Vol. 20, No. 5,020 - The American Reporter - July 18, 2014




by Randolph T. Holhut
American Reporter Correspondent
Dummerston, Vt.
August 30, 2013
On Native Ground
KEEPING IT REAL: MARTIN LUTHER KING'S PROGRESSIVE VISION

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DUMMERSTON, Vt. -- In the wake of the sale of The Boston Globe and Worcester Telegram & Gazette to Red Sox owner and hedge fund billionaire John Henry for $70 million in cash, and the sale of The Washington Post to Amazon.com founder and billionaire Jeff Bezos for $250 million, Bloomberg News columnist Megan McArdle recently asked, "Should we be worried that soon billionaires will own all our major news outlets?"

Her answer? "It may come to that, but I don't find that idea worrisome. (And yes, I know whose name is on our website.) Or at least, I don't find it as worrisome as the likely alternative, because it's looking less likely that most print media companies are going to survive the next decade or so as profit-making ventures."

McArdle buys into the conventional wisdom that newspapers aren't profitable, now that so much classified advertising has migrated online. "For struggling outlets that provide a valuable public service, billionaires are the answer to a citizen's prayer," she wrote.

But she forgets one important fact. Newspapers remain one of the most profitable businesses around. Even now, according to Alan Mutter at the Reflections of a Newosaur blog, "The earnings before interest, depreciation, amortization and taxes of the nation's publicly traded newspaper companies in 2012 averaged 13.7 percent, or nearly twice the 7.7 percent EBITDA posted by Walmart, the largest Fortune 500 company."

The trouble is that those publicly traded companies built their business models on making three times that amount. In 2005, a decade after the World Wide Web took off, newspapers were making an average of 24.2 percent. Back in the 1980s, some chains were getting 30-40 percent profits out of their properties, especially if their papers were the last ones standing in formerly multi-paper towns.

I started out in newspapers in the mid-1980s, when nearly every paper in America was raking in the dough, thanks to consolidation.

The Washington Post is a good example of this. They swallowed up their main morning competitor, the Times-Herald, in the 1950s. The Post's remaining afternoon competitors - the Washington Daily News and The Washington Star, once the dominant paper in the city - merged in 1972, but the merged paper would die in 1981.

By the time they were the last paper standing (save for the much smaller and much more conservative Washington Times, which has been running on Rev. Sun Myung Moon's money since its founding in 1982), the Post had a virtual monopoly on print advertising in the city in the 1980s and 1990s, and made lots and lots of money for the Graham family.

The attraction of pulling in double-digit profit margins in monopoly markets explains why Warren Buffett bought up so many small-and medium-market newspapers in the past couple of years. In places where the local newspaper is the dominant and trusted source for news, owning a newspaper is still a license to print money, even if margins are half of what they once were.

The problem was that these newspapers went from being mostly owned by local interests to being owned by chains that care only about squeezing every last penny of profit out of the communities they serve.

When news became a profit center rather than a public service, and the need to satisfy shareholders became more important than delivering the news, that's when the fortunes of newspapers starting going into the toilet.

Having billionaires own newspapers takes us back to the old days when the men (and the occasional woman) who ran them were usually more interested in using them as a bully pulpit to support their causes. Making a profit was an afterthought.

Henry and Bezos may follow in Buffett's footsteps and be disinterested owners of their respective papers, but the urge to use them like Rupert Murdoch uses the New York Post - to puff up friends and tear apart enemies - will be hard to resist. Murdoch has never made a dime off owning the Post, and it doesn't matter to him, he paper's value to him is as a tool to get what he wants, rather than be a profit center.

However, newspapers don't have to exist as the playthings of billionaires, or to generate profits for Wall Street. There's another model out there for newspapers - nonprofit journalism.

The weekly newspaper in Vermont that I help to run, The Commons, was established as a nonprofit. It has a dual mission to report the news, and to educate people on how to make the news. We've taught classes around our area on media literacy, writing, and interviewing. We've developed a journalism curriculum for students from elementary school to high school, and help several schools put out their own newspapers. We've offered apprenticeships to anyone willing to learn about journalism.

The paper is free, as is our website, commonsnews.org. So how do we fund our limited, on-a-shoestring operation? With a three-legged stool of support - advertisers, grants, and individual donors. It's not a lot different from the public broadcasting model -- we'll give you the content for free, and if you like it, you kick in a little money to support it.

That's the philosophy we operate under. There aren't many nonprofit newspapers out there, mainly because the Internal Revenue Service hasn't figured out yet what constitutes nonprofit journalism and is reluctant to consider journalism a public good. Also, a nonprofit newspaper would be subject to the same restrictions that other nonprofits have against direct advocacy for a political candidate or party.

But I think the nonprofit model can be replicated elsewhere, because a good community news organization is indeed a public good and is too important a task to be left solely to the free market. Freed from the need to please Wall Street and earn an ever-increasing profit each quarter, a nonprofit newspaper only needs to meet expenses and reinvest any extra back into the organization.

if the IRS would again start accepting applications for nonprofit status from news organizations, I think we would see the birth of a new age of news and information. We would get better, more relevant local journalism that is of, by, and for the community.

We don't need billionaires to save journalism. We need a better model that makes it possible to create good journalism. The nonprofit model is one way to get there.

AR's Chief of Correspondents, Randolph T. Holhut, holds an M.P.A .from the Kennedy School of Government at Harvard University and has been an award-winning journalist in New England for more than 30 years. He edited "The George Seldes Reader" (Barricade Books). He can be reached at randyholhut@yahoo.com.

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