Idea to save newspapers: Give them endowments

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 non-profits supported by large endowments.

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 sweeping layoffs, scale back home delivery and make other drastic cuts to counter plunging advertising revenue.

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."

"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 the idea faces skepticism from the very newspapers that stand to benefit. Critics say endowments also beholden newspapers to their large donors, and that giving newspapers tax-exempt status could restrict them from endorsing candidates or running editorials on pending legislation.

On a more practical level, skeptics question whether the millions of dollars needed to create such endowments could be raised during the worst recession in decades.

Four newspaper companies, including the owners of the Los Angeles Times, Chicago Tribune, The Philadelphia Inquirer and the New Haven Register, have sought Chapter 11 bankruptcy protection in recent months. In Denver, the Rocky Mountain News published its last edition Friday. Newspapers in San Francisco, Seattle and Tucson, Ariz., could close if buyers aren't found.

Newspapers are having to rethink every aspect of their operations, including their for-profit existence, given their inability to generate enough revenue from their Web sites to offset the losses in print.

In 2007, casualties of newspaper downsizing in Minnesota formed with $850,000 donated by four families. The non-profit also attracted support from more than 900 member donors and various foundations, including the John S. and James L. Knight Foundation.

Minnpost's mission: To produce the substantive local journalism its creators say has been on the decline because of industry cost-cutting. But those projects are relatively small, and endowments are rare.

Alberto Ibarguen, president of the Knight Foundation and former publisher of the Miami Herald, said obstacles include persuading shareholders to sell and persuading foundations to invest in a shrinking business.

An endowment might not help preserve a printed edition, but it could save functions such as investigative reporting and foreign correspondents as newspapers transition to the Internet, said Steven Coll, president of the New America Foundation think tank.