! January 9, 2009 Dear Colleague:! We are writing to you regarding today’s announcement that Hearst is putting the Seattle PostIntelligencer up for sale. The history of Hearst’s ownership of the P-I is a mixed one and one that we all wish would come to a different ending than we are about to describe. The Seattle community at large and the journalistic community have long described the P-I as a good newspaper and one that has served Seattle well. In fact, the enthusiasm for preserving it has been exceptional. However, the financial history of the P-I is a different matter. For many years, Hearst has supported the continued publication of the P-I despite poor financial results. After decades of losses by the P-I, Hearst and The Seattle Times Company entered into a Joint Operating Agreement in the 1980s in the hope that the life of the P-I could be preserved far into the future. For a while that seemed successful; what would almost certainly have been a shorter life for the P-I was extended by virtue of the JOA. Indeed, for more than a decade starting in 1984 the P-I was profitable. As time went on, however, the financial health of both newspapers, and the P-I in particular, started to decline. The history since 2000 is well known. It has been a stormy, controversial, and contentious period between the parties and every year since then the P-I has lost a significant amount of money. The Times, too, has publicly stated it has been losing money. The Seattle Times Company has been in charge of the financial health of the enterprise and made all of the decisions with respect to the production, advertising and other matters that so importantly impact financial health. Hearst did the best it could with the resources provided by a declining JOA to produce a quality newspaper. Regrettably, we have come to the end of the line. Under the present circumstances, we see no opportunity for us to publish the P-I on a profitable basis. The P-I has had operating losses since 2000. The P-I lost approximately $14 million in 2008 and its forecast anticipates a greater loss in 2009. For that reason, we have decided that it is time to give someone else an opportunity to publish the P-I. Today, we are putting the P-I up for sale. The losses are such that we can’t afford to have that process be protracted and difficult. If there is a buyer, that buyer will need to step forward quickly in order to avoid forcing Hearst to take other actions that may be appropriate. Accordingly, for 60 days we are going to receive any expressions of interest from potential buyers and, if possible, negotiate a sale of the P-I. We are offering the P-I for sale, including Hearst’s interest in the JOA. While the JOA has provided some income in the past, that income, as you have heard today, is inadequate to cover our editorial expenses. However, a new buyer may have other ideas and approach the business of publishing the P-I in a different fashion than Hearst.
In any event, we break this news with great regret. We will offer a window of opportunity here for a potential buyer before deciding on any other alternative. We don’t expect to go past the 60-day period in view of the heavy losses, which get worse with each passing month. It should be understood that, while Seattle is a very high cost newspaper market and the Seattle newspapers have had a harder job than many generating revenues that overcome the high cost, this is a national phenomenon that is broader than Seattle. Newspapers all over the United States are suffering as never before. Many time-honored and powerful newspaper voices are threatened to be stilled. Some are for sale in cities and under circumstances that nobody in the business would have ever predicted. It should, therefore, be recognized that what we face here, while perhaps more severe and longer running, is not a unique circumstance today. The acceleration of negative change in this decade is unprecedented. Still, it is our hope that we will find a buyer who wishes to continue publishing the P-I and who might find a business model that is different from what we have here today. In the absence of finding a buyer in this 60-day window, Hearst will evaluate its other options and act. Those options include a move to a digital-only operation with greatly reduced staff or a complete shutdown of all operations. In no event do we intend to continue to publish the P-I in printed form. Regarding frequent speculation over Hearst’s possible interest in acquiring The Seattle Times newspaper, we want to make it clear that such an acquisition of the Times is not an option we are considering. Nothing we are doing here today is meant in any way to suggest that we don’t believe in the future of print publishing in our other newspaper markets. We want to offer our profound thanks and admiration to our journalists in Seattle who have fought such a marvelous battle against such long odds for so long. Sincerely,
Frank A. Bennack, Jr. Vice Chairman & Chief Executive Officer Hearst Corporation
Steven R. Swartz President, Hearst Newspapers