NEW YORK (AdAge.com) -- The government should exempt newspapers from taxes on ad revenue, circulation revenue and charitable contributions if they decide to operate as nonprofits, a U.S. senator said today.
'Tragedy for democracy'
"We are losing our newspaper industry," Senator Benjamin L. Cardin, D.-Md., said in a statement. "The economy has caused an immediate problem, but the business model for newspapers, based on circulation and advertising revenue, is broken, and that is a real tragedy for communities across the nation and for our democracy."
Papers choosing nonprofit status would have to refrain from making political endorsements under legislation proposed by the senator, but could otherwise continue normal operations.
The senator's proposal adds to a growing body of ideas and efforts to preserve newspapers' journalistic functions. A group calling itself Revenue Two Point Zero recently posted a bevy of suggestions intended to shore up papers' income. And House Speaker Nancy Pelosi recently wrote the attorney general over concerns that antitrust laws could hurt newspapers' efforts to survive.
It just isn't clear whether nonprofit status, or even big backing by foundations, could preserve newspapers the way we've known them.
The St. Petersburg Times in Florida is owned by the nonprofit Poynter Institute, for example, but has endured the same budget cuts afflicting the rest of the industry.
"The notion persists that nonprofit ownership could be an alternative, given the deterioration of the for-profit business model for the industry," the Pew Research Center's Project for Excellence in Journalism said in a report last week. "But the current volatility of the business and the scope of the industry's challenges would put any investor's money at risk, even one willing to forgo profits."
A January Op-Ed in The New York Times envisioned The Times supporting a $200 million news budget with a $5 billion endowment invested to return 5% per year. But Alan Mutter, the newspaper vet turned Silicon Valley investor, blogged that The Times might need $400 million or more to cover all its expenses. And who knows how far revenue from circulation and advertising will fall?
"To generate sufficient income to protect the paper against future shortfalls in those key revenue categories, a prudent foundation would have to add several billion extra dollars to the endowment to fill any prospective gaps," Mr. Mutter wrote. "How many billion? It depends on when -- and whether -- you think the newspaper business will stabilize."