News from the Field

It’s time for newspapers to become nonprofit organizations

Throughout the journalistic world and elsewhere, speculation about the future of newspapers has grown fatalistic. Advertising revenue is declining and stock values are plummeting in the face of competition from Google and Craigslist and countless news blogs. At newsrooms across the country, thousands of journalists have been laid off as publishers attempt to cut costs and retain profits.

Proposed solutions to avert the collapse of the newspaper industry include a move to charge small sums for every article, as Walter Isaacson, president of the Aspen Institute, suggested in a cover story for Time magazine, and the creation of large philanthropic endowments, as two Yale University investment managers recommended in The New York Times.

But it may be time for a more radical reinvention of the daily newspaper. The answer for some newspapers may be to adopt a nonprofit ownership structure that will enable them to seek philanthropic contributions and benefit from tax exemptions.

Every type of media can be carried out as a commercial or noncommercial entity. National Public Radio and the Public Broadcasting Service, nonprofit magazines like Consumer Reports and The American Prospect, and book publishers like Oxford University Press are all examples of enterprises that operate under nonprofit ownership. The daily newspaper stands alone as a form that is carried out almost entirely in the commercial realm. A few highly respected exceptions — the St. Petersburg Times and The Guardian of London­ — prove that newspapers could easily operate as nonprofit organizations.

In most respects, nonprofit newspapers operate in the same manner as for-profit companies. They rely on the same mix of newsstand and subscription sales, as well as advertising revenue (online and print, display and classified). Where nonprofit newspapers could have an edge is in attracting a range of philanthropic support for their operations. As with public broadcasting, a mission-driven newspaper committed to serving the public interest with the highest quality reporting could obtain support in the form of membership contributions. In addition, foundations and corporations might be willing to underwrite certain broad areas of coverage, in much the way public broadcasting generates sponsorship revenue.

Of course, newspapers would have to take great care to maintain a bright line of editorial control to prevent interference from corporate and foundation sponsors in news-making decisions. And potential sponsors would have to understand the limits of their influence. But this relationship is no different from the challenge of restraining advertisers from seeking to influence coverage in commercial news-media enterprises every day.

One area in which newspapers may have a great edge is in the cultivation of bequests. Newspaper analysts have long bemoaned the fact that a growing share of newspaper readers are older. But this is not necessarily a disadvantage.

A newspaper that makes a long-term commitment to serve the community could make a very compelling case to donors who have grown up and grown old with newsprint on their fingers. And they may be willing to make a lasting contribution in their community if they felt that their newspaper would do the same. At a minimum, anyone who puts the local newspaper in their will can reasonably expect to have their name spelled correctly in their obituary.

As severe as their financial declines may be, most newspapers still generate operating profits, and until the nation’s financial collapse, those profits were in many cases substantial.

The problem in the newspaper industry is not that papers are wholly unprofitable. Rather, they grew addicted to excessive profits over many decades, when it seemed that owning a printing press conferred with it a license to print money. Those licenses have now expired.

At the same time, the industry is suffering from its own subprime-investment collapse, with many of the country’s leading papers, including the Los Angeles Times, the Baltimore Sun, and The Hartford Courant — all holdings of the financially troubled Tribune Company — struggling to emerge from bankruptcy. In recent years, the newspaper industry engaged in an orgy of consolidation, including the McClatchy Company acquisition of Knight Ridder and the Tribune Company’s merger with Times Mirror, which was subsequently sold to the realestate magnate Sam Zell. In January, the Minneapolis Star Tribune filed for bankruptcy protection, and the month before that, the Tribune Company did as well.

Over the next months and years, we may see more and more news-media companies go into Chapter 11, as they fail to generate the kind of returns that can cover excessive debt loads. Without a huge federal bailout along the lines of the relief plans designed for the troubled banking industry, even more newspapers are likely to declare bankruptcy.

The current malaise in the news business may be rooted in the declines of circulation and advertising revenue. But the depth of newspapers’ problems stems from foolish investment decisions. They may be hemorrhaging red ink, but it flows from largely self-inflicted wounds.

As with so many other areas of our culture, unbridled greed and unchecked corporate practices have laid waste to a critical social and cultural resource.

Newspaper owners with a strong commitment to serving the public interest may be willing to reorganize their companies to operate in trust. It may require owners to make some level of sacrifice. And it may call for some level of investment by philanthropic foundations, to sweeten the deal. But with the value of news-media stocks tumbling lower and lower every day, such deals might quickly become compelling.

After the dust settles, a combination of savvy restructuring and philanthropic capital can recreate a different type of newspaper industry, one that truly serves the public interest.

Who cares if newspapers do go out of business? We all should. Newspapers are the first draft of history, and they provide a critical check on the abuse of power by political and corporate interests. A healthy democracy and a just society depend upon a free and vigorous press.

 Vince Stehle is the executive director of Media Impact Funders. This piece originally appeared in a 2009 edition of the Chronicle of Philanthropy.

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