Endow Newspapers? Wrong Question

    by Dan Gillmor
    January 30, 2009

    There’s a debate under way in the newspaper/journalism corner of the blogosphere and Twittersphere, spurred by an op-ed commentary in the New York Times earlier this week. The piece, by Yale’s chief investment officer, David Swensen, and his colleague Michael Schmidt, a Yale financial analyst, starts with a questionable idea — that newspapers should be endowed as nonprofits in order to save them — and goes south from there. The column begins:

    “The basis of our governments being the opinion of the people, the very first object should be to keep that right,” Thomas Jefferson wrote in January 1787. “And were it left to me to decide whether we should have a government without newspapers or newspapers without a government, I should not hesitate to prefer the latter.”

    Today, we are dangerously close to having a government without newspapers. American newspapers shoulder the burden of considerable indebtedness with little cash on hand, as their profit margins have diminished or disappeared. Readers turn increasingly to the Internet for information — even though the Internet has the potential to be, in the words of the chief executive of Google, Eric Schmidt, “a cesspool” of false information. If Jefferson was right that a well-informed citizenry is the foundation of our democracy, then newspapers must be saved.

    There’s so much wrong with this essay that one scarcely knows where to start. In one critique, Alison Fine grasps a key reason the proposal lacks weight: Its “fundamental premise that only newspapers can hold government accountable” is absurd on its face.

    The piece drew plenty of other attention from journalists and industry watchers including an interesting question from the Nieman Journalism Lab’s Zachary M. Seward, who wondered how much it would cost “to sustain every American newspaper in perpetuity as non-profit organizations” — and, after consulting with Alan Mutter came up with a guesstimate of $114 billion. Cough.


    This is to save only the editorial staff, mind you. Journalists have an unfortunate habit of forgetting that other people also work in their organizations; and the logic here is that what we want to preserve is the jobs of the journalists who report the news — never mind that the people who still buy newspapers don’t do so entirely because of what fills the news columns, but also to see the ads and non-news features.

    Seward reasonably points out that we’d be foolish to endow the newspaper industry as it currently exists. When I look at most local newspapers these days I see skeletons: businesses that have been systematically looted over the years, to send money to far-off corporate headquarters to pay fat executive salaries and boost stock prices. Preserve them? Why would we want to do that?

    We’re unquestionably losing something important as the newspaper business model implodes. As a shareholder in three of those companies I’m unhappy about it, but I’m also not going to suggest that I blindly invested. Over the years I’ve made much, much more on my newspaper shares than I would lose now even if all of them (not a chance) were to fail tomorrow.


    But we’re already seeing some models for the future emerge. One, just one, is nonprofit.

    The idea that philanthropists should get into the community information business is not new, nor bad. It’s come up a number of times, most recently with the Knight Foundation’s funding support, along with community foundations, of local initiatives.

    And not-for-profit media is hardly new. PBS, NPR and many other organizations don’t aim to make profits. But nonprofits are enterprises, too. They require business models as much as any for-profit enterprise.

    Nonprofits generally exist, meanwhile, to ameliorate failures in the for-profit marketplace. Markets do fail, and they do so frequently. (I’m not talking here about the financial meltdown we’re experiencing, which is all about society’s failures in a much wider way.) Bill Gates’ worthy philanthropic efforts to rid the planet of diseases that aren’t profitable for the medical industry speaks specifically to this issue, as do countless other such enterprises.

    The market failure most notable in the newspaper business of the past half-century was felt not by the journalists but by the buyers and sellers of products and services in communities. This was due to newspapers’ monopoly status, leading them to extract outrageously high profits from advertisers who essentially had no alternatives. Ask anyone who used the classifieds before eBay and craigslist and other better, cheaper competition came along — they’ll tell you what a failed marketplace looks like.

    That era was good for the editorial staffs, which enjoyed long-term, stable employment and, in many cases, some distance from advertiser influence over the contents of the news pages. However excellent the journalists were, however — and many were truly superb — this was not a climate that bred risk-taking and innovation beyond imagining how to be better reporters. Improving the journalism was a great thing; but becoming conservative in other ways was not.

