Newspaper finance crisis: Nonprofit model no panacea but may be part of the answer

By Donal Brown

Like the economy generally, the newspaper industry’s financial crisis deepens daily with reports of bankruptcies, layoffs and closings. The prospect that this downward spiral could leave the country, or large parts of it, without a vigorous press to uncover news of vital interest has fueled interest in alternative business models–notably including the model of nonprofit organizations.

At a time when private investment capital is unavailable, the restructuring of newspapers and other media as nonprofits, able to attract philanthropic support to sustain professional journalism, is an idea that deserves to be taken seriously. It is no panacea, however.

Not surprisingly, the nonprofit model has both critics and supporters. The former have raised the concern that under the nonprofit model, newspapers would be beholden to their donors. Some fear that formally nonprofit news organizations would no longer be able to exercise editorial independence.

University of Missouri journalism professor Tom Warhaver, however, says that that concern is overblown. Warhaver is an editor of the nonprofit community newspaper, The Missourian, funded in large part by the University of Missouri. With different ownerships and sources of funding, there will always be pressures on the newsroom. Warhaver says, “As a day to day matter, no one calls and says you can’t do this story or that story.”

Government may pose a bigger threat to the independence of nonprofit newspapers. Federal tax law bars nonprofits generally from endorsing political candidates. A Senate bill, introduced March 24 by Democrat Benjamin Cardin, authorizes newspapers to operate as nonprofits but clarifies that the ban on political endorsements would apply to such restructured news media.

Still, if Congress can make an exemption for Major League Baseball to the anti-trust laws, it could exempt nonprofit news agencies from the prohibitions on endorsing political candidates. Whether as nonprofits or for-profits, newspapers’ unmuzzled participation in political debates–including endorsement of candidates and legislation–is crucial to vigorous debate. It should be encouraged, not curtailed, by federal law

Nonprofit status, however, is unlikely to provide a one-size-fits all solution to the industry’s economic woes. Existing nonprofit publications have had to downsize and seek economies to remain financially sound. Warhaven said that, after running a deficit in 2008 of close to $100,000, The Missourian dropped its weekend edition (circulation, 42,000), thus achieving savings in newsprint and staff costs, while also receiving an increase in the subsidy from the University.

The St. Petersburg Times, owned by the nonprofit Poynter Insitute, cut its staff from 430 to 300 by 2000. And just recently the Institute’s profitable Congressional Quarterly Inc. was put up for sale to generate revenue to operate the Times.

Converting to nonprofit status will also not help newspapers suffering from deteriorating editorial standards or failed formulas. Some claim that dumbing down the news with shorter articles or devoting too much content to soft news have hurt circulation numbers. Publishers should rededicate themselves to rigorous, in depth reporting of issues vital to their local communities and the nation.

Yet newspapers like the San Francisco Chronicle may be too far gone for the nonprofit model to make a difference. That’s because it has not found a its way in the varied communities of the Bay Area. The Chronicle may have relied too heavily on its veteran columnists and reporting on San Francisco culture at the expense of stories of interest to readers outside city limits.

Still, revenues are declining through no fault of newspaper staffs. When newspapers were seen as profit-generating entities, unreasonable expectations commanded the stage.

Monica Bauerlein, co-editor of the nonprofit Mother Jones magazine, finds great advantage in being free of demands for profit and growth. She says, “Our troubles really began when people started to think that newspaper presses could also print money, and the business became the province of investment bankers.”

As we saw with Knight Ridder, the profitability of its newspaper interests did not prevent stockholders from demanding changes when they saw stock prices decline. That meant selling off such profitable newspapers as the Miami Herald.

It would be too much to suggest that the nonprofit model is the holy grail of newspaper finance. Some newspapers such as the New York Times and the Washington Post might be able to survive with huge endowments similar to those that sustain elite private universities. Given their importance on the national scene, it is conceivable that foundations and wealthy individuals such as Bill Gates would respond to the crisis with billions of dollars in grants.

That won’t won’t be an option for many newspapers. There is already plenty of competition for private donor money. If a significant number of newspapers, from small town weeklies to major metros, join the competition, the resources will be stretched to no one’s satisfaction.

Warhaver thinks that there is no one answer but a bunch of little answers. He says, “I am still hopeful technology will help us rather than hurt us.” He wants to find a way to make the databases of the news business profitable.

He also sees promise in e-reader technology. He says reading devices like Amazon’s “Kindle” do not now work for newspapers because their size is wrong and they lack color, but already two barriers have been overcome: the clarity issue and battery life.

With additional innovations, newspapers might find a new means of distribution. It is comforting to have the New York Times delivered every morning before breakfast, but the Times itself says it could provide each of its loyal 830,000 subscribers with a Kindle for a little less than half of what it costs to print the paper on newsprint and then haul it to readers by truck.

Bauerlein agrees with Warhaver that newspapers need multiple sources of funding, including some from realms outside the organizations’ mission statement. “…Back when I lived in Minnesota, we were all jealous of Minnesota Public Radio’s success selling merchandise through its for-profit catalog operation…,” says Bauerlein.

Bauerlein describes the approach as “hybridization,” a mix of revenues from advertising, donations, subscriptions, merchandising, and sponsorships. She sees no difficult in adapting the model to large or small operations. The key, she says, is to maintain a sense of civic mission.
Donal Brown is a teacher and journalist