Agreement reached between Seattle Times and Hearst Corporation

In an agreement that will allow both of Seattle's daily newspapers to continue publishing for now, The Seattle Times Co. and The Hearst Corp., which owns the Seattle Post-Intelligencer, announced today that they have settled a four-year legal battle over their joint-operating agreement (JOA).

But the few details that were released left many observers scratching their heads about what the settlement means to both papers.

What is known: The Times will pay Hearst $24 million and Hearst is giving up its right to collect 32 percent of The Times' profits if the P-I ever closes.

The Times has agreed not to trigger until at least 2016 an escape clause in the JOA that could force Hearst to close the P-I, terminate the JOA or both. The Times has maintained for years that publishing both papers is an economic drain that threatens its future and its local ownership.

In the meantime, the papers will continue to operate under the existing financial provisions of the agreement, under which the Times receives 60 percent of revenue and the P-I 40 percent.

Frank Blethen, publisher and chief executive of The Seattle Times, said at a news conference this morning that the settlement "is very good news for us" and gives the Blethen family its best chance of extending 100 years of family ownership of the paper.

"We are happy to have found common ground," Blethen said. "Both newspapers were at risk due to the dramatic erosion of the newspaper revenue model in this decade. Now we can each focus on publishing newspapers that are relevant to our community while we work at adjusting the old business model to the new realities."

Still, Blethen made it clear he questions whether the existing JOA agreement can ever again be successful, with newspaper advertising continuing to drain away to other media, particularly the Internet.

"I'm still very skeptical it'll work," Blethen said. "I don't know if newspapers will survive, period."

He said he did not think it likely that the existing JOA model would be a "permanent solution."

But he said that shelving the long-running legal dispute with Hearst removes uncertainty and large expenses for both papers and gives them an opportunity to restore a JOA operation that worked for both papers for its first 17 years.

Despite his skepticism about the viability of the agreement in the long run, Blethen said, "My guess is that we'll have two newspapers longer than just about any other city."

Word of the settlement came minutes before a binding-arbitration hearing to settle the dispute was to begin.

Hearst spokesman Paul Luthringer said the full settlement agreement would be filed with the U.S. Justice Department, which oversees newspaper JOAs, but he didn't say when.

"It's a new day for the P-I," he said. The legal fight could have resulted in the Hearst paper being closed.

Under the JOA, which took effect in 1983, The Times and P-I maintain separate, competing news operations, but The Times handles the business and circulation operations for both. In return, it gets 60 percent and Hearst 40 percent of what remains after The Times is compensated for the non-news expense of producing both newspapers.

That provision remains in force, Luthringer and Times spokeswoman Jill Mackie said.

Mackie said both sides made concessions. "We've found common ground that works for both parties," she said. "The economics of this deal is something that came together in a way that satisfied the concerns of both parties."

When asked if The Times would continue to lose money under the arrangement, she responded: "We will make every effort to continue to look for new opportunities for revenue."

Luthringer said the settlement agreement includes provisions intended to boost P-I circulation, including:

Greater protection for P-I subscription sales.

A Times circulation executive devoted exclusively to P-I circulation.

Greater P-I control of its own promotion.

Repainting of trucks to display the names of both newspapers. They now feature only The Times' name.

The Times' average weekday circulation is about 212,000, the P-I's about 126,000.

Luthringer said Hearst's decision to give up the 32 percent profit stream if The Times becomes the city's only paper is significant. "We believe now no one can say Hearst has an interest in seeing the P-I fold," he said.

The dispute between the companies began in 2003, when The Times notified Hearst it had lost money under the JOA formula in 2000, 2001 and 2002. Under the contract, that required Hearst to either move to close the P-I — after which it would get 32 percent of The Times' profits — or terminate the JOA.

Hearst said either option was a death sentence for the P-I and filed a lawsuit challenging the Times' "loss notice." After three years of courtroom battles and negotiation, the companies agreed a year ago to submit the dispute to binding arbitration.

The mood of the Seattle P-I newsroom was one of "relief and elation" because the agreement appears to solidify the P-I's future until 2016, said political reporter Neil Modie. "Everybody seems pretty giddy."

The newsroom was alerted to the agreement by an e-mail from P-I publisher Roger Oglesby at 8:31 a.m., headlined, "You'll want to read this."

"Seattle is going to remain a two-newspaper town," Oglesby wrote, promising more details after a 10 a.m. newsroom meeting.

Kathy George, attorney for the Committee for a Two-Newspaper Town, a citizens group that has tried to intervene in the dispute, said the agreement appears to achieve the committee's primary goal: keeping both papers alive.

"My initial reaction is that this is good news," said George, a former P-I reporter and editor. "These two companies have agreed to keep the joint-operating agreement going and maintain two independent newspapers in Seattle. That's been our goal all along."