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Originally published February 5, 2009 at 12:00 AM | Page modified February 5, 2009 at 9:02 AM

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Hearst forfeits right to bid for The Seattle Times first

The Hearst Corp. has forfeited its right to buy The Seattle Times if the newspaper ever is put up for sale. In a letter Wednesday to the...

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The Hearst Corp. has forfeited its right to buy The Seattle Times if the newspaper ever is put up for sale.

In a letter Wednesday to the Committee for a Two-Newspaper Town, Hearst Vice President and General Counsel Eve Burton revealed the company had not made a $1 million payment to the Blethen Corp., The Times' majority owners, that was due Feb. 1.

Under terms of a "right of first purchase" agreement Blethen and Hearst signed in 1999, Hearst's nonpayment means the arrangement is dead. Otherwise, it could have remained in effect until 2083.

When Hearst announced last month it was putting its Seattle Post-Intelligencer up for sale and intended to stop publishing the newspaper if no buyer emerged, executives also said Hearst had no interest in buying the larger Times.

Burton's letter reinforced that lack of interest and appeared to clear up lingering questions about Hearst's intentions. Hearst had made 10 annual payments of $1 million each for the right to have first claim on The Times; this year's payment was to have been the last.

In her letter, Burton also said Hearst had not yet made a decision about whether to continue the P-I as an online-only publication with a greatly reduced staff — a possibility the company held out last month.

But if the P-I does live on via the Web, Burton added, it would be outside the joint-operating agreement (JOA) that has linked the two newspapers since 1983.

That statement raised a host of questions, including: • Does the JOA allow the P-I to publish independently online?

• If not, can Hearst get out of the contract?

• How much say does The Times have, and what does it want?

A Times spokeswoman declined to comment Wednesday, and a Hearst spokesman did not respond to e-mailed questions.

"We don't know if either party wants the JOA to continue," said Kathy George, attorney for the Committee for a Two-Newspaper Town. "We don't know what discussions they've already had."

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Hearst has notified employees and the state that, if no buyer is found, it intends to stop publishing the newspaper this spring, perhaps as soon as March 18. But the JOA does not provide for unilateral termination of the contract on such short notice, even if the P-I stops publishing.

That alone suggests discussions between the two companies are likely, if they haven't started already.

Liz Brown, administrative officer of the Pacific Northwest Newspaper Guild, which represents employees at both papers, said Hearst officials have told her the company has a team of lawyers researching how to end the JOA.

She and George agreed The Times Co. almost certainly would not want a continued P-I presence online outside the JOA. But, after waging an expensive, four-year legal fight over the JOA that was settled less than two years ago, neither company is likely to want to litigate, Brown said.

Under the JOA, the papers maintain separate news operations — print and online — but The Times handles the business side — again, print and online — for both.

In return, it gets 60 percent and Hearst 40 percent of whatever remains after The Times is compensated for production, advertising, circulation and other non-news expenses of producing both papers.

If revenues don't cover the non-news expenses, however, the companies also split any shortfall 60-40. Several sources indicated that, for the first time, that scenario appears likely this year.

Both papers have been losing money all decade. When it put the P-I up for sale, Hearst said the paper lost $14 million last year and was forecast to lose even more this year.

Meanwhile, The Times Co. has begun discussions with representatives of its employee unions to seek ways to deal with the financial problems it faces. In a memo to staff Wednesday, the company said it is asking each employee group to help save the equivalent of 12 percent of each group's pay and benefit costs.

And the Committee for a Two-Newspaper Town, whose goal is synonymous with its name, called on the community to consider a campaign to buy the P-I. "Time is running out," said Anne Bremner, co-chairwoman.

When Hearst put the paper up for sale Jan. 9, it said a buyer needed to be found within 60 days.

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

Copyright © 2009 The Seattle Times Company

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