Non-Profit Model for Newspapers May Be the Answer

By: Joe Mathewson Does anyone who admires newspapers need to be reminded how precipitously advertising revenue, the lifeblood of the business, is shrinking?

Does anyone think this trend is miraculously going to reverse itself?

Does anyone think that cutting staffs and pages will improve newspapers and turn the business around?

But, doesn't anyone see that the new business model is right before our eyes?

The model is public broadcasting -- or, even better, the Poynter Institute for Media Studies, Inc., which owns the St. Petersburg (Fla.) Times.

Not-for-profit, tax-exempt. No longer dependent on commercial advertisers. A brave new world!

These not-for-profits would be supported by corporate sponsorships and by contributions from foundations and public-spirited citizens who care about the community and who understand how it would be diminished by the loss of its newspapers.

Will it work? Who knows, without trying. But it's worked for Poynter and the Times, for more than 25 years.

The stay-the-course alternative, sadly, is pretty clear Young people, even journalism students, don't buy newspapers (though they read their content free online). The generation of newspaper buyers is shrinking and fading. And with them goes the advertising.

Before newspaper owners whittle their newsrooms and their product down to nothing, they owe it to themselves, their employees, their still-loyal readers and their communities -- and yes, to their shareholders, whose equity is shrinking -- to try the not-for-profit route.

There are two ways to do it:

1. If a newspaper, like the Chicago Sun-Times -- which has found no buyer -- has little or no market value, its parent company could simply donate the paper's shares to a not-for-profit foundation, or create one, as Nelson Poynter did in his will. Any residual value the newspaper might have would become a useful tax deduction, assuming the parent corporation is otherwise profitable.

2. If the newspaper still has market value, which probably means it's still making money, a not-for-profit organization could borrow to buy it, then repay the debt from the future earnings of the newspaper, probably in combination with other revenues.

The Poynter Institute model is preferable, because the Internal Revenue Code prohibits tax-exempt organizations from trying to influence legislation or supporting candidates for public office (no such endorsements on public broadcasting), but a for-profit newspaper like the St. Petersburg Times can still carry on these important civic functions of an American newspaper. The Poynter Institute, while receiving dividends from the paper, also receives contributions to support its many journalism education programs, and has built an endowment that generates additional operating funds.

Does the nation need more journalism education foundations? Probably not, but here's the broad definition of organizations that can qualify as tax-exempt as set forth in section 501(c)(3) of the Internal Revenue Code: "Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes ? or for the prevention of cruelty to children or animals ?" In other words, a local foundation owning a for-profit newspaper could be dedicated to supporting, for instance, local parks, or the environment, or local history, or the unemployed, or the homeless, or abused children, or a combination of such worthy endeavors. In some communities, an existing tax-exempt civic foundation could well become the owner of the local newspaper.

A not-for-profit newspaper, of course, should have a vital online version, and perhaps the newspaper, like the Web site, should be free. Young people do read free papers. But if, in the long run, there's insufficient demand for the printed product, at least the staff, the news stream and the audience will have been preserved, and an online-only newspaper is far better for a community than none at all. Such a move, of course, would greatly reduce production expenses, enhancing the financial stability of the Web-only "paper.?

Chicago, still a two-newspaper town, has a wide diversity of print, broadcast and online news sources, yet public broadcasting is enthusiastically supported. The public television station covers nearly half its expenses with contributions, memberships and corporate underwriting, while the public radio station goes well over half. Both balance their books comfortably.

Could the not-for-profit business plan work for a newspaper? Perhaps desperation, though uninvited and unwelcome, will soon help us find out.