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    Hearst may be remaking, not eliminating, The P-I

    It's clear the print P-I is a goner. But given Hearst advantages in e-paper technology and partnerships, an online P-I owned by Hearst is a distinct possibility.

    In the wake (pun intended) of Hearst’s announcement of the Seattle Post-Intelligencer’s demise, let’s deal with some realities.

    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.

    The numbers have shifted substantially, but the conclusion still works. According to the Newspaper Association of America, the industry’s trade group, print-ad revenue for U.S. papers dropped 18.2 percent to $34.54 billion in 2008, while their online ad revenue fell by 1 percent to $3.13 billion. At that rate, it would take more than a decade for print and online ad revenue to be equal. But those figures could change dramatically if a couple of things happen this year.

    First, print alternatives will have to disappear, leaving advertisers with no choice but an e-paper to reach a local mass market. In Seattle, that means The Times would have to stop publishing its print paper. The Times faces some grim realities of its own: its bankers are demanding payment on some $91 million or more in debt, its revenue stream is shrinking, and the cash it hoped for from the sale of its Maine papers and local real estate hasn’t happened. Times Co. CEO Frank Blethen says he was surprised by Hearst’s announcement, but his response was hardly a ringing promise that the Times wouldn’t dump its own print paper. “The Seattle Times has limited resources to ride out the recession,” Blethen said, while predicting that “long term, post-recession” “single metro newspapers/Web sites will still be viable businesses. Blethen also noted, without naming names, that several papers and newspaper chains “are in or are on the verge of bankruptcy.”

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    Posted Mon, Jan 12, 8:17 a.m. Inappropriate

    It would be nice to think that the P-I could survive and prosper solely online. It would seem extremely difficult if the Times continues both print and online editions. The Times strategy, it would be appear, is to
    hang in there through a difficult 2009, sell and/or borrow against whatever assets are necessary to the Times' near-term survival, and then move toward profitability as the city's only print daily.

    Is the Times too deeply in debt to get to profitability? When I think of Frank Blethen, I think of Ho Chi Minh. Just as Hanoi and the VC outlasted a powerful U.S. military establishment, so has Blethen, it turns out, outlasted powerful, N.Y.-based Hearst. I do not underestimate his determination to keep the Times alive and viable in Seattle and cannot imagine his giving up print until quite literally forced by the market to do so. Only time (and the Times) will tell.

    Posted Mon, Jan 12, 9:07 a.m. Inappropriate

    Lot of speculative questions here, but one basic one is do we know whether the PI would have to continue to share revenues with the Times if the paper continued to publish only online? Crosscut Seattle is also well positioned to answer the question of whether an online newspaper is a viable operation. I do not think it is. The Internet does not cough up enough ad revenue to maintain a full-scale newsroom, and I doubt it ever will. There may be more ads online these days, but online ad revenues are collapsing fast. Also online, the PI has none of the monopoly status in Seattle that it and the Times shared for the last 20 years, because there are many alternatives news available on the Internet, including Crosscut Seattle. I also do not believe Hearst any more has pockets deep enough to finance continued Web operations at a revenue loss. For these reasons, I think the PI is heading for newspaper heaven.

    Posted Mon, Jan 12, 5:23 p.m. Inappropriate

    If they really want a vibrant paper, have a conservative group like Fox buy it. It would be nice to have a DIFFERENT voice from The Seattle Times. The Times and PI have sounded like the same thing for too long. How about fair and balanced for a change?

    Posted Mon, Jan 12, 7:22 p.m. Inappropriate

    I have seen no comment about the paper that has already gone through this transition. The Capital Times in Madison, Wisconsin, separated from its dominant JOA partner The Wisconsin State Journal and went totally on line several months ago. I would like to hear Crosscut do a bit of hunting and find out just how successful that shift to an e-newspaper has been. Neither the P-I nor Times has discussed this actual experiment. Personally, I think people radically underestimate the deep esthetic attraction of the paper that is found on the front porch. Moreover, it would be interesting to hear some explanation about the successful existence of papers much smaller than the P-I. Why is it that places like Butte and Bozeman and Billings can sustain their small papers, but a paper with circulation of 120,000 cannot?


