New Hearst, Times JOA hints at future P-I tabloid

The new joint-operating agreement (JOA) between The Seattle Times Co. and The Hearst Corp., unveiled Tuesday, include hints that Hearst's Seattle Post-Intelligencer could switch to a tabloid format.

P-I Publisher Roger Oglesby said Tuesday that such a change "has been discussed at the P-I quite a bit over the past few years." It would serve to differentiate the smaller P-I from The Times, he said.

Oglesby said he didn't know whether a tabloid P-I would increase combined revenues for the two newspapers, but "it's certainly something worth talking about."

The new JOA was signed Sunday, ending a four-year-old legal dispute between the two companies that was to have gone Monday to binding arbitration — a private, closed-door trial with no appeal.

The old JOA said The Times couldn't change the P-I to a tabloid without Hearst's permission. The new JOA also includes that prohibition, but adds this:

"Hearst may at its discretion choose to move the P-I to a tabloid format. In such event, Times and Hearst shall agree upon such production, marketing, circulation and advertising accommodations and adjustments as shall be reasonably necessary or appropriate to effectuate the P-I's change in format."

The new JOA also includes, for the first time, language that says Hearst could allow The Times to sell subscriptions and single copies of the P-I for a different price than The Times. Tabloids often sell for less than "broadsheet" newspapers.

Rick Edmonds, a media-business analyst at the Poynter Institute, a Florida journalism think tank, said a tabloid P-I could be successful. "There's a lot of evidence that tabloids are liked by readers," he said.

In addition to the tabloid language, the new contract includes numerous concessions by The Times aimed at boosting the smaller P-I and giving Hearst a bigger voice in decisions affecting the papers.

Some of the changes were revealed in highlights the companies released Monday, including a commitment by The Times not to move to terminate the JOA, and perhaps kill the P-I, until 2016.

Others had not been reported before. The new contract, for instance, gives Hearst veto power over proposed increases in the minimum space allocated for news in both papers — previously The Times' exclusive domain.

Times spokeswoman Jill Mackie said the contract has been submitted to the U.S. Justice Department, which oversees newspaper JOAs. She said the deal will take effect sometime in the next few months.

Under the JOAs that have linked the P-I and Times since 1983, the papers maintain separate news operations, but The Times handles the business side for both. In return it gets 60 percent of what remains after it is compensated for the production, advertising, circulation and other non-news costs of producing both papers.

The Times sparked the legal fight in 2003, when it moved to trigger an escape clause in the contract that would have required Hearst to close the P-I, the end of the JOA, or both. Hearst said the P-I couldn't survive outside the JOA; it sued to block The Times' bid.

The new JOA settled all those claims. In it, Hearst gives up its right under the old contract to collect 32 percent of The Times' profits until 2083 if the P-I closes and The Times becomes Seattle's only daily.

But almost every other concession comes from The Times, which also is paying Hearst $24 million. And the new agreement continues many provisions, including the 60-40 profit split that Times Publisher Frank Blethen had said repeatedly was threatening his newspaper's profitability and continued family ownership.

Hearst also retains a right of first refusal should the Blethens seek to sell The Times, Mackie said.

When asked Monday what his company was getting from the deal, Blethen said that concluding the expensive legal struggle was the principal benefit.

Still, many observers continued to speculate Tuesday on what else might have motivated The Times to accept the deal.

Some suspect Hearst might have had a "smoking gun" to present at the arbitration hearing: testimony from Stephen Sparks, a former Times vice president.

According to a story earlier this month on the news Web site Crosscut.com, Sparks said in depositions that The Times had favored its own paper in circulation efforts and had tricked Hearst into allowing The Times to move from the afternoon to the morning publishing slot in 1999.

But Sparks was not on the witness list for the hearing, according to a source involved in the closed-door proceedings. That raises questions about how central his testimony was to Hearst's case.

Many of the Times concessions in the new JOA appear to respond to arguments Hearst made during the legal fight about alleged favoritism by The Times toward its own newspaper, or expenses unfairly charged partly to Hearst.

Among the changes, the new JOA:

• Requires, for the first 18 months after the agreement takes effect, that The Times ensure the P-I gets at least 40 percent of new Seattle-area subscriptions for both papers that are solicited through telemarketing, door-to-door marketing and similar efforts. Other benchmarks are established for later years.

Times spokeswoman Mackie said the 40 percent target isn't far from what's already being achieved.

• Prohibits The Times from using any revenue generated by the P-I toward the training and development expenses for Blethen family members involved with the paper who now are in their 20s and 30s.

• Limits annual cash compensation to any Times employee working primarily for the two-newspaper "agency" to $2 million from agency coffers. When asked if that would affect the salaries of Publisher Blethen or other executives, Mackie said The Times doesn't comment on compensation.

Other provisions allow the papers to embark on other business ventures, including "niche" publications, without sharing revenue, and require binding arbitration for future disputes between the companies.

But Kathy George, an attorney for the Committee for a Two-Newspaper Town, said the new JOA appears to allow Hearst and The Times to keep those arbitration proceedings completely secret — not disclosing their existence or their outcome.

Mackie had no immediate comment. Oglesby said he wasn't familiar with the details.

He also declined comment when asked how serious Hearst is about a tabloid future for the P-I.

Poynter's Edmonds said tabloids don't always fit their sensational stereotype. "Tabloid does not necessarily mean New York Post screaming headlines," he said, pointing to more restrained, generally admired publications such as New York's Newsday and Denver's Rocky Mountain News.

Tabloids use less newsprint, he said, and because they often rely more on street sales, can cost less to deliver.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com