Saturday, July 15, 2006


OWNERSHIP: Chicago Tribune column reviews newspaper ownership models

ORIGINAL URL:,1,391884.story
Published July 2, 2006

Newspapers: Profits versus public trust

By Alicia C. Shepard

The author writes about the media. Her book, "Woodward and Bernstein: Life in the Shadow of Watergate," is due out in October

It has been an explosive couple of months for the newspaper industry.
First, a hedge fund managed to unravel Knight Ridder, once the nation's second-largest newspaper chain. Now one of California's wealthiest families seeks to do the same with Tribune Co. Tribune, too, may soon find itself headed to the Wall Street chop shop. Both events suggest that it might be time to explore an alternative to publicly owned newspaper companies, a model that no longer seems to work.

Consider this. Newspapers are public trusts, and they continue to play a critical role in society: setting the agenda in big cities and small towns, acting as a watchdog on government and, even still, providing school lunch menus.

Some visionary newspaper owners have found a way to preserve their independence and protect themselves from feeling under siege if they don't make 20 percent (or higher) pretax profit margins, an extraordinary figure that has become Wall Street's minimum expectation for newspaper companies, although it would make oil companies swoon with delight.

One of the more enlightened newspaper owners is H. Brandt Ayers, whose father founded The Anniston Star in 1912. Ayers has said he could have sold the small newspaper in northeastern Alabama for $50 million to a hungry, acquisitive newspaper chain.Instead he found a way to guarantee long-term local ownership and independence, while still doing the kind of quality journalism that is possible only when not myopically focused on the bottom line.

Ayers created a non-profit foundation to use the newspaper's earnings to keep the paper afloat, and then take the profits to run a degree-offering journalism program. The Star's experiment starts next month with the arrival of seven graduate students from the University of Alabama who will use the newsroom as their classroom to practice community journalism."We anticipate that other publishers will see what we are doing and recognize the wisdom and replicate it," said Chris Waddle, who will run "the teaching newspaper" with the help of the John S. and James L. Knight Foundation.

What The Star and at least two other newspapers--the St. Petersburg Times in Florida and the New Hampshire Union Leader in Manchester--have done is effectively turn their newspapers over to a non-profit school that trains journalists. Instead of after-tax earnings going to insatiable shareholders, family members or faraway owners, these newspapers put their profits into educating journalists at the high school, college or professional level. The concept allows the newspaper to do its best journalism for the community rather than be beholden to the bottom line.

These newspapers still need to make money. But their unusual partnerships allow them flexibility to plan for and invest in the long term. Companies such as Knight Ridder became so slavish to satisfying Wall Street that they lost that option.

Courses for more than 1,000

In Manchester, The Nackey S. Loeb School of Communications owns the Union Leader, a paper once well-known because of former publisher William Loeb's fiery conservative editorials. Long after he died, his wife set up a non-profit school that offers media courses to all in New Hampshire, but to young people in particular. Since its inception, the school has taught courses in media skills and 1st Amendment law for more than 1,000 students.

Nelson Poynter first saw the beauty of setting up a tax-exempt foundation partnership in 1978, when he turned his newspaper, the St. Petersburg Times, over to the Poynter Institute, which now owns the 330,000-circulation, highly regarded paper."There is a famous Nelson Poynter quote," said Poynter Institute attorney George Rahdert. "`I've never met my great-grandchildren and I might not like them.' He felt a newspaper was better served by being placed in the hands of highly competent journalists than left in the hands of his heirs."

The prestigious Poynter Institute, one of journalism's jewels, educates hundreds of professional journalists from around the country each year with weeklong seminars and training programs.

"The St. Pete Times . . . puts the dividends into the non-profit Poynter Institute, which uses the dividends to run the school," explained Andrew Barnes, who was editor of the paper for 15 years. "The Washington Post, as an example, pays taxes and then turns over its dividends to shareholders. Since they are a public company, they have to tell everybody what they are doing. I don't have to tell you how much our profit margin is."

"The school was not rapacious in its demands," said James Naughton, Poynter's president from 1996 to 2003. "It was eager for a good return to continue the work of the school, but it was able to abide single-digit profits, if necessary, which most of the big media companies would never do."

Other protective models

A few other papers have similar arrangements that protect them from being gobbled up if they don't make eye-popping profits. The Day in New London, Conn., is owned by a charitable trust that prevents it from being sold unless it loses money two years in a row. All the paper's earnings are put back into the newspaper and then distributed through the trust to civic groups and charities.

Independent Newspapers Inc., which owns the daily Delaware State News in Dover and other weeklies, and the Northeast Mississippi Daily Journal in Tupelo also have arrangements whereby they are protected by non-profit holding companies that keep the papers independent. The Daily Journal then shares its profits with the community.

The downsides to this kind of arrangement seem small compared to the long-term security the staff and community feel. Independent newspapers don't get the price breaks a chain can demand on everything from paper clips to newsprint. They also don't get the advertising advantages and other synergies that come when an owner clusters newspapers geographically.

"I don't see the trend as the wave of the future," said newspaper analyst John Morton. "You have to be fairly altruistic to engage in something like that. Nelson Poynter was. The Loebs, even if you disagree with their politics, were too. The same thing with the family in Anniston."

In that case, if some rich person is looking for a legacy and immortality, what better way than to buy a newspaper and set it up so that it will always be independent? Hey, it could be more rewarding than owning a local sports franchise.

Copyright © 2006, Chicago Tribune

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