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Hearst threatened "most expensive" fight, says Times' publisher

By BILL RICHARDS
Special to The Seattle Times

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Blethen said a lawsuit Hearst filed last year was part of a strategy the New York-based media company developed after The Times and Hearst, owner of the Seattle Post-Intelligencer, revised their JOA in 1999.

That change gave The Times the right to move from afternoon publication to compete head to head with the P-I in the morning. In return, Hearst gained a larger share of the profits from the JOA and, in a separate deal, the first rights to buy the Blethen family's 50.5 percent ownership stake in The Times.

Blethen's letter, sent to the Pacific Northwest Newspaper Guild yesterday, said Hearst Chief Executive Victor Ganzi warned him an expensive lawsuit would "drive the value out of the business," forcing the Blethens to sell The Times to Hearst.

The letter asserted the alleged warning came "in our futile attempts to renegotiate the economics [of the JOA] with Hearst." Times spokeswoman Kerry Coughlin said yesterday the threat was made in a phone conversation between Blethen and Ganzi early last year.

"Never said that"

A Hearst spokesman, Paul Luthringer, said the allegation wasn't true. "Ganzi never said that," he said.

He called Blethen's other allegations in the letter to the union "old news" and said it was The Times, not Hearst, seeking to turn Seattle into a one-paper town.

Hearst has said it has offered The Times more than $50 million as "an upfront inducement payment" and a reduction of Hearst's 40 percent share of JOA profits if The Times drops efforts that could lead to the P-I's closure.

"Those proposals were rejected by Mr. Blethen, and he was unwilling to alter his primary strategic of forcing the P-I out of business," Luthringer said.

But Luthringer declined to say what else The Times would have to give up for the deal.
 
Times officials have contended the proposed deal contained unacceptable strings. Coughlin said that under the offer, Hearst would have been able to recoup most of its investment and also gain control of Times.

Since 1983, the two papers have operated under a JOA in which The Times handles business functions of the two papers while each maintains separate news and editorial operations.

Hearst sued The Times in April 2003, after Blethen had declared his intention to force negotiations under the JOA that could either shut down one paper or end the agreement. Hearst's suit seeks to block such a move, which it said would kill the P-I in either case.

The lawsuit came the day before Blethen notified Hearst that under a JOA formula The Times had lost money in 2000, 2001 and 2002, triggering the showdown.

Last September, King County Superior Court Judge Greg Canova ruled in favor of Hearst's challenge to the validity of The Times' first two years of loss claims. A three-judge Appeals Court panel unanimously upheld The Times' appeal in March.

Decision pending

Both sides are awaiting a decision by the state Supreme Court on whether to hear the case.

Both sides have agreed that the P-I could continue publishing while the case moves through the courts, a process legal experts say could stretch well into 2007.

Blethen's letter to the Pacific Northwest Newspaper Guild, which represents circulation, advertising and news employees at The Times and P-I, came in response to a union request in June for written suggestions on "How can the JOA conflict be resolved?"

The union said P-I Publisher Roger Oglesby declined the request, citing the litigation.

In his response, Blethen reiterated his charges that Hearst was using its lawsuit to "bleed" The Times and squeeze its owners financially. In addition to the Blethens' stake, the remainder of The Times stock is owned by Knight Ridder, the San Jose, Calif.-based media conglomerate.

Blethen called on union members from both papers to speak up in support of The Times.

A Guild spokeswoman said the union's executive committee would discuss Blethen's letter. She declined further comment.

Bill Richards is a freelance writer hired on a special contract by The Seattle Times to cover events involving the joint operating agreement with the Seattle Post-Intelligencer. He can be reached at brichards@seattletimes.com.