The Seattle Times Co. ended a three-month hiatus in the city's long-running newspaper war yesterday, notifying the owner of the Seattle...

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The Seattle Times Co. ended a three-month hiatus in the city’s long-running newspaper war yesterday, notifying the owner of the Seattle Post-Intelligencer that The Times lost money under the papers’ joint-operating agreement from 2002 through 2004.

The move puts the P-I’s owner, The Hearst Corp., on notice that The Times could press for the second time in 29 months to take actions that could shut down its crosstown rival.

In April 2003, Times Publisher and Chief Executive Frank Blethen notified Hearst that under the JOA the paper had lost money from 2000 through 2002.

Under the JOA, either paper can demand negotiations that could shut down the other, end the JOA, or both, within 18 months of notifying the other party of three consecutive years of losses.

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New York-based Hearst met The Times’ original loss notice with a lawsuit in King County Superior Court. Hearst’s suit challenged all three years of Times losses and sought to block any shutdown of the P-I or the JOA. Hearst has said it cannot operate the P-I outside the JOA.

In June, the state Supreme Court ruled 9-0 that The Times could claim losses in 2000 and 2001. Both papers have been silent since that ruling, although Hearst attorneys say they intend to challenge The Times’ 2002 loss claim.

Hearst said the paper inflated newsroom expenses that year to create the loss.

An attorney involved in negotiations over the next step in the legal proceedings said earlier yesterday the sides were at an impasse. The attorney, who asked not to be identified because both sides have agreed not to comment, said Hearst is likely to file an amended complaint on the 2002 losses within 30 days.

Both sides have agreed to suspend the 18-month negotiating period for The Times’ original loss claim until all legal matters in Hearst’s suit are over.

Reason unclear

It wasn’t immediately clear whether The Times’ latest action was designed to press Hearst to resolve the JOA dispute outside the courtroom or was simply a technical move to keep all legal options open.

In an e-mail message to Times employees yesterday, Blethen said the new loss notification was being filed to meet the agreement’s nine-month notification deadline. The loss-notice deadline for the 2002-2004 period expires today, Blethen’s message said.

“You may see media coverage in the coming days regarding developments in the joint-operating agreement,” Blethen’s message said. He offered no elaboration on what those developments might be and was not available for comment yesterday.

Times spokeswoman Jill Mackie said attorneys for both sides were discussing the latest notification and the existing litigation but had agreed not to comment while talks continue.

Mackie said The Times had not withdrawn its original loss notification and had no plans to do so.

A spokesman for Hearst said the company had no comment on the latest loss notification.

“Place holder”?

The notification could be just a “legal place holder,” Seattle University antitrust expert Jack Kirkwood said. Or it could be a way for The Times to signal to Hearst that it still wants to resolve the dispute, he said.

“My suspicion is they are doing both,” he said. “They are sending a signal that they think they’ll win on 2002, so let’s resolve this, and they are also holding a place for the 2002-2004 loss claim.”

Under the JOA, both papers maintain separate news operations, but The Times handles printing, distribution, marketing and other business functions of both. The two papers pool their advertising and circulation revenue and, after The Times is paid for the printing and other business expenses, they split the remainder: 60 percent to The Times, 40 percent to Hearst.

In pushing to end or change the JOA, The Times contends the arrangement is no longer financially viable, in part because of the P-I’s declining circulation.

Times officials say the company is also struggling because of a drop-off in some areas of ad revenue, such as auto and classified ads, and the long-running effects of Seattle’s economic slump following the dot-com bust and 9/11.

In an internal memo earlier this month, the company said The Times’ real-estate ad revenue was down 12.5 percent in the first eight months of this year, compared with a similar period in 2004, mostly from a drop in rental ads.

Times officials said they also expect to show a drop in year-over-year circulation for the six-month period ending in September, mainly due to cutbacks in outlying distribution areas and a boost in the single-paper price from 25 cents to 50 cents.

“I think the Seattle Times has a very real structural expense problem,” said Peter Horvitz, president and publisher of the King County Journal and several weeklies.

”The economy of this region can’t generate enough ad revenue to support two papers,” he said. Yesterday’s loss notification, he said, “is just another bit of evidence The Times is serious about attempting to dismantle the JOA.”

Bill Richards is a freelance writer hired on a special contract by The Seattle Times to cover events involving the joint-operating agreement with the Seattle Post-Intelligencer. He can be reached at brichards@seattletimes.com.