Wednesday, March 25, 2009

Non-profit status the savior for newspapers? Fat chance!

Maryland Senator Benjamin Cardin has proposed legislation to allow newspapers to be classified as non-profit entities (technically a “Low Profit Limited Liability Corporation” or L3C). Non-profit status for newspapers has been the hot buzz in the trade press for the past several months and is supported by the Newspaper Guild as an alternative ownership model. But it’s hard to see how it could make a significant difference. Taxes, especially property taxes, are significant expenses. But the real killers are newsprint and payroll. The factors that made newspapers so highly profitable in the past, namely high entry cost for presses and production equipment and the huge employee base that restricted competition, are what is dragging the industry down now. Desktop publishing eliminated the need for heavily manned, highly unionized composing rooms (often well over 350 printers in major markets) for new entrants, opening the door to small competitive suburban dailies and shoppers. As metro areas spread out, a declining circulation base became even more diffuse, raising the cost to deliver a paper to a reader. In the 1960s and 70s a carrier would typically deliver to half the households on a block, even in a competitive market. Now fewer than one in five subscribe to a paper. Newspapers are still stuck with big production facilities, too much press capacity and in the case of recently acquired papers, way too much debt. It’s hard to see how non-profit status will alter anything. The money advertisers spend is already a deductible business expense, no change there either. Several papers are already owned by non profit foundations or organizations. The profit making Times Publishing Company which publishes the St. Petersburg Times is owned by the Poynter Institute, a non-profit journalism school. Similar arrangements are in place at the Manchester (NH) Union-Leader, the Tupelo Northeast Mississippi Daily Journal, Anniston (AL) Star and the New London (CT) Day. But in no way does non-profit ownership, or non-profit status, insulate a newspaper from 15-20% year to year advertising revenue decllines. That’s the norm now. It doesn’t bring back readers who are getting their news from the internet. Would the Ford Foundation pick up a non-profit New York Times? Only if they are willing to fork over $100+ million a year for eternity. Update I am reminded that newspaper rank and file have been looking for ways to save their newspapers and their jobs through the same bailouts being handed out to financial institutions and auto companies. With a half a trillion here and a trillion there, what's a couple of billion for newspapers? The problem is how can they remain the government watchdog and feed at the government trough at the same time. By equating newspapers to NPR through the ruse of non-profit status, you open that door. The proponents of this bill would require newspapers to give up political endorsements, and that's about all. Certainly NPR and PBS have found it difficult if not impossible to carry anything positive about conservatives. To say they are non-partisan at election time is more than a stretch. They may not endorse candidates, but they certainly try to sway opinion. At some time in the not too distant future, the forces of fiscal restraint will be heard. A billion or two subsidy for a still biased press can be made a political liability for those who support it. Another thought. How about a Fairness Doctrine for non-profit newpapers?

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