New limits put on Seattle Times in amended JOA

By DAN RICHMAN
P-I REPORTER

Seattle Times Co. Chief Executive Frank Blethen can't pay for his extended family's twice-annual meetings from the joint revenues of Seattle's daily newspapers, under a new pact that on Monday unexpectedly settled Seattle's long-running newspaper dispute.

That revised joint operating agreement, or JOA, also limits how much salary can be paid to top Times Co. executives out of the papers' joint account. And it forbids charging to the joint operation the costs associated with running other Times Co. operations, such as its newspapers in Maine.

Those accounting restrictions are among several provisions in a 53-page agreement that imposes new limits and requirements on The Times Co.

The Hearst Corp., which owns the Seattle P-I, has long alleged that improper expense allocation by The Times Co. contributed to the Times' JOA losses between 2000 and 2005.

The Times Co. has maintained since 1983 that those losses made it impossible to stay in the papers' joint operating agreement, or JOA. Hearst says the JOA is essential to keeping the P-I alive.

The new agreement doesn't say The Times Co. wrongly charged any expenses to the joint operation. And because the settlement avoided arbitration that was set to begin Monday, whether the company did so won't be revealed.

Seattle P-I Editor and Publisher Roger Oglesby declined to comment on the new language because he said it was related to the confidential arbitration. Times Co. spokeswoman Jill Mackie would say only, "The document speaks for itself."

The agreement's new language:

Limits to $2 million a year the cash compensation that can be charged as a joint expense by any Times employee working mainly to assist the JOA.

Limits to 90 percent of their annual compensation the money that can be treated as a joint expense by top Times Co. officers who mainly assist the JOA.

It also forbids charging as agency expense:

The cost of travel, and general and administrative costs, incurred by Times Co. personnel working on behalf of The Times Co.'s other operations. Those include a printing plant in Kent and newspapers in Issaquah, Walla Walla, Yakima and Maine.

The costs, including travel, related to the training and development of Blethen family members, specifically including their twice-annual meetings.

The fees and expenses of members of The Times Co.'s board of directors.

The alternative to charging expenses to the joint operation is to treat them as a Times Co. corporate expense. That way, the expenses don't deplete the pool of money that determines whether The Times Co. suffered a JOA loss.

In other provisions, the new JOA agreement says that Hearst may choose to move the P-I to the smaller tabloid size and that The Times Co. must accommodate that move through changes in production, marketing, circulation and advertising.

In contrast, the prior version of the JOA, from 1999, says only that the Times can't change the P-I's format without Hearst's permission. That language remains part of the new agreement.

The P-I's Oglesby said that the paper might move to the tabloid format but that no plans are in place.

"Here at the P-I, we have talked quite a bit about the tabloid format for three to four years," Oglesby said. "It's very attractive to readers, and there are a lot of experts in the country who think it's the way to go."

The new document also says for the first time that The Times Co. will use "reasonable best efforts" to make sure the P-I gets at least 40 percent of all the new, non-customer-initiated home-delivery subscriptions during an 18-month period. That period will start when The Times Co. makes a $24 million payment to Hearst, as it has agreed to do.

The Times Co. will finance that payment and pay it "within the next few months," spokeswoman Mackie said. The payment date marks the new JOA's so-called effective date.

After that 18-month period, the proportion of those subscription sales -- which are generated through telemarketers, door-to-door salespeople, kiosks and direct mail -- that the P-I must get is mandated by a complex formula.

During a staff meeting Monday, Oglesby characterized this provision as "improved protections for the P-I regarding subscription sales."

Overall, the new JOA "seems a valiant peacekeeping effort to keep the P-I alive," said Stephen Barnett, an emeritus professor of antitrust law at the University of California-Berkeley, who reviewed the agreement at the P-I's request Tuesday.

"But the Times inevitably has a conflict between propping up the P-I under this agreement and letting the P-I expire so that the Times can have it all. The 'termination in 2083' phrase seems wildly optimistic because of that built-in conflict."

P-I reporter Dan Richman can be reached at 206-448-8032 or danrichman@seattlepi.com.

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