Entertainment & Entrepreneurship

A new piece of legislation has been proposed by Senator Benjamin Cardin of Maryland (D), in which he hopes to provide an additional business model for newspapers.

The Newspaper Revitalization Act would allow newspapers to operate as non-profits, if they choose, under 501(c)(3) status for educational purposes, similar to public broadcasting.  Under this arrangement, newspapers would not be allowed to make political endorsements, but would be allowed to freely report on all issues, including political campaigns.  Advertising and subscription revenue would be tax exempt and contributions to support coverage or operations could be tax deductible.

The measure is targeted to preserve local newspapers serving communities and not large newspaper conglomerates.  Because newspaper profits have been falling in recent years, no substantial loss of federal revenue is expected.

 Not too long ago, Jacob Weisberg wrote in Newsweek, lamenting the troubles of the newspaper industry.

The sorry predicament of the newspaper industry has given rise to a testy argument about journalism's future. In one corner are editors who believe news organizations committed a fatal mistake by giving their content away for free on the Internet. These people think that a successful digital business model demands revenue from users as well as from advertisers.

Another camp favors philanthropic support … more like universities, with their independence underwritten by charitable endowments. A third faction, which includes most Web journalists, doubts both those models and looks to online advertising for sole support. The New York Times now draws about $200 million in annual revenue from Internet ads—not far short of the cost of its global editorial operations. Without a print edition, the Times would be smaller business, but quite possibly a better one.

In presentation I made last week, I mentioned what I see as the eventual future of the newspaper:

• Physical delivery has been fully eliminated [or disintermediated to keep with the theme of my presentation]

• Kindle, micro-laptops and ever-lighter readers will put digital papers on kitchen tables and in bathrooms

• Consolidation

  • 2-5 national papers

    Network of local content providers (which in some cities will provide local content for all nationals)  

The specifics of the Newspaper Revitalization Act will need to be changed. There is simply no reason to provide newspapers a better tax arrangement than the arrangement available to public broadcasting or educational institutions. Advertising revenue should be treated as taxable income just as it is in the other media. But this will not create problems for those newspapers which choose to become tax exempt charities, since the taxable income will be offset by the companies operating expenses.

For many communities, physical delivery of newspapers will continue to be important for the next few years, until the technologies for digital paper make these devices cheaper, lighter and easier. But the time will be coming. The new legislative proposal is just another milestone on the road.