Philadelphia newspapers placed under nonprofit management
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Published on January 12, 2016
For several months there has been discussion that the management of the Philadelphia newspapers were considering placing them under the control of a nonprofit organization. Yesterday this happened as the two largest newspapers in Philadelphia, the Philadelphia Inquirer and the Philadelphia Daily News, along with the largest local news website in the area Philly.com all were moved to become part of the nonprofit Philadelphia Foundation. As full disclosure, the Philadelphia Inquirer and its related properties are and have been long-time clients of American Graphics Institute receiving InDesign training and Photoshop classes for the production and advertising staff.
Over the past decade the Philadelphia newspapers have been through several ownership changes and even bankruptcy proceedings. Since the Philadelphia newspapers were sold from the Knight portfolio of newspapers they passed from one owner to another, often taking on considerable debt that they were unable to service in the face of declining ad revenues and circulation. The latest owner, H.F. "Gerry" Lenfest, has now placed the ownership of these storied Philadelphia publications along with their news websites under the control of a newly created nonprofit. The Institute for Journalism in New Media was formed to manage these publications, and it is controlled by another, larger nonprofit, the Philadelphia Foundation. While the papers themselves remain a for-profit enterprise, they are now controlled entirely by a non-profit parent organization. This leaves the papers parent organization free to solicit donations for reporting or coverage, and those donations will now be tax deductible. With the newspaper losing money year after year, this structure helps the news organizations continue to operate without the pressure to generate income or service a large amount of debt.
As the fifth largest city in the United States, this transition reflects the rapid change in the state of print journalism. This move comes six years after the Philadelphia newspapers emerged from bankruptcy, and appears to reflect a belief by owners that profits in the Philadelphia news business were not likely to materialize. By converting it to a nonprofit, any subsidies provided by the parent organization or previous owner will likely be considered donations, and thus will be tax deductible. While running at a loss is not sustainable long-term, even for a non-profit, the new structure provides tax advantages for the previous owner should they wish to continue to subsidize the two Philadelphia publications and website.
Yet the change in structure alone won’t fix the larger problems that the Philadelphia newspapers are facing. Over the past decade they have endured steep revenue declines along with a loss of circulation audience and revenue. While there have been declines nationwide, those in Philadelphia have been at a much faster rate than elsewhere. Advertising revenue for print dropped below circulation revenue – the fees paid by subscribers – for the first time in 2012, and digital revenue has not grown fast enough to replace the drop in print advertising. To compensate, they have reduced the staff of both the Philadelphia Inquirer and Philadelphia Daily News by hundreds through layoffs and retirements. Yet they have continued to lose money. Structural changes will be needed to make the Philadelphia newspapers sustainable; changing the corporate structure to turn the papers into a charity won’t be enough to guarantee their long-term viability. As digital emerges as a preferred way to obtain local news and information, they will need to follow the lead of the New York Times and Boston Globe to get readers to register and pay for online content, while continuing to service the approximately 100,000 that subscribe to the Philadelphia Inquirer or Daily News each day.
About the author
Christopher Smith is president of American Graphics Institute in Boston, Massachusetts. He is the creator and editor of the Digital Classroom book series. At American Graphics Institute, he provides strategic technology consulting to marketing professionals, publishers and to large technology companies including Google, Apple, and Microsoft. He delivers workshops relating to digital marketing, web analytics, SEO, and SEM. He is also the author of more than 10 books on electronic publishing tools and technologies, including the Adobe Creative Cloud for Dummies. Christopher did his undergraduate studies the at the University of Minnesota, and then worked for Quark, Inc. prior to joining American Graphics Institute where he has worked for 20 years.