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| | | The day that I run into a Huffington Post reporter at a Baltimore zoning board hearing is the day that I will be confident that we have reached some sort of equilibrium. -- David Simon | |
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< | Information wants to be free. This is the promise that the Internet, through its unique and costless distribution mechanism, holds. Traditional pay models of information production are almost laughably anachronistic, but that isn’t stopping the entrenched news industry from fighting to impose these outmoded business models on the public. News has a fixed cost problem, much like its sister industry, the expression industry (i.e., music, film, and television); however, unlike its counterpart, the transition from priced print to free digital brings with it two tremendous costs: investigative reporting and localism. Today’s newspapers are not producing the revenue necessary to please its stockholders while employing enough personnel to produce quality journalism. A May 2009 Senate Hearing on The Future of Journalism contemplated just these costs and benefits. The question though, as Arianna Huffington put it, “is not how do we save newspapers, but how do we strengthen journalism?” | >
> | Information wants to be free. This is the promise that the Internet, through its unique and costless distribution mechanism, holds. Traditional pay models of information production are almost laughably anachronistic, but that isn't stopping the entrenched news industry from fighting to impose these outmoded business models on the public. News has a fixed cost problem, much like its sister industry, the expression industry (i.e., music, film, and television); however, unlike its counterpart, the transition from priced print to free digital brings with it two tremendous costs: investigative reporting and localism. Today's newspapers are not producing the revenue necessary to please its stockholders while employing enough personnel to produce quality journalism. A May 2009 Senate Hearing on The Future of Journalism contemplated just these costs and benefits. The question though, as Arianna Huffington put it, "is not how do we save newspapers, but how do we strengthen journalism?" | | |
The Destruction
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< | The allure of The Newspaper is at least partially an ideal: The image of a diligent, hard-nosed beat reporter hitting the streets each day, exposing corruption and inequality in our society is powerful one, proudly rooted in the bedrock of our nation. In truth, newspapers are businesses like any other, with boards and profit margins. Like any other business that finds itself at the losing end of creative destruction, it cuts off its metastasized branches. It shrinks its personnel; it shifts its focus from delayed reward news (e.g., social problems) to immediate reward news (e.g., scandal); it closes its doors. When it works effectively, creative destruction fulfills the same need but in a different way. In this case, in the process of opening entry to entrepreneurial citizen journalists, bloggers, and aggregators, it leaves two needs unsatisfied. | >
> | The allure of The Newspaper is at least partially an ideal: The image of a diligent, hard-nosed beat reporter hitting the streets each day, exposing corruption and inequality in our society is powerful one, proudly rooted in the bedrock of our nation. As Sally Duros, journalist and digital advocate noted, newspapers are the only business mentioned by name in the Constitution. In truth, newspapers are businesses like any other, with boards and profit margins. Like any other business that finds itself at the losing end of creative destruction, it cuts off its metastasized branches. It shrinks its personnel; it shifts its focus from delayed reward news (e.g., social problems) to immediate reward news (e.g., scandal); it closes its doors. When it works effectively, creative destruction fulfills the same need but in a different way. In this case, in the process of opening entry to entrepreneurial citizen journalists, bloggers, and aggregators, it leaves two needs unsatisfied. | | | (1) Investigative Journalism. There are costs of producing investigative stories that digital journalism has not yet figured out how to effectively and realistically subsidize. This is likely a temporary problem but a pressing one nonetheless. Citizen journalists simply do not have the resources to spend the hours extensively gathering resources, developing sources, and traveling to distant locations. At present, they depend on professional reporters to do this work and then they aggregate, comment, and redistribute the story. Eventually, there will be no one left to depend on beyond the few who survive and the even fewer who do investigative journalism. Few is not nearly enough for an institution that depends on the voices being many. | | | The Creation
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< | (1) L3C Status. Low profit limited liability company (L3C) model is an intermediate structure between the poles of for-profit and non-profit systems. L3Cs are taxable for-profit businesses, but, by law, they must place their charitable mission/community service goals ahead of profits. L3Cs derive their sustainability from program related investments (PRIs), loans made by private foundations for specific goals that are low-yielding, but tax deductible and in line with the IRS’s charitable giving requirements. In June 2010, Vermont's Point Reyes Light became the first newspaper successfully converted to an L3C. There are obvious drawbacks to this model. L3Cs must be authorized by an amendment to the state's (or the country's) General Limited Liability Company Act, and historically, newspapers have not been recognized as non-profits. | >
> | (1) L3C Status. Low profit limited liability company (L3C) model is an intermediate structure between the poles of for-profit and non-profit systems. L3Cs are taxable for-profit businesses, but, by law, they must place their charitable mission/community service goals ahead of profits. L3Cs derive their sustainability from program related investments (PRIs), loans made by private foundations for specific goals that are low-yielding, but tax deductible and in line with the IRS's charitable giving requirements. Because the probable investors are local, this reorients newspapers' mission to community service. In June 2010, Vermont's Point Reyes Light became the first newspaper successfully converted to an L3C. There are obvious drawbacks to this model. The creation of L3Cs must be authorized by an amendment to the state's (or the country's) General Limited Liability Company Act; only a handful of states have done so, likely because, historically, newspapers have not been recognized as non-profits. Additionally, attracting donations depends on the supply of investors satisfied with reaping high social dividends rather than any substantial financial ones. | | | | |
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< | -- StacyAdelman - 02 Dec 2011 | >
> | (2) 501(c)(3) Status | | | | |
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> | -- StacyAdelman - 4 Jan 2012 | | | | |
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| | | Stacy,
Great paper on an important topic. Do develop the idea of L3C? and introduce us to what it is. What are the respective roles of the federal and state governments in promoting L3C? newspapers? For instance, would states need to modify their corporate or nonprofit entity laws, and would the IRS/Treasury need to interpret tax law differently? It seems tax law will play a key role, but then that might raise a First Amendment issue from government entanglement in the press. |
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