The Hearst Corp. put the Seattle Post-Intelligencer up for sale on Friday, saying it will close the newspaper if it can't find a buyer in the next two months. As print ad revenues tumble and the recession deepens, it's likely that the final outcome will be closure rather than divestment. Thus, the Seattle P-I, founded in 1863, joins several other big newspapers threatened with extinction.

In making the announcement on Friday, the president of Hearst Corp.'s newspaper unit, Steven Swartz, told employees that "at the end of the sale process, we do not see ourselves publishing in print," adding that the newspaper lost $14 million last year. Hearst has held out the possibility of switching to an online-only publication if no buyer emerges, but this is small consolation for the newspaper's staff of 170.

As with most newspapers, online ad revenues are a small fraction of print; the P-I would not be able to support anything on the scale of the current operation.

The prospects for a sale are slim. Even when the economy was healthy, the newspaper business was already in distress, with ad revenues sliding in 2006 and 2007. (Hearst, a privately held business, doesn't release revenue figures, but the broad nature of the trend means it was impacted.) As the economy soured, the slide in print ad revenues turned into a headlong plunge. Plus, the paralysis in credit markets means that banks are not financing acquisitions, even for viable businesses.

The Seattle P-I faces the additional obstacle of competing in a two-newspaper market, sharing Seattle with The Seattle Times under a joint operating agreement forged in 1983. Industry observers have long been skeptical about whether Seattle--with a population of 600,000-- is large enough to support two daily newspapers, especially given steady declines in circulation. In the six-month period ending Sept. 30, 2008, the Seattle P-I's average circulation was 117,572, according to the Audit Bureau of Circulations--down 7.8% from 127,584 during the same period in 2007.

This puts the Seattle P-I in the same boat as The Rocky Mountain News, one of two dailies serving the Denver metro area, which will be closed if it does not find a buyer by mid-January, according to owner E.W. Scripps. Announcing the news in early December, the company cited financial difficulties, revealing that the newspaper lost $11 million in 2008. RMN is one-half of a joint operating agreement with the Denver Post, owned by the MediaNews Group.

The RMN's prospects for sale are no better than the Seattle P-I, as newspapers in general have failed to find buyers over the last year. Also in December, the Virginian-Pilot in Norfolk, Va. was taken off the market after potential buyers could not arrange financing. Likewise, the McClatchy Co. is trying to sell one of its biggest newspapers--The Miami Herald--but faces an uphill battle. Several other sizeable dailies, including The San Diego Union-Tribune and Austin American-Statesman, have been on the market without finding a buyer for months.

At the same time, threats of newspaper closures have become more common over the last year. The Star-Ledger, based in Newark, retreated from the precipice at the last second when union holdouts agreed to more layoffs. Also, Journal Register Co. said it may close up to 13 newspapers in Connecticut if it does not find buyers by Jan. 13.

In fact, big newspaper companies themselves face bankruptcy and dissolution in the worsening economic climate. In December, the Tribune Co. filed for bankruptcy protection, indicating that it is unable to service its $13 billion debt under the terms originally agreed with lenders. Philadelphia Media Holdings, the publisher of The Philadelphia Inquirer, defaulted in June, followed by The Journal Register Co. in July.

A December report from Fitch Ratings warned that "more newspapers and newspaper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010."

However, Ken Doctor, a newspaper analyst with Outsell, Inc., does not expect closings to become common events. "Most of these newspapers are simply becoming small enterprises," he said, predicting "shrinking staff, shrinking of individual daily editions" and reductions in frequency. In 2009, he said he expects more newspapers to follow the example of the East Valley Tribune in Arizona, which recently cut back its publication schedule from seven days a week to four.

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