Thursday November 24, 2005

Should newspapers be publicly traded?

Drawing of the proposed Watson Island Shangri-La, criticized by the Herald

Happy turkey-day, folks. This morning, we’re looking at an essay by our man Michael Lewis, “Just when we thought we’d outgrown childish name-calling …,” written in response to this article in the Herald. The whole thing is worth reading, but his basic point is that the Herald is taking three people’s unsubstantiated accusations and giving them inappropriate legitimacy.

What’s not proper is a headline that states that the hotel has communist ties – because that’s what “Hotel plan bashed for communist ties” says. It doesn’t say “alleged communist ties” – it assumes that if “activist and radio personality Ninoska Perez-Castellon” and city commissioner and radio commentator Tomas Regalado bash it, it’s got communist ties. That’s worse than allowing name-calling in print – it’s not only dignifying the ridiculous in a major newspaper, it’s accepting the name-calling as fact.

Michael ends with a riff about how we live in a free country, people are free to say what they want, newspapers are free to print whatever they want, he’s free to respond anyway he wants, and “[y]ou can decide which media sources you also want to skip.” And that is precisely where we have to disagree.

Now, Miami Today does some wonderful reporting (mostly on business), as does the New Times, the Sun Post, and other local weeklies. But Miami remains a one-paper town. For whatever its flaws, the Herald gets a lot of reporting done that nobody else is in a position to do. The people who criticize it the most are also the people who care the most about newspaper reporting, and so the people most likely to read it. This very blog relies on the Herald for some of its content.

The Herald has bigger issues, though (in fact, the entire newspaper industry does). Knight Ridder, the company that owns the Herald, is up for sale. Why? ‘Cause of the shareholders. It turns out, though, that the company is not loosing money. In fact,

Despite the gloom about the business on Wall Street, Knight Ridder and other newspaper companies remain profitable. In the third quarter of 2005, Knight Ridder reported operating income of $96.3 million, down from $126.5 million for the same period last year. Revenue for the quarter grew to $723.8 million from $708 million a year earlier.

Doesn’t sound so bad, right? The problem is that the company is publicly traded, and stockholders don’t care about a newspaper’s level of service to its community, or even, amazingly, about profits — they care about their stock prices. When the stock prices go up, they’re happy. When they go down, they demand changes, even if those changes are bad for the company in the long run (in fact, shareholder demands sometimes lead to the dissolution of companies).

There’s nothing wrong with newspapers being for-profit organizations, but when that for-profit status hurts their long-term success, maybe a transition to non-profit status is the answer. Think about it — the newspaper could continue to operate as it has, collecting ad revenue and subscription fees (in fact, it could solicit philanthropic contributions), but it’s board of directors would be replaced with a board of trustees, who’d have the community’s best interests in mind, along with the organization’s (those interests seem pretty compatible for a newspaper). We’ve heard of non-profit newspapers starting from scratch, but never of such a transition. In fact while the internet is full of stories about non-profits becoming for-profits, the only instance we could find of the reverse was a little software firm. Is it a good idea? Is it even possible? We welcome our readers’ input: the comment boards are open.


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  1. mkh    Fri Nov 25, 06:57 AM #  

    The move from profit to not-for-profit is an interesting idea, and one I’ve not heard before. Unfortunately I suspect the stockholders would be more likely to allow Noam Chomsky as editor-in-chief than stop their stripmining of American journalism.

  2. alesh    Fri Nov 25, 07:45 AM #  

    ok… that’s a valid point. so part of the deal needs to be that the stockholders get taken care of. i guess a big piece of money needs to be part of the equation. what if part of it came from philanthropic contributions (what rich donor wouldn’t want to support the first ever non-profit newspaper?), and part from loans (if the newspaper continues to operate essentially as it has, it can show a very healthy profit stream.

    any other issues?

  3. mkh    Sat Nov 26, 09:46 AM #  

    I’m not in a position to do much research at the moment, but when the Corporation for Public Broadcasting was founded, did any pre-existing for-profit stations make the move? It sounds as though what we’re talking about is a print version of NPR, really.

    Part of this also raises the question of the continued relevance of print news, anyway. I happen to like newspapers, but the case for their approaching demise is fairly strong. I can more easily imagine a scenario where (for example) becomes the primary distribution point for news, with a print version the next morning with more in-depth coverage.

  4. Miami Harold    Sat Nov 26, 10:57 AM #  

    What would be the motive to take a newspaper non-profit?