    We’re seeing an explosion of innovation now. Some of it is coming from inside news organizations. But the majority is, from my perspective, coming from outside, from people inventing or adapting business models as well as journalism and information techniques.

    Do we need funding sources for these new and adaptive projects? You bet. Some has already been committed or is in the pipeline now. It’s not enough, but it’s a start.

    I’ll wager, with little fear of losing, that a great deal of the community information we’ll get in a few years will come from for-profit sources. But that will still leave vast territories for two other models: volunteers and nonprofits. Sometimes these will overlap.

    The most essential role for nonprofits is almost certainly going to be in addressing the new market failure. This is the category I call “eat your spinach journalism,” the reporting that we all agree we need but which requires money and time to do. Certain kinds of investigations and watchdog reporting, including such basics as keeping an eye on what the City Council and local/state agencies are up to, may not support for-profit ventures, and we’ll desperately need other sources of funding for those.

    That the New York Times used its valuable op-ed space to showcase such shallow thinking by the Yale financial guys is depressing. At least their essay sparked some conversation. But please, let’s move onto realistic possibilities.

    Tagged: business models endowments newspapers nonprofits

    5 responses to “Endow Newspapers? Wrong Question”

    1. Thanks for the shout-out, Dan.
      I think there’s a wonderful opportunity for local newspapers to use their infrastructure and connect with, or even recruit, local bloggers to cover local events, like school board and planning board meetings.
      It’s worth a discussion — if the hand-wringers can listen to anything right now. Thanks again.

    2. Rick Falls says:

      I hope they all implode !

      The newspaper has been so out of touch for so long with their pricing to effectiveness ratio it’s ridiculous.

      It’s about time they face the inevitable crash and burn that they’ve arrogantly positioned themselves for.

      The horse and buggy days ended when a better alternative came along so ba bye newspapers.

      You’re simply no longer useful as an information source and most definitely your days as effective advertisers have clearly been over for a long time.

    3. You started down a road I was hoping you’d wind up making it to the end of with this …
      “Journalists have an unfortunate habit of forgetting that other people also work in their organizations; and the logic here is that what we want to preserve is the jobs of the journalists who report the news — never mind that the people who still buy newspapers don’t do so entirely because of what fills the news columns, but also to see the ads and non-news features.”

      But you stopped short. Ads and non-news features? How about people who still buy newspapers (or who read the news online or in magazines or who listen to the radio) want well designed content as much as they want factually sound content. We want text that doesn’t hurt our eyes, audio that doesn’t skip or grate. We want someone to copy edit everything before we have to read it. We want it printed on paper we can take on the train with us, which means we want it laid out and sent to the printer. Some of us care which printer and how toxic the ink.

      Sure, people buy papers for “ads and non-news features” but if those went by the wayside, democracy could survive. Honestly, those are what aren’t threatened in the least. I can pick up any glossy magazine at the newsstand and get filled-till-I-loose-a-button with ads and non-news features. It is journalism that is harder and harder to find.

      Without real reporting on what is going on in our government, and outside our government, we can’t take an informed stand. That matters, and getting that reporting from even the best journalist out to the hands / eyes /ears of the public takes a lot more than just journalists. That is what I thought you were going to say — don’t forget about the production staff. The people who make this all go and go smoothly.

      That said, I do think that we need independent journalism to keep up with issues outside of any one advocacy agenda.

    4. And … Allison … I just don’t see it. The promise of engaged local citizens blogging the school board meeting just hasn’t materialized in any consistent way, and engaged citizens don’t have the wherewithal to spend a half day following up on claims and assertions from the meeting or going back to check up on promises made. That is the stuff that good journalists do (and plenty of lazy journalists don’t, to be sure) that volunteers can’t do reliably for very long.

    5. As you’ve noted, we should take Jefferson’s use of the word “newspapers” to mean “media” or “press”. But still, I think nonprofit endowments as a business model for social-interest media organizations is a good idea.
      There are certain social needs that, when left entirely to the market, result in such inequity that we collectively establish an alternative structure to sustain them. Childhood education is one. Perhaps noncommercial media is another.
      I like the endowment idea, though I’d contribute to an endowment supporting a blog aggregator before I’d contribute to one supporting a print paper.

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