    Posted Mon, Jan 12, 7:59 p.m. Inappropriate

    Butte, Bozeman and Billings all have much higher market saturation than the P-i. Mid-size papers with higher penetration have much lower cost thresholds. They should continue to dominate their markets; especially when they have both strong print and online products.


    Posted Mon, Jan 12, 9:18 p.m. Inappropriate

    Where will the hard-nosed investigative journalistic work be done?-Especially the foreign news bureaus we hope will give us true understandiung of wars world-wide?-And also the local matters like dishonesty in Port of Seattle management?-Without the P-I, Chicago Tribune, NYTimes, et al?


    Posted Mon, Jan 12, 10:05 p.m. Inappropriate

    As I understand Mr. Richards' piece, his point is not just about an on-line paper (which the P-I and Times currently produce), but a totally new paperless presentation using a digital reader, perhaps on a plastic sheet that mimics a newspaper page by being thin, flexible, and potentially just as readable as a newsprint page. If this is where the technology is headed, then won't the current newsgathering, opinion stating, editing, and ad listings be directly transferable to the new medium? So perhaps we are witnessing a momentary, albeit, painful transition that once complete, will call for the same skills that many of the P-I's professionals now deliver. Missing from the picture will be the newsprint purveyors, press builders, printers, and door-to-door delivery people. That is sad in this economic environment, but a dislocation that many industries have experienced in recent years as technological innovation remakes modern global society.

    Posted Mon, Jan 12, 10:54 p.m. Inappropriate

    Only the nimble will survive. Here are some of the transitions that are occurring:

    Demographic: more online savvy, less bound to print. Old paper readers will die off. New online only kids will want everything online -- Xbox, TV, iPod, phone -- they don't care. But you won't catch them paying 75 cents for a paper.

    Advertising: Ads are moving rapidly online where it's cheaper for advertisers to buy and cheaper for creatives to produce.

    News outlets: Metastatic growth is occuring including blogs. Single sources are old fashioned. compare, for example Yahoo to Google. At least part of a news site's purpose is aggregation, filtering, and sorting. Crosscut does this fairly well by the way. Top ten lists are huge.

    News sources: Newspaper, wire and broadcast reporters used to hold an effective monopoly on the mediation of all news. Now we have many quasi-professional sources plus sources from around the world that compete with the local paper. Creating networks that are greater than the economic sums of their parts is the key to success, i.e., if more news contributors make more money when they band together, and the contributing newspapers and advertisers do to, then you have the proverbial win-win self re-inforcing ecosystem. Creating this news ecosystem is a big challenge and requires "coopetition," i.e., cooperation amongst competitors. Plus vision and seed money.

    Technology: Over time news reading technology will become less and less expensive, of higher quality and responsiveness, and will display integrated text and video in a way that will be objectively superior in all respects to paper as a medium. But who knows how long this will take? Five years? Ten years? Fifty years? The shrewd news operator needs to be cagey about these developments. It ain't easy. May be best to ride the investment of a major technological provider such as Yahoo, Microsoft, Google, Amazon or Sony. In creating Web sites, big technological innovators exist as well, including the big papers such as the NYTimes, Hearts and the WSJ. But big magazines broadcasters are also players. Likely, the space will become vertically integrated, so that the typical newspaper will build a newspaper ala carte, e.g.:

    online? yes, print? no,
    Kindle technology? no Microsoft technology? yes
    NYTimes News Network? yes FOX News Network? no
    Google Videos? yes MSNBC Videos? yes
    Craigslist Network? yes Autotrader Ads? yes Monster Jobs? no
    Google Search? no Yahoo Search yes?

    and on and on... Each niche will have competitors, and newspapers will become savvy at integrating and shopping and partnering with the various niche providers. In the same way that niche providers provide technology and raw news, teams of reporters may also provide investigative reporting and specialize through blogs, exclusive reportage, Washington Post Writers Gulags, etc.

