updated 4/16/2007 8:44:12 PM ET 2007-04-17T00:44:12

Seattle’s two daily newspapers have agreed to settle a legal dispute that threatened to close the Seattle Post-Intelligencer, erasing a cloud that has hung over the city’s journalism industry for the past four years.

The Seattle Times Co. and Hearst Corp., which publishes the P-I, announced the settlement in separate statements. The two had been headed for binding, closed-door arbitration to settle disagreements over their joint operating agreement, which The Times contended was no longer financially viable.

“It’s a new beginning for the P-I,” said Hearst spokesman Paul Luthringer.

Under the agreement, which took effect in 1983 to save the P-I, The Times handles printing, circulation and advertising for both papers, and keeps 60 percent of their joint profits.

Hearst will pay The Times $25 million in exchange for not seeking to end the agreement before 2016. The Times, meanwhile, will pay Hearst $49 million to settle the litigation and buy Hearst’s right to collect 32 percent of The Times’ profits through 2083 if the P-I closes — “Now no one can argue that Hearst might have a financial interest in seeing the P-I fold,” Luthringer said.

Even though the settlement requires The Times to pay a net $24 million to maintain an arrangement that its officials have long criticized, Times Chief Executive and Publisher Frank Blethen called the deal “very good news for us.”

“It gives us a longer period of time to see if we can make this model work,” Blethen told a news conference. “The huge $64 question for all of us is, are newspapers going to survive? ... I’m still very skeptical that it will work.”

Gene Balk, a Times news researcher and the newspaper’s unit chairman for the Pacific Northwest Newspaper Guild, said staffers were struggling to understand what effect the deal would have on The Times.

“We’ve been operating under this assumption that we can’t really survive under the JOA,” he said. “Now, we are going to be operating under the JOA still, so it does raise a lot of questions.”

Blethen noted that the deal would allow The Times to stop spending millions of dollars a year on litigation, focus on adapting to an Internet-driven world, and avoid the uncertainty of binding arbitration. Blethen and Times President and Chief Operating Officer Carolyn Kelly said no decisions had been made about when the company would pay Hearst, where exactly the money would come from or whether the deal would require layoffs at The Times.

Reporters and editors at the P-I, some of whom had taken side jobs as professors or bartenders in case the paper closed, burst into applause when Publisher Roger Oglesby walked into the newsroom Monday morning with several lawyers who worked on the settlement.

“It’s just great to be able to plan a summer vacation and not worry that we’re going to come back and find the key doesn’t work in the door,” said P-I reporter Chris McGann.

“We’re pleased. This is at least a 10-year reprieve” for the joint operating agreement, said Phil Talmadge, a former state Supreme Court justice who co-chairs the Committee for a Two-Newspaper Town, which intervened in the legal dispute. “The people of Seattle will be well-served, and the Times and Hearst will have an opportunity to prove that the JOA can be profitable for both newspapers.”

Also as part of the agreement, The Times agreed to name an executive to oversee the P-I’s circulation, which has dropped dramatically in recent years; to guarantee the P-I equal color production quality and color printing capacity; to let the P-I handle its own image promotion; to repaint circulation trucks with equal branding for the two newspapers. The P-I had long complained that The Times promoted its own circulation at the P-I’s expense.

Blethen characterized those details as “relationship-restoring” efforts, but said The Times never sought to undermine the P-I. Any future disputes between the papers can be settled by binding arbitration, according to the deal.

The Times gave notice in 2003 that it had lost money for three consecutive years, triggering a JOA provision that required Hearst to close the P-I or find its own printing plant and handle its business functions. Hearst sued to challenge The Times’ rights to invoke the so-called “stop-loss” provision.

Times spokeswoman Jill Mackie said the JOA will be amended with the settlement, which will become public after it is reviewed by the Department of Justice.

The P-I’s average weekday circulation is 126,225; The Times’ is 212,691, according to the most recent figures from the Audit Bureau of Circulations.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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