January 12, 2016

Gerry Lenfest’s decision, announced Tuesday, to give the Philadelphia newspapers and their digital operations to a new non-profit institute has been in the works for some time. In transferring ownership, Lenfest also pitched in a $20 million endowment.

  • Will it work for the Inquirer and Daily News?
  • What are the benefits and limitations?
  • Is the model one others will follow?

I am a double agent on these questions, having worked at the Tampa Bay Times organization and now its non-profit owner, Poynter, for the better part of 30 years.

Yes, it has worked here, keeping the Tampa Bay Times committed to ambitious journalism, independent and locally owned.  I like to think too that Poynter has grown over time to an important resource for journalism training and supporting journalism’s role in civil society more broadly.

But no, the structure does not immunize us from the business model and digital challenges the rest of the industry faces.  Or from newsroom downsizing. Even if not operated to maximize profits, the Times, and now the Philadelphia papers, need to be well-run, adaptive businesses or they won’t have much of a future.

After speaking with Lenfest and publisher Terry Egger by phone, I would say the new ownership model there is similar to the Poynter/Times in structure and intent but different in some important details.

The big idea is to insure stability, make the primary mission of each organization excellent journalism and avoid the pressure of ownership by publicly-traded or private equity controlled chains to deliver  profits and dividends for a wide group of shareholders.

Having a for-profit, tax-paying business owned by a non-profit is also a clean way to avoid federal tax issues.

Poynter is incorporated as a freestanding school.  By contrast, Lenfest’s Institute for Journalism in New Media, sits within the structure of an existing foundation and has a distinctive charter:  to receive donations and support specific journalism projects at the papers and to develop digital projects in cooperation with five local universities, represented on the Institute’s board of managers.

For now management stays in place at the Philadelphia Media Network as does a different board of directors.  They will make business decisions going forward including executive hires or dealing with union contracts and unexpected issues.

Lenfest said that he expects the Institute to start lean with “an executive director, a program officer, a development officer and a secretary.”

“We haven’t really tested the waters,” Lenfest added, but he hopes to draw support both from individuals, Philadelphia-area foundations that have shown an interest in journalism and some nationals. To be successful in five or ten years, he said, the institute “will need to raise the endowment to many times what it is now” and establish a record both of preserving good journalism in the city and innovations with its academic partners.

A pilot project with students and staff at engineering-oriented Drexel University building out a mobile app, was both good for the papers and a good learning experience for the students, he said.

Lenfest agreed with my sense that this model could work other places — but only with private ownership, typically by one individual or family. Taking the New York Times to non-profit status, as a few outsiders looking in have occasionally proposed, would be a tangle of complex financial and legal difficulties  in compensating both Sulzberger family and public shareholders fairly.

Plus even a single owner needs to be willing to give the paper away  — a barrier to such arrangements in more profitable times when family fortunes were tied up in that one investment.

David Chavern, president and CEO of the Newspaper Association of America, said in a phone interview, “My reaction is that it’s a very good thing for those papers and the city; it gives them a stable home and structure after years of [ownership] turmoil…but I’m not sure I see it as a broad answer for the industry.”

Besides the transitional issues most owners would face, Chavern added, “there are some disadvantages (to nonprofit ownership).  It’s not especially good for raising capital should you wish to buy other papers or other businesses.”

Publisher Egger said that there were related concerns within the company.  “The board had a very robust discussion” he said, before approving the deal.  “They wanted to be sure there was no way we lost our edge as a business, and we take that to heart.”

Ultimately the gamble will rise and fall on the ability of Egger and his editing team to put the Philadelphia Media group on a solid footing and the board and yet-to-be-named staff of the new institute to build it out.

“There is a lot of work ahead,” Lenfest said.  “It’s not a sure thing..”

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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