Report: Stage set for P-I to close

Is the Seattle Post-Intelligencer on its last legs?

Quoting an unnamed source, KING TV reported Thursday night that the newspaper's owner, The Hearst Corp., planned to put the P-I up for sale soon, setting the stage for its closure in the next few months.

The P-I's managing editor said he knew of no such plans. A Hearst spokesman in New York did not return calls, pages or e-mails.

Executives at The Seattle Times, which has partnered for 25 years with Hearst and the P-I in a federally sanctioned joint-operating agreement (JOA), said they did not know if the report was true.

"I'm stunned," Times Publisher Frank Blethen said in a newsroom hallway, declining further comment.

But with both Seattle dailies and metropolitan newspapers across the nation in serious financial trouble, a P-I shutdown probably would help The Times' bottom line, several industry observers said.

"It would benefit The Times, because anybody who wants a newspaper would have no choice but to buy The Times," said Stephen Lacy, a Michigan State University journalism professor who has studied JOAs.

A P-I demise wouldn't solve all The Times' problems, he said, but "overall, I would suspect [The Times] would see economic gains."

KING reported that Hearst did not expect to find a buyer for the P-I, and that "Seattle will likely become a one-newspaper town within the next few months."

Hearst could make an announcement as soon as today, the television station said.

The U.S. Justice Department's Antitrust Division, which oversees newspaper JOAs, has required that newspapers involved in such arrangements demonstrate before closing that no one will buy them.

Putting the P-I up for sale now could avoid problems with the department later, Lacy said.

Under the Seattle JOA, The Times handles advertising, circulation and other business functions for both papers, but they maintain separate news and editorial operations. The Times gets 60 percent, Hearst 40 percent, of what remains after The Times is paid for the non-news costs of producing both newspapers

Until 2007, a clause in the JOA would have required The Times to pay Hearst 32 percent of its profit until 2083 if the P-I closed and left the Times with a monopoly. But Hearst agreed to drop that provision as part of the 2007 settlement to a four-year legal battle with The Times over the JOA's future.

In return, The Times paid Hearst $18 million.

P-I Managing Editor David McCumber said Thursday night he was surprised by KING's report "in the sense that I have no idea if it's true or not."

He also said "rumors of our demise have been exaggerated in the past."

Several P-I reporters, who asked not to be named, said they were worried and sad about the possibility of their paper closing.

But they also recognized the TV report had not been confirmed, said David Horsey, the P-I's Pulitzer Prize-winning editorial cartoonist. "My first reaction was I'm not sure KING TV knows what they're talking about," Horsey said.

The union that represents workers at the P-I and The Times said it had received no information about a sale or closure.

"Just about every newspaper in America is on life support right now. So while nothing would surprise me, we don't have any indication that an announcement about the sale or closure of the P-I is imminent," said Liz Brown, administrative officer for the Pacific Northwest Newspaper Guild.

Hearst also owns 11 daily papers, 28 TV stations, two radio stations, more than two dozen U.S. magazines and a large portfolio of cable and online investments.

It is a privately held company that does not disclose its finances, but has indicated its newspapers, like others, face financial difficulties.

Editor & Publisher magazine reported last month that incoming Hearst Newspapers President Steve Swartz had sent employees a memo hinting at possible cutbacks and plans for "100 Days of Change" beginning in early 2009.

"These are historically difficult times for our country and our industry, and our problems will likely worsen over the months ahead. Many companies in our industry find themselves saddled with far too much debt, and a painful restructuring process has just begun, with all the negative publicity that comes with that," the memo states.

"We at Hearst benefit from being such a strong and diversified company, but we haven't been spared the difficulties of a newspaper industry in the midst of a difficult transition. We've had to make some tough decisions over the past couple of years, and we'll have to make more before we've returned this division to a path of sustained profit growth, which we are committed to doing."

He later notes the "100 Days of Change" plan, but with few specifics.

Since The Times switched from afternoon to morning publication in 2000 to compete head-to-head with the P-I, the P-I's weekday circulation has dropped from nearly 200,000 to about 117,000. The Times' circulation has slid less dramatically, to about 198,000.

Declining advertising revenues have forced newspapers across the country to make deep cuts. But while The Seattle Times Co. has undergone several rounds of staff buyouts and layoffs to cut costs and put assets up for sale to raise capital to pay off debt, Hearst has said relatively little about the P-I's condition.

It has a hiring freeze, and has proposed a two-year contract with no pay increases in negotiations with the Newspaper Guild, whose P-I workers have been working without a contract since July 25.

Anne Bremner, co-chairwoman of the Committee for a Two-Newspaper Town, said she has no information about whether the P-I will be put up for sale but would be "stunned and sick about it" if the P-I closed. Her group fought for years to preserve the JOA between The Times and the P-I.

Bremner said the committee will explore its options if the P-I is put for sale, including examining any possible effort by Hearst to buy The Times.

Hearst has right of first refusal if The Times' majority owners, the Blethen family, decide to sell.

Seattle Times staff reporters Steve Miletich, Christine Clarridge, Jim Brunner, Emily Heffter, Sanjay Bhatt, Nick Perry and Carol Ostrom contributed to this report. Eric Pryne: 206-464-2231 or epryne@seattletimes.com