Tuesday, March 24, 2009

Bridge to nowhere: Non-profit press ownership

Thanks but no thanks, Sen. Benjamin Cardin. Congress doesn’t need to pass a law to allow newspapers to be owned by non-profit organizations.

The St. Petersburg Times and the Christian Science Monitor already are owned by non-profits and they are struggling as much to make ends meet as most of their commercially operated peers.

The Poynter Institute, which owns the St. Pete paper in a trust established by the late Nelson Poynter, has put its prized Congressional Quarterly up for sale to offset slumping sales at the paper. The Monitor is discontinuing print production to trim an $18.5 million loss that no longer will be tolerated by its owner, the Church of Christ, Scientist.

While it was a nice gesture for the Democrat from Maryland to suggest a Newspaper Revitalization Act to enable non-profit ownership, he might as well try to repeal the laws of economics or gravity, instead.

Regardless of whether a paper is owned by a non-profit organization or an unreconstructed capitalist, it has to take in more money than it spends – or it will perish. The form of ownership doesn’t change this fundamental truth.

The problem at many newspapers is that their rich historic profits have been trimmed – or in some cases vaporized – by an average plunge of as much as 20% since the industry recorded all-time high advertising revenues of $49.4 billion in 2005. Some papers, like the San Diego Union-Tribune say their revenues have tumbled 40% in recent years.

The industry’s revenue collapse was exacerbated in two ways:

:: Over-borrowing by many publishers to fund ill-timed acquisitions caused the recent bankruptcies of such companies as Tribune, the Minneapolis Star Tribune, Journal Register Co. and Philadelphia Newspapers.

:: Even the most conservatively managed newspaper has been hammered by the worst recession in a couple of generations.

Non-profit ownership will not save a newspaper – or any other business – if it is consistently losing heavy amounts of money. Here’s a case in point:

Some civic leaders last week suggested that a non-profit group might step in to buy the San Francisco Chronicle from the Hearst Corp., which is about to axe a third if the paper’s staff to staunch a loss that probably came to some $70 million last year. The deficit likely would rise in 2009 without the upcoming personnel cuts.

While it is highly doubtful that Hearst would sell the Chronicle for the reasons described here, it would not be enough for local benefactors to create a charitable foundation to buy the Chronicle for even a mere dollar.

Absent a sharp increase in sales and a major reduction in operating expenses that Hearst has been unable to achieve over the nine years it has sunk more than $1 billion into the paper, the only way the Chronicle could survive as a non-profit would be if the civic leaders established a charitable fund capable of underwriting losses of more than $1 million a week.

A conservatively managed endowment of no less than $1 billion would have to be raised to generate the 5% annual return necessary to cover a $50-million-a-year burn rate. What are the chances of that happening?


Anonymous Anonymous said...

Wrote the below to Sen. Cardin's office yesterday after first learning about his proposal. (I am, however, wary about the 'gag' non-profit tax status would impose; that's just too high a price to extract.)

This is where the "major reductions in operating expenses" can come from, plus it offers other interesting synergies. The revenue problem can be attacked independently.

But you're right, a change in the form of ownership won't help much in the long run.

Senator Cardin:

I applaud the Senator for broaching this possibility. Indeed, I would suggest taking this [exploration] a step or two further.

I would urge you to craft a mechanism somewhat parallel to how C-SPAN is funded (e.g. $ from a complimentary for-profit medium, say, radio or television broadcast licensees. Even -or especially- ISPs, internet service providers.)

Further, since newspaper journalistic content can be delivered by *several* means other than simply on paper or over the internet, I would *strongly* suggest that newspapers NOT be made available over the internet. (Now, take a breath and read on.)

Newspapers *could* join with local radio broadcasters, even public stations, to *broadcast* their journalistic content to subscribers in metropolitan areas. Radio could deliver a daily newspaper to virtually *everyone* within an entire metropolitan area in less than one minute. Yep - less than one minute.

This content could be delivered at, say, 4:30 AM. (even at other points throughout the day, if desired), with regular audio programming resuming after that short one-minute interruption.

And it *could* be delivered into a new-fangled bedside clock radio that could in turn 'feed', via wireless link, the received content to whatever reading device (computer screen, iPhone or Kindle) the end user prefers.

