So the rumor of the Seattle Post-Intelligencer being up for sale was true. I expect Seattle’s days as a two newspaper city are numbered (and n is <= 60).
My assumption is the sales process is window-dressing by Hearst, who own the P-I. They don’t expect any bidders because of the terrible economic climate and the even worse prospects for newspapers. The one possible exception is the Seattle Times, their partner in the incestuous Joint Operating Agreement between the two papers. It may be that under the JOA, Hearst’s best strategy is to shutter the P-I in name or in practice and then collect a chunk of the Times’ revenue. Why go to the expense and trouble of printing a paper if you don’t have to?
The Times oversees all non-news aspects of publishing the P-I, including printing and delivery, under the agreement. The two papers share production and business costs, and divide the remaining revenues according to a formula that gives 60 percent to the Times and 40 percent to the P-I.
Depending on the terms, the Times will have to look at whether it is cheaper to buy out the P-I themselves or potentially pay Hearst a significant share of their (declining) revenues going forward. Any other bidder would be competing against this analysis as well.
The terms of the Joint Operating Agreement are of course secret (transparency is often a “do as I say, not as I do” kind of thing) so we don’t know what the actual revenue and/or profit sharing terms are or whether they survive if the P-I ceases operating (or just becomes a far smaller, web-only operation). They did announce in 2003 that the P-I gave up its claim to the Times’ future profits if the P-I were to close (imagine how different their aspirations were when those terms were originally negotiated):
The JOA agreement falls under the Newspaper Preservation Act, a federal law passed in 1970 intended to preserve newspaper competition. But the marriage between the P-I and the Times has been rocky. In 2003, The Times sought to dissolve the agreement, saying it was losing money. After a contentious legal battle, the Times backed down from the divorce.
In a settlement, the Times agreed to take no action to end the JOA until at least 2016. Meanwhile, Hearst gave up its right to receive 32 percent of the Times’ profits if the P-I were to close. In exchange, the Times paid Hearst $24 million.
It looks like Hearst may have a special card here in which case the Times has an economic boat anchor of General Motors proportions attached to its already challenged business model. The best indicator of whether Hearst has that card is if the Times makes a bid for the P-I (and their share of the JOA in particular) in early March.
I bet the TechFlash guys, no matter what challenges they face doing a startup in the current climate, feel better about their decision to leave the P-I and try to build something new.