Anybody who keeps an eye on the media these days knows that newspapers are no longer the financial honey pots they used to be. In the old days – say, 2004 – newspaper annual profits averaged a towering 25 percent, enough to make most other business owners drool. But if that was sublime for the newspaper industry, here's the ridiculous. Last month, in its annual federal securities filing, McClatchy Co. of Sacramento, which owns 49.5 percent of Seattle Times Co. voting stock, valued that stake as of last June at $102.2 million. That's about $184 million less than the $286 million Knight Ridder's appraiser, Morgan Stanley, said the said the same share was worth in late 2005, before Knight Ridder sold itself to McClatchy. Same assets. Same time frame. Big difference. Perhaps the Seattle Times Co. just looked a whole lot bigger to Knight Ridder, the seller, than it did to McClatchy, the buyer. Or perhaps it really has lost value. McClatchy paid $6.2 billion in cash and debt assumption for all of Knight Ridder, which was then the nation's second-biggest newspaper chain, last June. A senior McClatchy financial officer, who declined to be named, says the $102.2 million valuation of the Seattle Times Co. stake was what the Sacramento-based company actually paid Knight Ridder for it. Knight Ridder has been dissolved, so there's no one to comment on that company's far-higher determination of the value of The Seattle Times and five other daily Seattle Times Co. newspapers. Fascinating. But what does it have to do with the Times today? Since the Times Co. is privately owned, it doesn't have to disclose financial information. But there are hints that the street value of the company has been plummeting faster than that of newspapers generally. For example, McClatchy sold the Minneapolis Star-Tribune in December for $530 million – less than half the $1.2 billion purchase price eight years earlier. That shocked media analysts. Nine years ago, the Seattle Times Co. paid more for a handful of papers in Maine than McClatchy's current valuation for all of the company today. The privately held Times Co. owns The Seattle Times, the Yakima Herald-Republic, the Walla Walla Union-Bulletin, and, in Maine, the Portland Press-Herald and Sunday Maine Telegram, the Kennebec Journal in Augusta, and the Morning Sentinel in Waterville – plus weeklies, Web sites, real estate, and Rotary Offset Press in Kent, Wash. In other words, the Seattle-area Blethen family, which controls 50.5 percent of the Seattle Times Co., might be watching the family's chief asset shrink fast. That would put pressure on their negotiators when a private arbitration with Hearst, which owns the smaller and struggling Seattle Post-Intelligencer, begins next Monday, April 9. (Update 4/6/2007: The proceeding has been postponed until April 16.) Hearst has sued the Times Co. over the two companies' federally sanctioned joint operation, which the Times Co. manages. This binding arbitration is supposed to settle the matter. McClatchy is under pressure itself. It has been shedding papers to pay down the enormous debt it took on for the Knight Ridder acquisition. Still, its shareholders – including some who forced the Knight Ridder sale – aren't happy. McClatchy's stock hit a 52-week low on Monday, April 2. Its holding in the Seattle Times Co., over which it has no control, doesn't come near the profit margin McClatchy receives from other newspaper properties. "McClatchy's valuation of its minority share in The Seattle Times has nothing to do with our arbitration with Hearst," says Times Co. spokeswoman Jill Mackie. "This is not a reflection of the valuation of the entire company. It's a valuation made by a minority shareholder; 49.5 percent times two doesn't equal the whole." True, "Minority owners have no control of a company, and their stake is often worth less than majority ownership," says a McClatchy official. McClatchy's Securities and Exchange Commission filing was, she says, "based on the valuation our auditors found appropriate for the purchase price." Perhaps the minority valuation itself isn't important, but if it indicates the Blethens' Seattle Times Co. stake, too, is shrinking fast, much-larger Hearst might have more leverage to pry additional concessions out of the cash-strapped Blethens. The Seattle Times Co. could be facing additional distractions from lenders. A consortium of bankers led by Citicorp holds the note on the $200 million-plus purchase of the Maine papers in 1998. They have twice slapped technical defaults on the Seattle Times Co. for failing to meet the note's cash requirements. In an interview last August with the Media Giraffe Project, part of the journalism program at the University of Massachusetts at Amherst, Times Publisher Frank Blethen called 2005 his company's "financial low point." The Times Co. used some $15 million it got from selling six acres near its downtown Seattle headquarters in 2005 to pay down some of the Maine debt and fend off lenders. But Citicorp and the others are sure to be paying attention to the arbitration with Hearst. Through a Times spokesperson, Blethen declined to be interviewed for this article. A few years ago, Hearst seemed quite interested in acquiring the Blethens' majority share of Seattle Times Co. voting stock. Hearst began paying the Blethens $1 million a year in 2000 for the right of first refusal, should they want to sell. Meanwhile, Hearst has spent millions in legal fees fighting efforts by the Times Co. to kill the print edition of the P-I and end the papers' joint operating agreement. It seemed like ink was important to Hearst. But now Hearst seems more focused on the P-I's Web site. Nationwide, online advertising revenue is growing and print revenue is flat or declining. Under the rules of next week's arbitration, Hearst could continue to operate the site even if arbitrator Larry Jordan rules for the Times Co. and ends the JOA. With pockets deep enough to afford experimentation, Hearst has said it will join an international publishing consortium that plans to test a prototype of a cheap digital screen this year. The screen can be rolled up and put in a reader's pocket. In February, Hearst said it had paired with Microsoft to develop software called News Reader that could be used on such flexible computer hardware. The P-I, Hearst said, will be the project's first test bed.