Will Seattle Times publisher Frank Blethen pull the trigger on ending the joint operating agreement (JOA) with his hated editorial rival, the Hearst-owned Seattle Post-Intelligencer? Last September, highlighting his desire to solidify his control of the Seattle market, he privately told his staff that he would ["One-Paper Town?" Sandeep Kaushik, Oct 10]. Since then, he's hewed to the public line that he's considering the possibility but hasn't yet come to a decision.

Given the array of potential scenarios, it's possible--though unlikely--that Blethen may still decide it's in his interest to back down and keep the JOA as it is, preserving a two-daily town for now. The truth is, the asset-rich, cash-poor publisher now finds himself in a high-stakes game of strategic chicken with his buttoned-down, poker-faced, and rich rivals at the Hearst Corporation, whose privately held national media conglomerate dwarfs the Seattle Times Company. In 2001 alone, Hearst generated $5.2 billion in revenues and over $500 million in profits.

The JOA, implemented in 1983, allows the Times and P-I to share business functions while competing editorially. It runs through 2083, but since the Times has experienced three consecutive years of losses, Blethen has the contractual right to call for the closure of the P-I. If he does, and Hearst resists, Hearst will have 18 months before the JOA ends in order to position the P-I to survive on its own. Alternatively, if Hearst shutters the P-I, Hearst gets 32 percent of the Times' profits for the next 80 years. On its face, that seems a powerful incentive for Hearst to give in, especially given the current weakened state of the P-I.

But Hearst's money--and Blethen's lack of it--alters the strategic dynamic. Blethen is a local character whose obsession is preserving his family's control over the Times (he sports a Times eagle tattoo on his calf) in an era when major family-owned papers are anachronistic. He now has to decide whether it's better to risk all now--including his family's stake in the Times--in the hopes of killing off the P-I once and for all, or continue to live with an imperfect JOA despite the fact that he believes long-term consolidation trends threaten his dynasty.

Probably he'll move to end the JOA, since we know he has always hated the agreement. And in the short-term, at least, he has leverage to press Hearst to knuckle under. Right now, the P-I is in trouble, with an older readership and sharply dropping circulation. If Blethen ends the JOA, Hearst can't resist him without dumping tens of millions into the P-I to keep it going--likely having to build a new printing facility, for starters--while not knowing for sure that it can maintain a viable circulation.

Plus, Blethen knows that no regulatory white knight will ride in to save the P-I. The Department of Justice (DOJ) oversees JOAs. We already know Blethen spoke to the DOJ about his plans before he told his staff he intended to kill the agreement. And a source directly familiar with the DOJ's thinking recently told The Stranger that in vetting the revisions made to the Seattle JOA in 1999--when the Times switched to morning publication--DOJ lawyers understood that it might lead to the shuttering of the P-I. They will accept whatever happens, the source said, adding that the DOJ believes Blethen will dissolve the agreement.

But if Blethen does kill the JOA, it's no sure thing he'll come out on top when the dust clears. For one thing, Hearst is gunning for a Seattle television station, which could immediately bolster a post-JOA P-I. Fisher Communications, which owns ABC affiliate KOMO TV in Seattle, is up for sale, and Fisher has previously acknowledged that Hearst "covets" KOMO. Last July, Hearst CEO Victor Ganzi, in a rare BusinessWeek interview, made no bones about his intent to buy TV stations in the markets where Hearst owns newspapers, a tactic that all but assures lucrative advertising synergies. Such newspaper-TV cross-ownership is technically banned, though the Federal Communications Commission is expected to eliminate the rule later this year, and other companies--most notably the Tribune Company in Chicago--have already found ways around it.

This prospect obviously scares Blethen. An oddly personal editorial in the January 10 Times defended the ban on cross-ownership, asserted the value of having strong personalities owning media outlets, and called on the government to "see it is not rigging the game against individual owners." If Hearst does get KOMO--no sure thing--Blethen may suddenly find he loves the JOA, since it would keep Hearst from exploiting the cross-ownership's potential.

Another consideration is that moving against the JOA will likely provoke a lawsuit. Hearst could try arguing that the Times' 2002 loss--which enables Blethen to end the JOA--was deliberate; the Times hired 71 news staffers last year in a down economy.

Worst of all for Blethen, Hearst is acting as if it will continue to publish the P-I even if the JOA ends. It would be expensive, but Hearst can afford it, and it makes sense if Hearst believes that further Times losses will eventually drive Blethen to sell out. In 1999, Hearst gained first right to buy the Times if he does.

According to a January 11 story by new Times freelancer Bill Richards--hired to cover the JOA--the Times was in noncompliance on its loans into 2002, and Blethen feared he would be forced to sell out then. Though that didn't happen, it is not clear how long Blethen can sustain further losses before once again finding himself in financial trouble. That is Hearst's biggest incentive to keep the P-I alive no matter how much it costs--at least until Blethen cries uncle. It wants--and intends--to consolidate the Seattle market itself, and, if it can drive Blethen under, it will buy the Times (and shut the P-I).

Blethen, then, faces a difficult strategic choice. He could keep the JOA, though he fears the long-term trend toward media consolidation will overwhelm him. Or he could end the JOA now, which will likely spell doom for the P-I sooner or later, though he can't be sure he'll still be in control of the Times when the P-I goes under. That's what he meant when he said last November on PBS, "Seattle can't support two morning newspapers. The question is, when will the market go to one paper and who will own it?"