In this construct, copyright protection for news content could also be afforded, so no longer could their valuable news content be 'swiped' by aggregators on the internet.

Just wanted to share a couple of ideas that could be worked into a genuine long-range solution to the great challenges currently faced by the journalistic community, a community on which we all rely for an informed citizenry.

I'd be happy to entertain any questions. But rest assured this is do-able.

11:10 AM  
Anonymous Anonymous said...

Non-profit ownership will not save a newspaper – or any other business – if it is consistently losing heavy amunts of money. Here’s a case in point:

what's an amunt?

Beyond that, the fact that the Chron may not be saved in no way refutes the viability for the rest of the industry.

As the Cardin himself noted, this wasn't supposed to be a tool for behemoths, it's designed to bolster "local and community newspapers, not conglomerates which may also own radio and TV stations."


Focusing on scenarios which the bill's author himself says wouldn't work is a strawman argument without much merit.

11:18 AM  
Anonymous Anonymous said...

It seems to me that the strategy is a two step one: establish newspapers as non-profits, shovel taxpayer/future taxpayer dollars at them. This is just a strategy to step around 'bailout fatigue' - presumably bailing out a non-profit will be easier to sell to the people.

11:51 AM  
Anonymous Anonymous said...

I would be interested in your response to Robert McChesney's recent piece in The Nation.

6:55 PM  
Anonymous Anonymous said...

T., I'd like to hear more, a lot more, about the "newspaper by radio signal" idea. Seems very viable to me, reminds me of teletext in 80s, leveraging spectrum so to speak. Can you elaborate or send us to relevant information on this?

Re: the C-SPAN funding model. This is also appealing, based on a fee structure similar to cable spectrum allotments. I agree with assessing fees according to Internet and broadcasting spectrum fees -- toward the social good and so forth. But my question is this: why are newspapers the resource or public asset that are the natural institution to receive these funds? What about non-profit hospitals, or Planned Parenthood, or AIDS projects in Surabaya? Why would newspapers get the nod? Is it because media fees would support other media that has lost readership, or is there another reason?

6:56 PM  
Anonymous Anonymous said...

R. Baier: I'll get to responding to your queries momentarily, but I first wanted to thank Anonymous for pointing to the excellent piece in The Nation by and Nichols and McChesney.

I liked it so much I thought I'd snip some important passages from it and include them here (unless Alan objects).

I think it also provides a solid public policy basis for directing aid to the journalism community and in most all respects serves to answer your "why newspapers and not non-profit hospitals?" question/

"We begin with the notion that journalism is a public good, that it has broad social benefits far beyond that between buyer and seller. Like all public goods, we need the resources to get it produced. This is the role of the state and public policy. It will require a subsidy and should be regarded as similar to the education system or the military in that regard. Only a nihilist would consider it sufficient to rely on profit-seeking commercial interests or philanthropy to educate our youth or defend the nation."

"as the corporate sector shrivels we need something to replace it, and fast. Public and community broadcasters are in a position to be just that, and to keep alive the practice of news gathering in countless communities across the nation. Indeed, if a regional daily like the San Francisco Chronicle fails this year, why not try a federally funded experiment: maintain the newsroom as a digital extension of the local public broadcasting system?"

"..[such government-led efforts would be] a bridge across which journalism might pass from dying old media to the promise of something new. Think of it as a free press "infrastructure project" that is necessary to maintain an informed citizenry, and democracy itself"

7:17 AM  
Anonymous Anonymous said...

Now to R. Baier's queries:

I can't send you to information on this, it's mostly all in my head, where it's been gestating since the mid-90's, coincident with the period of the Internet's rapid ramp-up. The internet's power has required me to consistently challenge and re-assess/adapt this concept and my thinking.

I have yet to find anything on the web (or patent office) that even relates to this, tho' to be perfectly honest, I haven't looked for awhile. And more than a hundred years after its invention, who can re-patent radio?

The core of my thinking is that radio offers the most economical means of disseminating information across a large metropolitan area.

But radio's information delivery by aural means (i.e. voice) is quite limited. Two large impediments are 1) maximum delivery speed is ~300 words per minute - but who can comprehend and absorb that?; and 2) no memory at the receiver that would enable browsing or searching through the content.

There are other, more nuanced, differences with a newspaper experience but I won't go into them here. Teletext suffered all these same disabilities.

