A 'Hybrid' Path for Saving Newspapers

The increasingly urgent debate over how to maintain robust news coverage in America during a time when the economic model appears to be collapsing has been taking place on two parallel tracks – for-profit and nonprofit solutions. Each appears insufficient in its own way.

Now Senator Ben Cardin of Maryland has proposed legislation that would allow a hybrid model to emerge – one that would take advantage of revenue streams from both sources. This particular bill may not be the answer. But given the drawbacks of other alternatives, the dual-track approach it embraces is worth a serious look.

The central dilemma in the news business is that audiences are migrating to online news sites at an accelerating pace, but ad revenue isn't following them. Newspaper companies are thus seeing their combined print and online audiences grow even as revenues tumble.

The threat to shut down The Boston Globe unless there are $20 million in union concessions is only the latest stunning development. The owners of the Los Angeles Times, Chicago Tribune, and Philadelphia Inquirer have declared bankruptcy. Hearst is threatening to close the San Francisco Chronicle. Even The New York Times seems suddenly fragile.

Those advocating for for-profit solutions see the greatest potential in online revenue streams that would pay news organizations for their original content. But we seem a long way from a meaningful model, and for a lot of newspapers time has grown short.

Meanwhile, people in the nonprofit world are focused on creating supplemental news operations to fill gaps created by the decline of traditional media. ProPublica does first-rate investigative reporting; Kaiser Health News covers health policy; MinnPost.com covers regional news in Minneapolis.

These initiatives have value. But they can't begin to match the scale or reach of the journalism that they are seeking to replace. In what is widely viewed as a horrendous year, newspaper companies last year brought in $38 billion in advertising, more than 90 percent of it from print. An estimated $20 million was spent on nonprofit alternatives.

David Swensen, manager of Yale's endowment, has proposed a way to bring the nonprofit approach to scale: Convert struggling newspapers to nonprofits and create large endowments to cover their editorial operations. He has written that for $5 billion The New York Times could be preserved in perpetuity. Steve Coll, president of the New America Foundation, has noted that the Washington Post could be endowed for $2 billion.

Forget for a moment where all those billions would come from. Endowing an entire news staff is a solution that exceeds the dimensions of the problem. Advertising is declining at major newspaper companies, but it is a long way from vanishing. It is a revenue source that needs to be supplemented, not replaced.

It is also hard to justify spending philanthropic donations on all forms of journalism. Underwriting the Washington Post's coverage of the financial crisis seems a justifiable use of charitable dollars. The same can't be said of the Post's voluminous Redskins coverage. But lively coverage of sports is as valued by a newspaper's readers as coverage of the weighty issues of the day.

Which brings us to the hybrid approach. Senator Cardin's proposed Newspaper Revitalization Act would allow a newspaper like the Post or the Globe to do everything it currently does – or has yet to invent – to earn revenue. But it would also allow it, after converting to nonprofit status, to accept tax-deductible contributions as well.

Ad revenue would likely still pay for Redskins coverage, but grant money could underwrite that expensive bureau in Baghdad. A newspaper could still raise an endowment to ensure its future. But with ad dollars continuing to flow in, a newspaper like the Post wouldn't need anything close to $2 billion.

This merging of for-profit and nonprofit models faces some serious objections. Why should the tax laws give an advantage to newspapers over other kinds of media? How will the recipients of philanthropic dollars avoid having their news agendas distorted by donor preferences? Would the crutch of donor support hinder the search for new commercial revenue necessary for news organizations' long-term viability?

All are good questions, worthy of debate. But at a time when the prospect of no-newspaper towns is looming, an approach that allows newspaper companies to benefit from both for-profit and nonprofit revenue streams is well worth considering.

Donald Kimelman is managing director of information initiatives at The Pew Charitable Trusts.