Union officials negotiating new contracts at three Maine daily newspapers — the Portland Press Herald/Maine Sunday Telegram, the Waterville-based Morning Sentinel, and the Augusta-based Kennebec Journal — have begun to assume that the papers will soon be for sale, given the magnitude of the cutbacks sought by management. If the union position were substantially weakened, that would make the papers — which are struggling financially — far more appealing to outside buyers.
The papers are owned by the same family-run company that controls a majority interest in the Seattle Times newspaper in Washington state. And it has been a subject of widespread speculation in newspaper circles that the Times was itself up for sale.
The papers are controlled by the Blethen family, of whom patriarch Frank Blethen is the fourth generation to run the Seattle Times, which was bought in 1896 by his great-grandfather Alden Blethen, who was born in Maine but moved to Seattle as an adult.
One hundred and ten years have taken their toll on the Seattle paper, and the eight years of Blethen ownership of the Maine newspapers have been an additional weight on the finances of the company. Both companies are struggling: in Seattle, the Times is fighting a bitter battle against Hearst, the owner of Seattle’s other daily newspaper, the Post-Intelligencer, hoping to close the P-I. The company has stated that it has lost millions of dollars over the past six years alone.In Maine, where the Blethens’ 1998 purchase of the Press Herald and the other newspapers from Guy Gannett Publishing was heralded by pledges of increased revenues and decreased costs, costs have increased (despite hiring freezes, layoffs, and the shrinking of the physical size of the newspaper) while revenues have, at best, remained flat, according to company statements.
Because the Blethen interests are privately held, it is difficult to predict or speculate on their business dealings, but changes within the newspaper industry have given the family a new way out of a years-long financial mess. That new way effectively requires the sale of the Blethens’ Maine newspapers, despite the company’s longstanding practice of extolling family ownership over what they call “absentee corporations.”
In September 2003, Frank Blethen (who refused to comment for this story) told Press Herald reporter Edward D. Murphy he had considered selling the Seattle Times to raise badly needed operating cash, but was talked out of it by other family members. He said he was frustrated with suffering continued losses. And though the article summed up Blethen’s position as “ruling out” selling newspapers, it did quote him with a telling statement: “You have to ask yourself the question, ‘Can you just keep going?’” The answer three years later: not much longer.
Seeing the light
The Seattle Times Company is run primarily by the Blethen family, who have 50.5 percent of the voting stock, and by voting as a bloc control the direction of the company, sometimes over the objections of the minority owner. Until just a few months ago, the Knight Ridder media conglomerate held the remaining 49.5 percent of the company's voting stock. Last year, Knight Ridder ran afoul of its shareholders, who forced the company to put itself up for sale in mid-November 2005. The company was bought in mid-March to the McClatchy Company, a California-based newspaper chain whose flagship is the Sacramento Bee. (The $6.5-billion deal received the blessing of federal anti-trust regulators in June, in part because McClatchy sold off some Knight Ridder papers in markets where McClatchy already owned a paper.)
A couple months after Knight Ridder announced it would sell itself off to the highest bidder, Blethen representatives at the Morning Sentinel and the Kennebec Journal introduced new proposals into ongoing contract-renewal talks with those papers’ respective unions. The proposals, which are still being disputed by the unions, would give the Blethens permission to take away tasks from union workers and assign them to contract or freelance workers. But the move that really upset union representatives was a provision that would let the company move those tasks back to full-time workers who would not have to be members of the union.
To union members, that means a person could be laid off, their job taken away and given to a contractor, and the company could later hire the contractor as a full-time staffer who would be outside the union. Over time — some estimate about 10 years; others worry it could be far less — the union would just wither away. It’s a move negotiators have called “union-bashing,” and company representatives have told the unions to expect the same provision to be demanded during next year’s contract-renewal negotiations with the union at the Portland Press Herald/Maine Sunday Telegram. (At all three papers, the unions represent not only reporters and lower-level staff editors, but also workers in layout, printing, advertising, circulation, and distribution.)
The move reversed the position the Blethen family had taken toward unions eight years ago, when buying the Maine papers from the Guy Gannett company: though they were not required to do so by any law or business rule, the Blethens agreed to honor pre-existing contracts with unions. Now, the lawyer for the Portland Newspaper Guild, John Richardson (yes, the one who also serves as Speaker of the Maine House), speculates that the anti-union shift is an effort “to make the papers as presentable as possible for a future sale.”
Stuck in the mud
Some industry analysts say the union-busting attempt is not necessarily an indicator of a pending sale. Rick Edmonds of the Poynter Institute says management simply doesn’t like unions, even though organized labor is weaker because both unions and companies are less financially able to endure long strikes, unions’ ultimate weapon.
