News Release

April 29, 2003
Kerry Coughlin
Corporate Communications Manager
The Seattle Times
206/464-3318
kcoughlin@seattletimes.com

THE SEATTLE TIMES SENDS NOTIFICATION TO THE HEARST CORPORATION UNDER JOA LOSS CLAUSE

The Seattle Times sent official notification today to New York-based Hearst Corporation media conglomerate, owners of the Seattle Post-Intelligencer (P-I), that The Times has experienced three consecutive years of financial losses and is exercising a "loss clause" in the Joint Operating Agreement (JOA) between the two newspapers.

This begins 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 on its own. This 18-month agreement was part of the renegotiated JOA in 1999. The revised clause modified the provision in the original JOA, which simply ended the JOA rather than encourage the two parties to restructure the JOA in an economic fashion.

Since late last year, The Seattle Times has been in discussions with The Hearst Corporation to explore options within the JOA to make it economically feasible. When Hearst indicated it was unwilling to consider sufficient modifications to stem the projected losses in the future, losses which are threatening the survival of the independent Seattle Times, The Times told Hearst of its intention to send the notice as a last resort.

"This is exactly what the clause in the contract was intended for," said Frank Blethen, publisher of The Seattle Times. "It was created to protect this community's local, independent, family-owned newspaper from a multi-billion dollar media conglomerate, willing to absorb financial losses until The Times was forced to sell to them." Blethen pointed to San Antonio and, more recently, San Francisco as examples of Hearst's history of taking over as the sole surviving newspaper after running the weaker of two papers.

Blethen pointed out that Hearst attempted to eliminate the stop loss language in the renegotiated 1999 agreement but that The Times refused. The Times repeatedly told Hearst they were unwilling to be put in a position where Hearst could bleed them out of business. This was an essential part of the original contract. Blethen said "There would not have been an amended agreement without this provision." Rather than simply ending the JOA, the new provision, which The Times agreed to, gave the two parties 18 months to work out the details of a one-newspaper JOA or the ability of Hearst to publish the P-I on its own with its substantial resources.

The Blethen family has owned The Seattle Times for 106 years. In the early 1980s, when The Hearst Corporation declared the P-I to be a failing newspaper, The Seattle Times Company entered into a JOA with Hearst under which it took on advertising, production, circulation and marketing for the P-I. The two newspapers have separate and competitive news departments.

In a lawsuit filed yesterday against The Seattle Times, Hearst challenges The Seattle Times' right to invoke the clause that allows The Times to call for negotiating to one newspaper in the JOA or, failing that, terminating the JOA. Publishing one newspaper under the JOA rather than two would eliminate costly inefficiencies and allow for critical investment in content and service.

Hearst's complaint cites a separate "force majeure" JOA contract clause, written to cover severe unexpected events that might prevent production of the newspaper, as grounds for dismissing the financial losses The Times experienced over three consecutive years. It claims a labor strike, September 11 and an ongoing recession should invalidate The Times' losses. The suit also asserts that The Times created losses through its efforts to rebuild following the damaging labor strike in 2000.

"Going back over a three-year period and listing circumstances that impacted almost all businesses in this country does not change the fact that The Times had financial losses," said Carolyn Kelly, president of The Seattle Times. "And there is nothing in the contract's loss clause that excludes particular circumstances. Indeed, I believe this is exactly what the negotiators of the contract intended. It simply says ‘if we lose money for three consecutive years' which we have," she said.

Kelly also addressed Hearst's suggestion that The Seattle Times was hiring or spending money to create losses. "It makes no sense when we aren't even back to where we were in 2000," she said. "The Times overall employment is still well below pre-strike levels outside of the newsroom and slightly below in the newsroom, where partial rebuilding was essential if we were to avoid a disabling downward spiral in the circulation of both our daily and Sunday newspapers, as well as the P-I." Kelly said The Times financial losses have been audited and verified by an independent accounting firm.

The JOA between The Seattle Times and the P-I remains in effect and the Seattle Times Company will continue to manage business functions for the P-I as usual. Readers should not expect any change in their service at this time.

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