit by an independent accounting firm that validates The Times losses over the past three years. She said that regardless of the lawsuit filed by Hearst or potential notification under the JOA contract clause by The Times to Hearst, that The Seattle Times will continue to manage the P-I in accordance with the JOA as long as it is in effect.

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