With the advent of PDAs and evolution of smart, networked mobile devices, barriers to wireless delivery of information are now gone. Unfortunately, newspapers have not adapted, remaining caught in the Guttenberg era of 'moving type' fresh off huge expensive physical presses by costly (and time-consuming) armies of delivery trucks and drivers.

Leaping into the wireless age is pretty easy technologically speaking, but the profitability and business model challenges would remain in an industry highly-skilled and capable in news collection and reporting, but far behind the curve in technology.

Nonetheless, the value to society of a free press is beyond calculation. Nichols and McChesney's piece is a wonderfully concise statement of that truth. Our challenge is to find a way by which we can maintain it as a viable part of our communities.

Hope this helps.

8:05 AM  
Anonymous Anonymous said...

But Nichols and McChesney do pose a viable option for survival.

-- a $200 tax credit for newspaper subscriptions, with caveats
-- get young people accustomed to producing media
-- and the essential component, public subsidy for journalism, at a rate comparable to that in several European states
-- making all content free online

To quote: Other democracies outspend the United States by whopping margins per capita on public media: Canada sixteen times more; Germany twenty times more; Japan forty-three times more; Britain sixty times more; Finland and Denmark seventy-five times more. These investments have produced dramatically more detailed and incisive international reporting, as well as programming to serve young people, women, linguistic and ethnic minorities and regions that might otherwise be neglected by for-profit media.


7:39 PM  
Anonymous Anonymous said...

Anonymous points to a Nichols/McChesney suggestion: a $200 tax credit for newspaper subscriptions

That's simply a central government micro tax-credit approach to avoid a micro-payment plan.

Kicking the problem upstairs to Uncle Sugar won't overcome the clumsiness of micro-payments -- it just concentrates it in one more D.C. bureaucracy at the mercy of Congress, manipulated by the industry's lobbyists.

The seventy-year old FCC hasn't proven to be a very successful model, has it?

I can just see Monty Python parodying a Department of Micro Tax-Credit Department.....no thanks!!

9:25 AM  
Blogger DANIELBLOOM said...


have you heard about the new word coined to stand for reading text online versus reading on paper surfaces? it's SCREENING. to screen means to read online on a screen. see urbandictionary dot com and email me for added into. i coined it. James Fallows said "not needed"....John Markkoff said "Hmmmmmmm." DAvid Pogue said "Interesting."........Alex Beam said "Not necessary"

Online v. print reading: which one makes us smarter?

By Coco Ballantyne , SCIENTIFIC AMERICAN blog

It's no mystery that publications have been taking a beating as more
and more people read their news on the Net. But there's a catch. The
online info may be instant and abundant -- and in many cases free --
but it may come at a cost, says a new study published in the Journal
of Research in Reading.

Study author Anne Mangen, an associate prof of literacy studies at
Norway's University of Stavanger, says she discovered that reading
online may not be as rewarding – or effective – as the printed word.
The reasons: The process involves so much physical manipulation of the
computer that it interferes with our ability to focus on and
appreciate what we're reading; online text moves up and down the
screen and lacks physical dimension, robbing us of a feeling of
completeness; and multimedia features, such as links to videos and
animations, leave little room for imagination

6:40 PM  
Blogger John Chapman said...

As a consumer of newspapers, internet websites and blogs, I have a problem with any government bailout of newspapers in the form of funds, or special legal provisions.

No one requires newspapers to put their information online without any access restrictions. Clearly, copyright law allows fair use of snippets of articles.

Google, and other search engines are able to index this information- and it is easy to block any search engine by a simple quick entry into a robots.txt file. However, this solution is too simple and effective. It isn't really the issue the newspapers want solved.

The newspaper industry isn't special. They have to adapt, or go the way of the horse and buggy and telegraph. There is much content, much reporting going on now that isn't simple syndication.

Throw AP away. Report yourself on things. Wall Street Journal does this successfully.

I fully support fair use, the right of newspapers to protect their content for only paying customers.

NO ONE is stealing your content. Bloggers link to it. Search engines index it. We as consumers read it- and perhaps might even see an ad or two. Make the content compelling enough, we will pay for it.

However, we don't pay for much at all. Your information is a commodity, not worth much...

Thanks for listening.

2:50 PM  

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