    Love of journalism?

    Sense of professional responsibility?

    Commitment to unearthing hard truths?

    Burning desire “to afflict the comfortable

    and comfort the afflicted”?

    Pure unadulterated ego?

    The first 4 no longer exist in any great measure

    at the top levels within the industry itself,

    which is one major reason newspapers have become so lame.

    The 5th is all over the damn place including the non-profit world

    and wouldn’t make a difference

    in the quality of the ultimate product.

    The Christian Science Monitor is an interesting publication,

    independent, well-written, carefully researched,

    and whether or not it’s non-profit,

    it is in fact published by a church (a non-profit entity).

    But its mission is goes beyond mere provision of news,

    which is why it earns donor support.

    I doubt any donors could be rounded up to support

    a garden variety newspaper that happens to be non-profit

    unless it had a specific agenda—political, cultural, religious, etc.

    Again—what’s the motive?

    And then, who would read or trust it?

    But the bottom line is, well, the bottom line.

    Newspapers are too profitable any more to abandon entirely;

    as components in major media empires,

    their role is to generate revenue.

    When reporting the news gets in the way of making profits,

    they simply report less news.

    Proof: Knight Ridder and The Miami Hurled.

  5. alesh    Sun Nov 27, 09:44 PM #  

    Marc, there is a distinction to be made between a “newspaper” as a physical printed object and a “newspaper,” the news-gathering/writing organization. The former will become obsolete in proportion to the availability of convenient, inexpensive web-browsing machines (laptops, tablet pc’s, low-power digital books, etc). The latter is “in crisis” but may not be in decline.

    The Herald, for example, has a competent (if flawed) web outlet, a partnership with wlrn radio, and Channel 4. Those organizations recognize that they cannot match the Herald’s newsgathering reach/grasp. That’s the very quality that profit-maximizing measures are hurting, though.


    The absence of those idealistic principles (“love of journalism,” “commitment to unearthing hard truths” etc) in newspaper management is a direct result of the shortsightedness of quarterly-earnings-watching shareholder presures. I guess the only way around those forces is with the one-time expense of simply buying them out. This would require assembling a one-time big piece of money.

    The CSM is an interesting case – my understanding is that it almost breaks even; the church makes up the difference. But I think NPR, public television, etc. is a better example.

    And in those cases, people do give money even though (i’d argue because of) those organizations attempt to be free of bias.

    Public radio gets money from the government, public donations, and ad sales. A non-profit newspaper could get money from all those sources, although probably a smaller (or none) percentage from the government, and a larger percentage from ad sales and subscriptions.

    It seems to me that the reverence that the history of newspapers in our country receives would make a good hook for going after philanthropic contributions, especially if the organization could make the argument that they’re serving the community better then they did when they were for-profit.

    Why couldn’t that work?

  6. mkh    Mon Nov 28, 06:21 AM #  

    I agree as regards the continued value of a news gathering organization versus the print edition. “In decline” isn’t the same as “extinct,” you know. Personally, I suspect that the recent breakthroughs in digital paper—1200 dpi is much more legible than any computer screen commonly available today—may help revive the newspaper form.

    CSM is a great example, though, and worth pondering more.

  7. JSS    Mon Dec 5, 06:37 PM #  

    One point you may have overlooked is that the Miami Herald is not one of the profitable newspapers in the chain. Secondly, Knight Ridder is not simply a newspaper business. It owns Career Builder, it has investments in other media, etc. Many people feel that they should cut off the least profitable portions of their operations, including expensive newsgathering operations. After all, if they get all of our info from wire services and press releases they will be tremendously profitable.

    I also think that people have too high of an opinion of the non-profit world. It can be just as screwed up, self serving, and ultimately power and profit driven as any other portion of the economy.

    Still, it is a great idea. It brings into question the nature of corporate capitalism especially as it affects public serving institutions.

    What we may need however, is the development of self sustaining new media that will support costly investigative and alternative source journalism.

  8. alesh    Tue Dec 6, 06:55 AM #  

    Interesting point, JSS. If the Herald is in fact NOT profitable, that actually makes the prospect more realistic, because it makes Knight Ridder a very eager seller. Getting all their info from wire services and press releases is the direction they’re headed. If they jump to that overnight, they might be profitable in the short run. It would catch up to them absurdly soon, though: remember that the other piece of this is the inevitable separation of the newspaper as a news-gathering organization vs. the newspaper as a physical news/content delivery system.