Most media companies don’t like unions, agrees Lou Ureneck, a 20-year Press Herald veteran now chairing the Boston University journalism department. “Unions increase costs and reduce flexibility for management,” he says.
“Flexibility” is exactly the buzzword the Blethen Maine Newspapers negotiators are using. An assistant to Blethen Maine CEO Chuck Cochrane returned a call to his office, saying the company would not comment on labor negotiations, which the company feels are “best resolved at the bargaining table.” In response to calls seeking comment on other aspects of this story, the assistant explained Cochrane “does not give interviews” as a general practice.
But representatives of the Portland Newspaper Guild were happy to talk. “We don’t understand their need to take everything away from our contract,” says Darla Pickett, chapter chairman at the Morning Sentinel.
The unions have asked for the company’s justification, and have gotten the response that the company wants “flexibility.” The company says “they have no plan . . . but they just want it,” says Mike Sylvester, the union’s executive director.
He believes that constitutes bad-faith negotiations on the part of the company, recalling an October offer by the union to re-negotiate a side deal to help the company reduce health-insurance premiums. But the company, he says, accepted the offer by demanding the union waive all rights to negotiate over healthcare in the future. The side deal was ultimately worked out, without the waiver of future rights, but “We had to fight them to save them hundreds of thousands of dollars,” Sylvester says.
In Seattle, the Times’s union staffers are embroiled in a bitter dispute that some fear could bring a repeat of the last negotiations, when for seven weeks in the winter of 2000-’01, newspaper workers struck, a move that cost the Times as many as 30,000 subscribers, according to Seattle union president Yoko Kuramoto-Eidsmoe, who also says the Blethens took that dispute “personally.”
All of this was happening before Knight Ridder was actually sold, so the position on unions of the future buyer was not certain, but the industry has been moving away from unions for some time.
In 2003, Seattle Times freelancer Bill Richards, hired under a special contract to report independently on the JOA, reported — to loud Blethen denials — that the Blethens’ financial picture may not be as bleak as they have long claimed. But in the intervening three years, across the industry, expenses have only climbed, and revenues have been flat or declining. So if the Blethens’ picture was rosier than they said then, it has only worsened. In 2004, the Times sold six acres of downtown Seattle land to Microsoft billionaire Paul Allen for $31 million, in a deal Frank Blethen told his newspaper would allow him to avoid major cutbacks throughout the company.
The Maine papers’ picture is worse still: in 1998, the Blethens’ Seattle Times Company officials told the Press Herald they would have to increase revenue and cut costs to make a profit in Maine. But between 1999 and 2003, there were two rounds of layoffs at the Press Herald, by far the largest of the three Blethen-owned Maine dailies. In mid-October 2005, the Press Herald announced a hiring freeze, and a week later said it was laying off 15 workers and eliminating six vacant positions, blaming flat revenues and dropping circulation.
In 1998, the Press Herald’s circulation was 74,500, and the Maine Sunday Telegram’s was 124,500, according to the press release announcing the sale to the Blethens. In April 2006, daily circulation was at 68,100, and Sunday was at 106,750, according to publisher’s statements on file with the Audit Bureau of Circulations, an independent agency that monitors newspaper circulation. That’s a nine percent drop in daily circ, and 14 percent on Sundays.
Where to go?
The anti-union efforts in Maine (as well as powerful anti-union negotiations in Seattle this year, including a demand for Times employees to accept a two-year wage freeze) will come to a head by the middle of next year. The Press Herald/Sunday Telegram contract expires in May 2007, the same month the arbitrator’s decision is due in the Seattle JOA case.
Even if they win the JOA case, if the Blethens suddenly unveil hidden riches, they will only be inviting another legal battle over allegations they misled everyone in the dispute. And if they lose, with no land left to sell to raise money and limited prospects for improving newspaper revenue, their options will be limited.
One of those options — indeed, one of the best — is to sell a newspaper or a group of papers. Frank Blethen has repeatedly said he would not sell the Seattle Times or the Maine newspapers, citing family connections to the two regions.
The family can’t — or won’t — sell the Times, mainly because Hearst has a right-of-first-refusal agreement to buy it if the paper ever goes on the block. Frank in particular has spent years of time and gallons of ink badmouthing big-corporation ownership of media companies. (And in 2001, the family turned down a buyout offer of $750 million from Knight Ridder, including assuming $250 million in company debt. The family must have known it was the best offer they would see for many years to come.)
