NEW HAVEN, Conn. --- As sharp revenue reductions put the future of many U.S. newspapers in doubt, one idea gaining attention is the conversion of newspapers into tax-exempt nonprofits supported by large endowments.
Although viewed by many as a long shot at best, such a radical change could be a savior for the industry and its vital role in a democracy.
That's why the endowment model is drawing renewed attention as newspapers impose massive layoffs, scale back home delivery and make other drastic cuts to counter plunging advertising revenue amid a recession that has compounded struggles from the migration of readers to the Internet.
David Swensen, who managed one of the world's largest endowments as chief investment officer at Yale University, said endowments "would enhance newspapers' autonomy while shielding them from the economic forces that are now tearing them down."
"By endowing our most valued sources of news we would free them from the strictures of an obsolete business model and offer them a permanent place in society, like that of America's colleges and universities," he wrote in a recent opinion piece in The New York Times .
BUT FIRST, THE IDEA must overcome skepticism from the very newspapers that stand to benefit. Critics say endowments could make newspapers beholden to their large donors, and giving newspapers tax-exempt status could restrict them from endorsing candidates and running editorials on legislation.
Skeptics question whether the millions and millions of dollars needed to create such endowments could be raised during the worst recession in decades.
Newspapers are having to rethink every aspect of their operations, including their for-profit existence, given their inability to generate enough revenue from Web sites to offset print losses.
In 2007, recent casualties of newspaper downsizing in Minnesota formed Minnpost.com with $850,000 donated by four families. The nonprofit also attracted support from more than 900 member donors and various foundations, including the John S. and James L. Knight Foundation headed by the former publisher of The Miami Herald .
Minnpost's mission: to produce the substantive local journalism its creators say has been on the decline because of industry cost-cutting.
National Public Radio, whose endowment received a major gift of $194 million from Joan B. Kroc in 2004, relies primarily on funding from member stations and corporate sponsors. Income from its endowment will generate just 6 percent of funds this fiscal year.
Creating an endowment to sustain a newspaper will be tougher.
WHILE WELCOMING Mr. Swensen's proposal, Alberto Ibarguen, the president of the John S. and James L. Knight Foundation and former publisher of the Miami Herald , said obstacles include persuading shareholders to sell and foundations to invest in a shrinking business.
Newspapers, and their bankers, would need to offer a fair price to shareholders or face rejection or lawsuits, said Rick Edmonds, a media business analyst at the Poynter Institute, a nonprofit journalism organization funded through profits from the St. Petersburg Times in Florida.
Joel Kramer, the editor of Minnpost .com, said without enough philanthropy money available to endow a significant number of newspapers, a better approach would be to support innovators and startups such as Minnpost.
Major news organizations spend millions of dollars to provide coverage from around the world -- resources no blogger or casual journalist can match. But because of cost pressures, many newspapers have closed foreign bureaus.
Newspapers also have been able to devote fewer resources to the type of investigative projects that exposed the Watergate scandal.
An endowment might not help preserve a newspaper's printed edition, but it could save functions such as investigative reporting and foreign correspondents as newspapers transition to the Internet, said Steven Coll, the former managing editor of The Washington Post and now president of the New America Foundation think tank.
Mr. Swensen, who declined to comment beyond his column in the New York Times , acknowledges that only a handful of foundations and wealthy individuals have the money required for such endowments.
"Enlightened philanthropists must act now or watch a vital component of American democracy fade into irrelevance," Mr. Swensen wrote.
PAPERS IN PERIL
The Rocky Mountain News published its last edition Friday. Newspapers in Seattle and Tucson, Ariz., face closure if buyers aren't found, and the San Francisco Chronicle also faces closure or sale if it can't slash expenses.
Four newspaper companies sought Chapter 11 bankruptcy protection in recent months:
- Tribune Co., owner of the Chicago Tribune and the Los Angeles Times, filed Dec. 8.
- Star Tribune Holdings Corp., Owner of the Minneapolis Star Tribune, filed Jan. 15.
- Journal Register Co., Owner of the New Haven (Conn.) Register, filed Feb. 21.
- Philadelphia Newspapers LLC, owner of The Philadelphia Inquirer, filed Feb. 22.
-- Associated Press