Seattle Times still standing, but unknown for how long

SEATTLE -- As the Seattle Post-Intelligencer moves toward printing its last edition, it remains unclear whether its bigger rival, The Seattle Times, is far behind -- and whether this famously literate city could soon find itself without a major daily newspaper.

The Times is heavily in debt and struggling to cut expenses, just like many other newspapers across the country. But the Times is different from many large newspapers because it is controlled by the Seattle-area Blethen family and doesn't have deep corporate pockets from which to draw.

"The Seattle P-I may be going out of business, but the Times is an equally troubled company, and possibly even more troubled," said Alan Mutter, a former newspaper editor and Silicon Valley chief executive who writes the Reflections of a Newsosaur blog.

Appeal for tax break

Publisher Frank Blethen acknowledged the struggles last month as he appealed to state lawmakers for a tax break for newspapers.

ELAINE THOMPSON ~ Associated PressPeople walk newspaper boxes and into the The Seattle Times building Tuesday, March 10, 2009, in Seattle. Like dailies around the country, The Times is drowning in debt and struggling to cut expenses.

"Some of us, like The Seattle Times, are literally holding on by our fingertips," Blethen said.

Blethen declined an interview request made through newspaper spokeswoman Jill Mackie, who refused to discuss the company's finances in detail.

"There's a future for The Seattle Times as long as we can hang on through this very deep recession," Mackie said. "Are we certain we're going to get through this time? I think Frank would say we're not certain."

The family has more assets than debts, Mackie said, and is willing to sell them to keep the newspaper alive. The family also owns smaller newspapers in Washington and Maine and has put up for sale $100 million in properties, including the Maine newspapers, though buyers are hard to come by these days.

The P-I's owner, Hearst Corp., plans to announce a decision next week on whether to turn the newspaper into an online-only publication with a reduced news staff. A 60-day sales period expired this week, and Hearst had pledged to stop printing the newspaper if it can't find a new owner.

That would leave the Times as Seattle's only major printed daily, alongside The Daily campus newspaper for the University of Washington and the business-oriented Seattle Daily Journal of Commerce. Areas directly to the north and south of the city are served by The Herald of Everett and The News Tribune of Tacoma. The King County Journal, which competed with the Seattle newspapers in the eastern suburbs, closed two years ago.

Of all the big cities that have lost or are in danger of losing newspapers -- Denver and San Francisco, among others -- none is as likely as Seattle to find itself without a printed daily newspaper.

Some of the troubled major newspapers around the country remain profitable. They simply aren't making enough money to keep up with debt payments, forcing some of their parent companies to seek Chapter 11 bankruptcy protection while they work to transform their ownership structure and reduce debt.

Privately held

The Times is privately held and doesn't release financial information, but it has made clear that it's bleeding heavily. Three rounds of job cuts last year trimmed its payroll by the equivalent of about 500 positions, including roughly 100 in the newsroom, leaving a newsroom staff of about 215. The newspaper has also sought wage and benefits concessions from employees.

One possible source of help is the Times' minority owner, McClatchy Co., which acquired a 49.5 percent stake when it bought the Knight Ridder chain in 2006. However, the Times has historically frozen the minority owner out of the newspaper's operations, and McClatchy would likely demand more power in return for cash, even if it had any to spare amid its own struggles with debt. McClatchy recently valued its share of the Times at zero.

McClatchy declined to comment.

On the surface, it seems as if the P-I's demise as a printed newspaper would give the Times some breathing room, handing it a monopoly on readers and advertisers. When Hearst announced it was putting the P-I up for sale in January, Blethen said it would make it easier for his newspaper to survive.

But the short-term reality is more complex. The Times would pick up many of the P-I's subscribers, but that wouldn't translate to an immediate windfall.

With the joint operating agreement that has governed business operations at both newspapers appearing to be dead, the Times would have no one to share expenses. Under the agreement's terms, the Times handled non-news functions for both newspapers in exchange for 60 percent of their joint profits -- or losses.

Even more crucial is the state of the economy. Circulation gains usually mean higher advertising rates, but big advertisers like department stores and auto dealerships just don't have as much money to spend.

"It's not unbridled good news," said Ken Doctor, a media analyst with Outsell Inc. "In some cases it's a roll of the dice to see what happens to the surviving paper."

The P-I's weekday circulation is 117,572, compared with 198,741 for the Times. The Times' Sunday edition -- which includes the P-I's opinion pages -- has a circulation of 382,332.

One of the more curious aspects of the situation is that Hearst, having poured tens of millions of dollars into the P-I in recent years, is walking away when the Times seems on the brink.

Neither Hearst nor the Times has discussed that. Hearst spokesman Paul Luthringer in recent days has said only that the company is still considering whether to run the P-I as a Web site, and Mackie says it would be premature for her newspaper to discuss a post-P-I world.

What brought Seattle to this point?

Rowland Thompson, a newspaper industry lobbyist here, traces the city's journalistic woes to a strike staged by workers at both newspapers in 2000. The seven-week strike cost the newspapers dearly -- just when the Internet bubble had burst.

The Times and Hearst also spent much of this decade in an expensive legal fight as the Times sought to end the joint operating agreement. Finally, in a 2007 settlement, the Times paid Hearst a net $24 million to perpetuate the agreement, even though the Times had described it as financially untenable.

Between the strike and the legal fight, the papers weren't able to regain their footing before the current recession set in, Thompson said.

Liz Brown, administrative officer of the Pacific Northwest Newspaper Guild, deflected the blame from the strike, saying newspapers around the country began having revenue problems early this decade as much classified advertising moved online.

Unionized editorial workers at the Times have been asked to approve a freeze in pension benefits, and further concessions are under consideration, Brown said.

Meanwhile, the state House has overwhelmingly passed the bill Blethen was lobbying for, which would give the newspaper industry a 40 percent business tax break akin to ones enjoyed by the timber and aerospace industries in Washington. The Times hasn't said how much it would save.

But even such efforts might not be enough.

"That's a real fear," said Anne Bremner, co-chairwoman of the Committee for a Two-Newspaper Town, which has sought to keep both newspapers alive. "What a tragedy it would be in a city like this, a city with one of the highest literacy rates in the country. But maybe it's not too late for the P-I. Where's Bill Gates?"

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Associated Press Business Writer Michael Liedtke in San Francisco contributed to this story.