The Blethens’ reputation in Seattle is in part based in its opposition to companies such as Hearst. The family “literally think that everybody is out to crush them and their legacy of family ownership,” says Elizabethe Brown, administrative officer of the Pacific Northwest Newspaper Guild, which represents employees at both Seattle dailies. To sell their flagship newspaper to the company they have accused for years of being an “absentee owner” would be a dramatic reversal of course
He could sell some of the smaller papers in Washington, but if he’s keeping the Times, it would certainly be useful to have some regional partners with which to share news and advertising.
What’s left are the papers in Maine, to which the family has sentimental (and thin historical) ties. The Blethen family is well ensconced in the Seattle area; it seems unlikely they would all uproot and move east, though one of the rumors in Seattle is that “Maine is the exit strategy,” according to Brown.
The family has been reducing its presence in Maine of late. The only Blethen family member still working in Maine is Robert Blethen Jr., a member of the “fifth generation” who works in circulation at the Press Herald. (There are other members of the family on the board of directors of Blethen Maine Newspapers, but they are required to come to Maine only once a year, for the company’s annual meeting.)
What then?
Though it would be hard to recoup the $200 million purchase price of the Maine papers, some estimates peg the McClatchy stake in the Seattle Times Company at $300 million, and one analyst has estimated McClatchy paid $150 million for that share, based on accepted formulas for calculating the purchase price of a newspaper asset.
If McClatchy sold its 49.5-percent share of the Seattle Times Company to the Blethens in exchange for the family’s Maine dailies, the Blethens would win on two counts. Not only would they have disentangled themselves from the Maine papers’ union fights and uncertain financial futures, but they would also fulfill a longstanding plan regarding the Seattle paper — namely, to be its sole owner. In March, the Press Herald reported, Blethen executive Chuck Cochrane said in a memo to that company’s Maine employees, “The Blethen Family is committed to retaining its majority ownership of the Seattle Times Company . . . and, if the opportunity ever presented itself, to acquire the minority interest.”
But McClatchy, which kept from the Knight Ridder deal papers in markets averaging 11.1 percent growth in number of households, would likely look at Maine’s projected population growth of 0.5 percent through 2020, and refuse a trade, preferring either to sell its share outright, or keep drawing meager dividends (which in 2005 gave Knight Ridder $3.7 million). That would leave the Blethens to find another buyer.
A self-congratulatory editorial on August 13 in the Maine Sunday Telegram paraphrased Frank Blethen as saying his family will not “take part” in the “jostling and realignment” of newspapers that has come after the Knight Ridder sale, suggesting the papers are not for sale.
On the same day (and also inspired by the 110th anniversary of the Seattle Times), Guttman wrote in her column that the family ownership of the Maine papers is the reason “so many of our journalists and employees have chosen to be at the newspaper.” She did not address the ongoing and looming labor disputes, but paraphrased Cochrane telling staffers “there is no corporate office in our company. There are no corporate directives or missives. At our newspaper, Maine people call the shots.” (That, presumably, includes such “Maine people” as Cochrane, who came here from Washington when the Blethens bought the papers, and Guttman, who started her career in California and came to Maine in 1994.)
Guttman wrote about how “values” and commitment to community are what drive the Press Herald/Sunday Telegram, rather than finances, saying “our goal is loftier than making record-higher profits quarter to quarter, year to year.” (That must be a relief, given the dark financial position the Seattle and Maine papers are in.) She wrote about the “freedom” that family ownership gives to a newspaper. And she quoted a memo from Frank Blethen on the occasion of the company’s 110th anniversary: “We are proud of the dedicated employees . . . We are pleased that we could keep Portland, Waterville, and Augusta away from the sorry fate of the faceless investor ownership which has fallen on most newspapers.”
Who else would be interested in buying? The Costello family, who own the Lewiston Sun Journal, have been expanding their holdings in Southern Maine in recent years, buying the weekly Forecaster chain in 2003, and in 2005 adding the Rumford Falls Times and the Norway Advertiser-Democrat. They, too, are a privately held family newspaper company with years of presence in Maine. There’s also the Warren family, who own the Bangor Daily News.
Chris Harte, a former publisher of the Press Herald/Sunday Telegram (when they were owned by Guy Gannett), who also used to be a Knight Ridder executive, was part of a group that bid to purchase the Philadelphia Daily News and the Philadelphia Inquirer, which became available as part of the McClatchy-Knight Ridder deal, but ended up not being the winning bidder.
Harte, an heir to the Texas-based Harte-Hanks newspaper fortune who lives in Cumberland Foreside and has an office in downtown Portland, is a major investor in the rapidly growing Current Publishing weekly-newspaper empire in Southern Maine. He told the Inquirer in March that he “might look at some of the other” papers Knight Ridder had held as well, though he says he is not likely to be interested in buying the Maine papers.
Kirsten Terry contributed to this report.