From Crosscut.com

Hearst May Be Remaking, Not Eliminating the Seattle P-I

By Courtney Lowery, 1-12-09

	Hundreds of reporters at the Democratic Convention in Denver published only on the internet.

Word broke over the weekend that Hearst was putting the Seattle P-I up for sale. Bill Richards at Crosscut.com in Seattle today looks at some of the possibilities for the paper. And no, closing it down isn’t the only option. Here are a few “realities,” as Richards puts it:

No one is going to buy The P-I. Six years ago, Hearst’s then-chief executive Victor Ganzi wrote himself a note after a day of negotiating with Seattle Times Co. executives. Ganzi’s blunt assessment of his own paper, which came to light in court documents during the Joint Operating Agreement fight between Hearst and the Seattle Times Co: a “failing newspaper — in ’81, in ’99, and now and future.” Ganzi lost his job last year during some top-level Hearst in-fighting, but his assessment stands solid. The P-I is the second paper in a city that won’t support two dailies; it hasn’t made a profit in eight years, and, after the globe on top of its rented headquarters on Elliott Bay, there’s nothing to sell. When Hearst put The P-I up for sale in 2004 as a legal maneuver, the offering prospectus gave those who read it a chuckle. Nobody offered to buy then, and they certainly won’t now.

Hearst isn’t killing the print P-I just because the paper lost $14 million last year. Less than two years ago, Hearst renewed its agreement to pay the Blethens $10 million just for rights to buy the family’s 50.5 percent Times Co. stake. It spent several million more fighting The Times from 2003 to 2007 to keep The P-I going. And it got $24 million from The Times in 2007 because Times Publisher Frank Blethen made a strategic mistake and thought he could run the New York-based Hearst out of town. Is Hearst on the financial ropes? Well, it paid $500 million, in cash, for its new Manhattan headquarters in 2006. And last year it reported record cash flow for 15 of its last 16 years.

Hearst has given up on making newspapers profitable. It was no coincidence that Lincoln Millstein, Hearst’s senior vice president for digital media, was standing alongside Hearst Newspapers President Steve Swartz in The P-I newsroom Friday. Millstein and Swartz engineered the newspaper industry’s alliance with Yahoo, a move that gives Hearst and other media companies access to Yahoo’s online employment, search, and ad operations. He also helped set up the online sales network, quadrantONE and he is behind the alliance between Hearst and ten other media outfits and Seattle’s Zillow online real estate site. Anyone see a strategy emerging here? Hearst dumps its print paper, in part because much of The P-I’s classifieds have migrated online, but forges a bunch of alliances with Web-based classified outfits so they can be integrated into a new e-paper and recapture some of that lost revenue.

An online P-I might make money for Hearst. Here’s where we veer off into speculation — but backed by some interesting data. Loyal Crosscut readers will recall we ran a projection a little over a year ago showing how an electronic paper might already be profitable. We created an imaginary paper, the Bugle-Interrogator, that was just about the P-I’s size (100,000 daily circulation) and using industry data we calculated killing the B-I’s print paper would save more than half its annual expenses. We also figured online ad revenue would arc upwards without a print option for advertisers, making an online B-I profitable.

Click here for the rest of the story at Crosscut.com.

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