Seattle: A Good (Bad) Year
Did The Times Hire to Lose Money?
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| Choices: Seattle is a two-paper town, but red ink threatens the JOA that keeps it that way. © Cheryl Hatch/AP WideWorld |
Journalism job-seekers were pretty much out of luck in just about every city in America last year — except one. While news organizations across the country froze salaries and laid off experienced pros, The Seattle Times went on a hiring spree, expanding its editorial staff by a remarkable seventy-one positions.
The Times wasn't spending so freely because it was flush with profits — the newspaper has lost money for the last three years. For most companies, massive hiring in the face of that much red ink would seem counterproductive. But losing money three years straight might give The Seattle Times a way to slip out of its joint operating agreement with the Seattle Post-Intelligencer and kill off the competition. Which raises a question: Did the Times add all those journalists' salaries to ensure it lost money in 2002?
Under their unusual JOA, either newspaper can seek to terminate the contract if it loses money three years in a row. The Times's owner and publisher, Frank Blethen, says he is weighing whether to initiate that clause in the contract, which would set in motion eighteen months of negotiations aimed at eliminating one newspaper and sharing the survivor's profits. Under the current contract, if the Post-Intelligencer's owner, Hearst Corp., agreed to shut down the P-I, it would get 32 percent of the Times's profits through 2083. But if no agreement were reached, the JOA would end, leaving the Post-Intelligencer without a printing press, a circulation structure, or an advertising team — and with little hope of survival.
Blethen has indicated he believes Seattle can support only one newspaper — and he intends that it be The Seattle Times. At a company meeting last fall, he told staff members about the clause and said, according to several media reports, including one from the Times, "If the P-I doesn't invoke it, we will." Blethen declined interview requests from CJR.
If the Times does invoke the clause, Hearst asserts it will not simply walk away from Seattle — particularly since the company is guaranteed 40 percent of combined revenue under the current JOA. Hearst has been publishing the Post-Intelligencer since 1921 "and intends to continue to do so," a Hearst spokesman, Paul Luthringer, said. "We do not believe either party has a basis for terminating the Seattle Joint Operating Agreement."
One possibility is that Hearst would take the Times to court to try to prevent it from invoking the clause. In this scenario, Hearst might try to force the Times to prove it lost money all three years and, failing that, argue that the Times intentionally tried to lose money through excessive hiring. Another possibility, raised in a February 8 P-I story, is that the U.S. Department of Justice may block the move on the ground that closing one newspaper and paying the owner of the other a share of the survivor's profits would violate antitrust law.
A Times spokeswoman, Kerry Coughlin, points out that although the paper did a lot of hiring in 2002, the company had downsized about 20 percent in 2001 because of a strike and the recession. The hiring, she says, was aimed only at returning to past staffing levels. The Times raised the newsroom staff from 295 to 366 employees in 2002. But, she points out, that's still eight fewer editorial positions than the Times had before the strike in January 2001.
Moreover, she said, The Seattle Times was able to expand its staff last year because it saved money by refinancing its debt. "The reason we were able to add those positions last year," she said, "was that the family made a critical decision to reinvest in the long-term future of the company."
In an internal memo to his staff dated January 7, Blethen said the hires were necessary "to rebuild the business to preserve our reader base and protect our franchise."
Still, the newspaper analyst John Morton, who has consulted for Hearst, says the Times's staff expansion was highly unusual in such a tough fiscal climate, particularly for a newspaper losing money. "I'm not aware of any other newspapers that have staffed up to this degree," he said. "It's exceptional."
The Times emphasizes that it has hired people only to cover what it sees as core, strategic areas for the newspaper. So perhaps it was a telling sign when, in January, the paper hired Bill Richards, a former Wall Street Journal reporter, to cover the JOA. It should be an interesting beat.
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