Someone very smart commented the other day on an earlier post that Seattle would become the first major zero-newspaper town — this year. In other words, the Seattle Post-Intelligencer would indeed close and so would The Seattle Times.
I think he's right.
In effectively closing the P-I, billion-dollar behemoth Hearst is merely cutting some losses [PDF]. Last year, it was $14 million, and this year was likely to be more. That suggests an even grimmer situation for the Times. If you unscientifically apply the joint operating agreement (JOA) formula for splitting profits — 40 percent for Hearst, 60 percent for the Times — to losses, you wind up with the Times losing something north of $22 million last year and losing much more in 2009. On top of that, the parent Seattle Times Co. is carrying a debt load of some $90 million for its 1997 purchase of three newspapers in Maine, which now are for sale and have a buyer that can't get a loan to consummate the deal. I'm not sure all the land on which sits the Seattle Times Co.'s six daily newspapers would be worth that much in today's real estate market.
And unlike Hearst, it appears that the Seattle-area Blethen family that controls 51 percent of the Seattle Times Co. does not have a significant cash reserve, if it has any at all. Their resources are all cash flow, and that flow is the color red.
So I agree with our friend that The Seattle Times soon will die, too. Even if you reorganize under bankruptcy law, what sort of products can you put out whose cost doesn't make the hole deeper still?
So let's imagine what Seattle will be like with no daily newspapers. What and who can fill the void?
To be continued ...
Clarification: My use of the 60-40 split to illustrate the kind of loss The Seattle Times might be incurring is just that — an illustration, a way of guestimating. It's not how it really works. And it's possible Hearst actually is getting a check from the Seattle Times Co. but it's woefully short of covering Hearst's news expenses. The companies don't disclose finances, so we don't really know what the case is.
Seattle Times Co. holdings
† Non-daily newspapers