Journalist Bill Wyman—who is not, repeat not, the age-of-consent refusenik bassist for the Rolling Stones—lists a baker's handful of reasons why the fad for nonprofit status will not cure the (hopefully) terminal illness afflicting traditional journalistic enterprises.
Wyman's objections range from the pithy ("A nonprofit company is a timid company") to the back-of-the-envelope ("The costs-to-potential-income ratio is vastly, fatally, lopsided") to the more elaborate:
Newspapers earn their money by selling ads on newsprint and delivering them, via a societal convention cum monopoly, to people's doorsteps' each morning. The value of that monopoly subsidized the news gathering.
Unfortunately, the monopoly is seeing its value plunge precipitously.
The point is this: Any plan to make money doing journalism that doesn't contain a revenue source involving magic money on this scale isn't going to work.
At Salon.com, which I think is a fair example to give, in that it balanced serious and investigative journalism with, uh, lots of articles about sex and TV, we all saw how few people read the articles that took the most time and money and effort to produce… [These were usually] dwarfed by anything about "Survivor," or Lord of the Rings, or certain sexual proclivities, or, in the tech world, the open-source darling of the time.
(Let me tell you, an article about a Star Wars/Lord of the Rings trivia contest between lesbian Linux programmers would have caused an internet meltdown.)
I think Wyman's economic argument is right, and the fact that they are reproducing golden-age $600,000 editor-in-chief salaries makes it highly likely Pro Publica and similar new organizations will end in tears. Publications with a distinct readership appeal and a narrow focus—including Mother Jones and, ahem, Reason—can thrive in the nonprofit universe. Publications that are trying to reproduce the purview and cushy lifestyle of a daily paper, not so much.
It's even less likely that nonprofit status of the sort promoted in Sen. Benjamin Cardin's (D-Maryland) "Newspaper Revitalization Act" will help out bloated news organizations like The New York Times (which long after papers' fiscal crisis was clear spent $640 million on a gigantic Renzo Piano headquarters, half of which it has since had to sell at a massive loss) and the Los Angeles Times (which still keeps more than 500 editorial employees at salaries well above the industry average, and also maintains dozens of national and international bureaus and an in-house "test kitchen," all to put out a paper that rarely runs more than 100 pages in its weekday editions).
When I was covering the Cardin bill a while back, the striking thing was how little interest anybody in the newspaper business had in it. I couldn't even get people at the 60,000-circulation Peoria Journal Star, a frequently named candidate for nonprofit status, to stand up and cheer for the idea.
Wyman's former colleague Scott Rosenberg (the Keith Richards of Salon) notes that Salon has always been a for-profit enterprise yet has also lost money hand over fist. I don't follow Salon's current financial situation, but traditionally it has survived by finding investors who share the site's vision. Nonprofit believers forget that favorable tax treatment doesn't change the laws of nature. You still need to bring in more than you spend, or eventually you won't be around.
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