How well endowed should you be?
The issue of replacing profit-oriented corporate ownership with public-spirited newspaper publishing foundations became the flavor of the week this week among those rightfully concerned about the future of American journalism.
The author of an op-ed in the New York Times suggested the Times could carry forward on a $5 billion endowment generating $200 million a year to fund its news operations. The author of this article in the New Yorker theorized that the Washington Post could publish in perpetuity on a $2 billion grant to support a $120 million-per-year newsroom. And the Nieman Journalism Lab took the concept to the next level by projecting that it would take $114 billion to subsidize all of America's newspapers.
In each case, the idea is that the endowments would be conservatively invested to generate incomes of about 5% per year.
Apart from the not-so-trivial issue of who would provide all those billions, there is the question of whether the proposed endowments would be sufficient to support these journalistic institutions as we know them today.
And the answer, as so often is the case in complicated hypothetical discussions, is: It depends.
The $200 million budget suggested for the New York Times probably would cover the payroll for the publication of an online-only version of the paper with a staff comparable in size to the present complement. However, the project would cost more than just the salary and benefits for the journalists working on the website.
A more realistic budget would be $400 million to cover such expenses as administrative staff, rent, telecommunications, utilities, insurance, travel, entertainment, desks, computers and other equipment.
A doubling of the estimated operating budget would require a doubling of the endowment to $10 billion.
If the idea were to continue publishing the print editions of the Times in substantially the same form they exist today, then an even larger endowment would be required. How big? It depends.
Based on the company’s 2008 financial statements, it probably costs about $1.2 billion to print and distribute the physical incarnation of the New York Times.
A substantial portion of that expense, of course, could be offset by advertising and subscription sales. The question is how much would be.
Newspaper circulation is as low today as it was in 1946. Only 18% of households last year subscribed to newspaeprs, which is half the number who took them 63 years ago. Advertising is down by nearly 25% from its record sales high of $49.4 billion in 2005.
To generate sufficient income to protect the paper against future shortfalls in those key revenue categories, a prudent foundation would have to add several billion extra dollars to the endowment to fill any prospective gaps.
How many billion? It depends on when, where – and whether – you think the newspaper business will stabilize.