Bridge to nowhere: Non-profit press ownership
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?