Wednesday, January 28, 2009

The future of newspapers

I've been mulling over what the future of journalism and the future of newspapers will look like. In the short term we're going to see the closing of more and more small and local newspapers. Who then will create the primary source material that our commentary driven media relies on? Who's going to pay someone to be the beat reporter for the St. Louis Cardinals so that ESPN has a trove of primary source material at hand to disseminate via ESPN.com? Who is going to pay for a Colorado Capitol beat reporter to generate the primary material for the blogs and radio hosts? I don't know the answer and in the very near term there may not be an answer. Print journalism as we know it is a dying profession but the primary source material they generate is still very much needed and in demand, especially online. Someone will come up with a model whereby the online publications, blogs and the like will reimburse free lance journalists who cover a designated beat.

It's not just the small to medium sized newspapers that are in trouble though. The Atlantic Monthly recently did a lengthy report on the state of the New York Times,

Earnings reports released by the New York Times Company in October indicate that drastic measures will have to be taken over the next five months or the paper will default on some $400million in debt. With more than $1billion in debt already on the books, only $46million in cash reserves as of October, and no clear way to tap into the capital markets (the company’s debt was recently reduced to junk status), the paper’s future doesn’t look good.


So what happens to these august institutions like the New York Times and the Washington Post? We're not in a market where a media corporation is going to purchase these newspapers. Their brand names may rate higher than The Rocky Mountain News nationally and internationally but financially there's little to no difference between the Rocky and the Times at this point. So given that a corporation cannot purchase these institutions we're left to turn to wealthy individuals and families to support these enterprises. In the case of the Times the Ochs-Sulzberger family has owned or effectively controlled the paper since 1896 but how long can a family be asked to sustain an enterprise for the public good that is losing large sums of money?

In today's NY Times two financial chiefs from Yale University offer a solution,

Although the problems that the newspaper industry faces are well known, no one has offered a satisfactory solution. But there is an option that might not only save newspapers but also make them stronger: Turn them into nonprofit, endowed institutions — like colleges and universities. Endowments would enhance newspapers’ autonomy while shielding them from the economic forces that are now tearing them down...

As educational and literary organizations devoted to the “promotion of social welfare,” endowed newspapers would benefit from Section 501(c)(3) of the I.R.S. code, which provides exemption from taxes on income and allows tax deductions for people who make contributions to eligible organizations.


I think this idea has a lot of merit and significant potential as a solution for the big name newspaper franchises. There is a catch though that the authors note,

One constraint on an endowed institution is the prohibition in the same law against trying to “influence legislation” or “participate in any campaign activity for or against political candidates.” While endowed newspapers would need to refrain from endorsing candidates for public office, they would still be free to participate forcefully in the debate over issues of public importance. The loss of endorsements seems minor in the context of the opinion-heavy Web.


This looks to be a not insignificant hurdle until you realize the prevalence of "c3" advocacy non-profit groups doing political and community organizing work. There's been an explosion of these types of groups in the last few years as organizations move away from the infamous "527" model of independent advocacy. I actually worked for such a group this past election cycle and there were at least a dozen similar organizations that were doing similar work.

Give the whole piece a read, I think the authors may have at least pointed us in the general direction of the future of our media.

1 comment:

Andrew Oh-Willeke said...

Why not the 527 model? After all newspapers were affiliated with political parties for long periods of American history. The main tax difference between a (c)(3) and a 527, is that the 527 pays income on investment income.