Friday, January 30, 2009

How well endowed should you be?

Don’t worry. This isn’t spam about Viagra. It is a serious attempt to run the numbers to determine how much it would take to endow a newspaper as a sustainable, non-profit organization.

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.

15 Comments:

Blogger tom said...

Is this formulation with or without print advertising revenue?

I could see where you'd need the massive subsidy for an online-only operation, but print, for all its failings, does produce substantial revenue.

11:10 AM  
Anonymous Anonymous said...

Okay, so the NYT and the WPO are bailed out, but what about the Bumkist Bugle and Recall? Why should taxpayer dollars (non-profits are that to escape full corporate taxes, and someone has to pay the bills) be poured into just New York and Washington. Don't the Bugle and Recall readers or newspaper readers in any other part of flyover country deserve to be rolled up in this plan? And since we are doing newspapers, why not extend some benefits to saving the shoe plant up the road, or that polluting chemical plant across the river?

11:44 AM  
Anonymous David Boraks said...

It's an intriguing idea, newspaper publishing endowments. I'm skeptical of the idea of nonprofit boards having oversight on newsgathering - which I view as an essentially entrepreneurial endeavor. But it might be possible in the case of larger papers, if they can find the funds. Or maybe they can divert profits into an endowment for a certain number of years and then convert. Meanwhile, I hope the idea here is to endow news organizations - which happen to publish in whatever form makes the most sense - print, web, video etc. I don't think we should be talking about saving newspapers in their current form.

3:51 PM  
Blogger tgd said...

@Anonymous:

Ummm ... taxpayer dollars?

Simple issue first: The discussion (which, to be less polite than Alan, is silly) assumes private endowment dollars, not taxpayer bailouts. How does that involve "taxpayer dollars"?

If, as I think you intended, your argument goes: "Taxpayers will lose because the endowed non-profits won't have to pay federal corporate tax!"

You're assuming there are any profits to tax. And paper after paper is falling below that line.

4:51 PM  
Blogger Jeffrey Dvorkin said...

In interesting idea BUT...if newspapers went the endowment route, they would be tempted to and be legally entitled to get into FUNDRAISING! As a former public radio denizen, it's a whole other world which some legacy papers could do well. While Americans are incredibly generous (in normal economic times) would that largesse extend to the newspaper industry? And if it did, what would the impact be on NPR and PBS?

4:14 AM  
Blogger Darren said...

A $114 billion newspaper endowment would be larger than the top couple of foundations in the world combined. Bill and Melinda would have to give up curing Malaria. The NYT alone would require an endowment that would be somewhere between the size of the Rockefeller and Ford foundations.

4:54 AM  
Anonymous Anonymous said...

If the NYT, WPO were valued by readers and advertisers, there would be no need for bailouts, endowments or whatever. They've been mismanaged into the ground. Think debt. Subsidizing failures? What they're selling, people are not buying. They're Edsels. Let them go! Get over it. Geez!

5:57 AM  
Blogger Melissa Bower said...

I think endowments are a great thing to consider, but we should be frugal about what we're really trying to protect. It's the journalism itself that is important, not the paper print product.
Does anybody know if there are online news organizations who offer business Web design as part of their advertising? Here in small markets, I think some of the newspapers are having trouble making a sell online because local businesses simply do not utilize the Internet at all. News organizations have some of the best Web designers, communicators and marketers in the business, why can't we help local businesses find their way online?

6:41 AM  
Anonymous Anonymous said...

We have an example already of a U.S. newspaper run by a non-profit: the St. Petersburg Times. So how is it going? Not well, I hear. St. Pete is buffered by the same economic forces that the rest of the newspaper industry is, and has had both buyouts and layoffs. Today it does not survive without a subsidy from its parent organization, drawn from the profits of Congressional Quarterly.
This points to the basic issue involved in the current newspaper business turmoil. It is not just an economic issue, but an issue of newspapers losing their monopoly on news. In the past, if I wanted any international or national news, I had little choice but a newspaper, magazine or the chance I would catch a broadcast on one of the three TV networks. I used to listen to shortwave broadcasts of the BBC World Service and Radio Netherlands to fill in the voids. Today, I can read papers from any capital around the globe and am overwhelmed with information.
Endowing newspapers or setting them up as non-profits is not going to bring that old news monopoly back. Endowed or not, newspapers cannot survive unless they redefine themselves. Take a message from the Obama campaign: It's time for Change.

7:10 AM  
Anonymous Anonymous said...

Interesting comments, but what are we proposing to endow here?
Take the New York Times. Does the endowment only cover the newspaper or the associated New York Times newspaper, radio, sports and real estate properties whose profits currently are supporting the newspaper's publication. These include the Boston Globe, the Gadsden Times, the Gainesville Sun, the International Herald Tribunem the Petaluma Argus-Courier, the Sarasota Herald-Tribune, the Spartanburg Herald-Journal, the The Tuscaloosa News, Radio station WQXR, the New England Sports TV Network, the Internet service About.com, the Bostson Red Sox and Fenway Park. Many of these properties are not facing financial difficulties and produce a lot of money for the parent company, and their support is needed to keep the Times publishing.

1:26 PM  
Anonymous Ann H said...

Also to consider: How many people who do not subscribe now would subscribe to a non-corporate publication? I would. There's something about Capitalism in our Media that rubs me the wrong way.

3:56 PM  
Anonymous Anonymous said...

Like horse-drawn buggies, rotary phones and Polaroid cameras, printed news no longer works. Endowment funds? Bailouts? So our 'guardians of the public trust' can continue to print 'news' that looks, feels, reads, smells and sounds the same from Maine to LA to Waikiki?

3:19 AM  
Anonymous Anonymous said...

The Christian Science Monitor is another publication published by a non-profit, the Boston-headquartered Church of Christ Scientist. I believe its circulation is now about 30,000, and it is in transition to Web only. This is proof that endowments are not necessarily a recipe for continued market success.

8:18 AM  
Anonymous Dave D. said...

..For years the John Birch society published their Blue Book using donations. They couldn't give it away. I see an endowment as the same proposition. Unless folks want the NYT, they won't read it, even if you give it away.

5:40 PM  
Anonymous Mark said...

Consider this less-drastic idea: Newspapers continue to operate the way they do now - reporting the daily news and telling interesting local stories - but they give up their most important role - watchdog investigative reporting - to non-profit foundations.

A medium-sized city could support a small endowment that paid for two reporters and one reporter/editor. Such a team could easily put out one big, multistory, investigative package per month. It would then sell the stories at a subsidized rate to the newspaper, TV stations or any other media, which would be obliged to print/air a fund raising appeal.

This is a hybrid strategy. The non-profit investigators would get a lot of their project ideas from the daily paper. The daily would have more local stories to cover after the mud had been raked.

6:47 AM  

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