An opportunity in Seattle?

What's interesting about Hearst's announcement today that it plans (in the immortal words of Jack Welch) to fix (by going all-digital), sell or close the Seattle Post-Intelligencer is that the paper lost "only" $14 million last year as the junior partner in the Seattle JOA. Given Hearst's considerable and profitable assets elsewhere, that doesn't seem like enough to throw in the towel just like that, although chances are that 2009's results will be somewhat worse. Clearly Hearst has determined that there's no hope in sight for positive cash flow in the current set-up.

Chances are seriously against the likelihood of finding a buyer willing to take on an entity that loses money, and where the owner really has no control over revenue generation or operations. It's the same as the Denver situation, where the Rocky Mountain News is likely to disappear shortly for lack of a purchaser. Outside observers agree there's virtually no chance someone will want to buy the P-I "as is."

But Hearst has left open the possibility of moving to a digital-only version of the P-I. As reported in the P-I (italics added): “Steve Swartz, president of Hearst Newspaper Division, told the newsroom that Hearst Corp. is starting a 60-day process to find a buyer. If a buyer is not found, Swartz said, Hearst will pursue other options. The options include moving to a digital-only operation with a greatly reduced staff, or completely shutting down operations. In no case will Hearst continue to publish the P-I in printed form, Swartz said.”

Just how a digital-only option would work within a JOA is unclear, because the JOA is predicated on two printed products capable of publishing print advertising sold by the lead partner, and presumably doesn't define how profits or losses are shared if one partner goes digital-only.

Here's the intriguing possibility: someone steps forward to buy the P-I, transforms it into an all-digital enterprise, and goes it alone, pulling out of the JOA. This sets up a full-scale, head-to-head, old-fashioned newspaper war between a printed newspaper and an online news venture, which could be most interesting. The other half of the existing JOA, the Seattle Times, is on the ropes itself, trying to sell its print assets in Maine to stay afloat, so it is unlikely to be able to outbid any potential buyer of the P-I, whether or not it has a right of first refusal under the JOA agreement.

So, how about it, Microsoft millionaires? For a few million bucks, you can pick up what's left of the P-I, become a digital press baron, and find out whether, in one of America's most digital towns, a digital news business can prevail over an analog paper. And, if nobody steps forward, how about it, Hearst? Couldn't this be a great laboratory for testing whether online-only can prevail over print?