    Nothing that I write above is really new. The point is that change is occurring at many levels at different rates in a way that is transforming the industry. Paying attention to the big picture, the big trends and the micro-trends must be done all at once. If you're a big paper like the Seattle Times, it's easy to let the Old World View distort reality. Same with Hearst and the P.I. It's also easy to let the New World View distort financial reality and over commit to the new in anticipation of a fairly quick return that may take decades to mature. The VideoText guys were right after all...

    By the way, Crosscut -- with the right financing and leadership -- has as good a chance of becoming a dominant player in the Seattle market as anyone. Because we're in the midst of the Oklahoma land rush, the end of the world as we know it, and the Flood, if cards are played terrifically almost anyone can become a dominant player (with the right news/tech/financial prowess). Hard to be good at all three, let alone just one.

    The well known news is that we live in interesting Times. Many newspapers will die in these Times. Out of their burned paper ashes will spring a new news industry, possibly including the intelligent design of the post-Post Intelligencer ...


    Posted Tue, Jan 13, 5:26 a.m. Inappropriate

    The Wall Street Journal requires a subscription for commenting. This likely is a component of the next phase of the 'dead tree' media. How much, is, of course, TBD.

    Posted Wed, Jan 14, 4:11 a.m. Inappropriate

    Agreed that online publication is the future of newspapers. But to think that the newspaper websites in their current form are a sufficient substitute for a print newspaper is premature.

    The current model with only a portion of the articles; with meaningless, useless, and off-topic comments; with no way to see an equivalent of a full-page ad; and so on will not be the product that replaces the traditional print newspaper.

    If this is the direction that Hearst and the P-I is going, I wish them luck. I hope they are at the forefront of the new generation of electronic news media. They will need, however, something much better than what they have now.


    Posted Wed, Jan 14, 5:20 p.m. Inappropriate

    What consumer actually wants to see the equivalent of a full-page ad?

    Speaking not of the future of journalism but the likely demise of the print edition of the P-I, I wonder if the last issue will be as big a seller as the Obama election issue, and if they will be selling front-page replicas of that, as well. I used to collect newspapers when I was a kid (fall of the Berlin Wall, beginning of Gulf War I, etc.) but gave that up a long time ago. On the one hand, I wouldn't mind having a copy of the last P-I; on the other hand, the folks at the regional branch of the Washington State Archives in Bellevue told me that newsprint is not only devilishly hard to preserve, it'll also do a number on anything you store with it.

    Posted Wed, Jan 14, 9:05 p.m. Inappropriate

    As you read my opinion for free I ask you to think about the monitary value of opinions based on observations of data and information gathered and reported by others. Now think about the Time grab for columnists a few years ago. Newspapers like the Times may be too top heavy, too much opinion that has had a fall in value by readers (right or wrong) that have an unlimited source of opinions. What has a value to readers at home feeding material for forming their own opinions, as well as the heads of newspaper version of talking heads, is nuts and bolt reporting.
    It is often where critic of the Internet, blogging, etc, point when showing a quality/value comparison, coupled with the training of the schooled trade.
    Popular names are not as valued as useful information. I think we will see a return to reporting to provide value to readers and I do not know if the Times is structured to meet that demand as is. Newspapers, in my opinion, evolved columnists in a medium response at a time when magazines were more popular and promoted longer form and reflective thought, and competition for people with those skills. Now they have to compete with the front page of google/news that has 20 headlines with a short paragraph if information, many short bursts of sourced information.
    The churn on the Times web page is pretty well keeping up with the pace. But that churn is reporting, and not the twice a week columns.
    I rambled, sorry, but I can't be fired.

    Mr Baker

    Posted Tue, Jan 20, 2:24 a.m. Inappropriate

    Opinions are too numerous and savourless, as more and more bloggers with worse spelling are just aggregating the work of journalistes. Also there is a mouthbreathing sort of late night doughnut run approach in the upper echelons of the newspaper industry nowadays.
    There isn't enough new information or stimulating story flow at these papers. Look at Hearst's ridiculous relationship with the bottom-feeding Media News Group.
    I just hope nobody cries when the television media no longer has the print media to piggy back on for important or even entertaining stories. Then the public will know nothing, and be ready for the new American oligarchy's next phase.

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