Opinion ID: 2576158
Heading Depth: 1
Heading Rank: 2

Heading: history of the times-hearst joint operating agreement

Text: ¶ 5 Founded in the 1890s, the Seattle Times and the Seattle P-I have been the only metropolitan daily newspapers in Seattle for some time. Comm. for an Indep. P-I, 704 F.2d at 469-70. By the late 1960s, however, the Seattle P-I began losing ground to the Seattle Times in terms of circulation and advertising revenue. Id. In 1981, owners of the two papers entered into a JOA to share certain expenses and revenues. Id. at 469-70. ¶ 6 In 1982, the United States Attorney General approved the JOA pursuant to the Newspaper Protection Act. See Comm. for an Indep. P-I, 704 F.2d at 471. [2] The attorney general's approval was predicated on a finding that one of the newspapers was a failing newspaper. 15 U.S.C. § 1803(b). The attorney general found that the Seattle P-I was such a newspaper and approved the JOA, a decision that was upheld in federal court. Comm. for an Indep. P-I, 704 F.2d at 473-74. ¶ 7 Pursuant to the terms of the 1981 JOA, the Times was required to provide the newsprint, presses, and labor and to print, sell, and distribute both newspapers. The two newspapers were to maintain independent news and editorial departments, however, and remain separately owned and managed. The Times and Hearst shared the total operating revenues and expenses, minus news and editorial expenses, of both papers in a ratio of 66 percent to 34 percent respectively. ¶ 8 In 1999, the parties amended the JOA. [3] The amendments allowed the Seattle Times to move from an afternoon publication to a morning publication, and compete head to head against the morning Seattle P-I. Compare Clerk's Papers (CP) at 34 (1981 JOA § 4.1) with CP at 88 (1999 JOA § 3.1). In exchange for this concession on the part of Hearst, the Times agreed to change the revenue-sharing formula in Hearst's favor. Compare CP at 38-39 (1981 JOA § 5.1) with CP at 92 (1999 JOA § 4.1). Under the 1999 JOA, the Times and Hearst share the combined revenues and expenses of the two newspapers, except for news and editorial expenses, in a 60-40 ratio respectively. Under this revenue-sharing plan, each newspaper receives its share of the remainder of the combined revenues minus expenses in that same ratio. That remainder is then used by each newspaper to pay its own news and editorial expenses. The fixed ratio applies regardless of whether the newspapers are generating revenue in the same 60-40 ratio. These revenues and expenses are respectively referred to as agency revenues and agency expenses. The excess of agency revenues over agency expenses is referred to as the agency remainder. This is the amount distributed to each newspaper, in the 60-40 ratio, for the purposes of paying the news and editorial expenses of each newspaper. ¶ 9 The JOA contains a loss operation clause. [4] That clause permits either party to terminate the agreement after three consecutive years of operation losses. The loss operation clause may be invoked when the agency remainder is insufficient to pay a partys own news and editorial expenses. A party invokes the loss operation clause by issuing a loss notice, stating its intent to establish the Newspaper Cessation Date ... at the earliest possible opportunity. CP at 102. The parties must then cooperate to bring about the cessation date but, if unable to do so, the agreement automatically terminates 18 months after the loss notice. [5] The JOA also contains a force majeure clause, which provides that neither party shall be liable to the other for any failure of performance resulting from force majeure events, such as acts of war or labor strikes. ¶ 10 Between 1981 and 2000, the story of Seattle as a two-newspaper town was a seemingly happy one. Whether the ending will be as happy is yet to be seen. Beginning in November 2000, the Newspaper Guild and the Teamsters Union went on strike. The strike affected both papers, causing significant increases in expenses and decreases in revenues. As a result, the Times was unable to cover its news and editorial expenses in both 2000 and 2001. The Times was also unable to cover its expenses in 2002, though the loss in that year was not attributable to the strike.