August 17, 2009
Recovery for Newspapers?
An opinion published in today's Atlanta Journal-Constitution suggests that newspapers, hard-hit by the current economic climate, could well recover if they began operating as nonprofit organizations. According to the op-ed piece, today's newspapers are struggling because they are losing out on advertising revenue. As a result, many newspapers "simply do not have a profit incentive to engage in significant watchdog or accountability journalism."
That said, the article has a proposal:
One possible solution to rescuing the watchdog function of the press is to allow newspapers to operate as nonprofits. If a newspaper were run as a nonprofit, this would allow people who valued the impact of its stories to donate and receive a tax deduction.
According to the article:
Media and nonprofit leaders recently . . . identified several steps the federal government could take to make it easier for struggling daily newspapers to transition to nonprofits. For example, the Internal Revenue Service currently has the power to issue tax guidelines that would make clear that metro daily newspapers could be run as nonprofits.
Additionally, Congress could speed the development of new forms of media organization, such as the low-profit limited liability (L3C) corporation. L3Cs are companies with low profits but high positive spillovers on their communities.
A newspaper run as a L3C could draw many different types of investors. Foundations interested in accountability coverage could make a program-related investment in the L3C and state up front they did not expect a high rate of return. Socially conscious investors who care about local news could also invest in the L3C and accept only a modest rate of return. With these two sets of investors accepting lower rates, a third set of investors in search of a market rate of return also could be willing to invest in a newspaper.
In the final analysis, this development would ultimately help newspapers return to their watchdog role:
If a metro newspaper were run as a L3C, the presence of investors who focused on the quality of public affairs coverage would help managers make the case for watchdog stories. And if the L3C ended up doing well and doing good at the same time, the taxes on any profits would be paid as they were distributed among the investors.
This is not a bad idea at all!
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