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February 2, 2009

A radical plan from the New York Times to save itself?

Bill Tate
Just days after seeking all but usurious, loan-shark style financing from a Mexican mogul it once all but accused of being a thief,  The New York Times has floated an even more desperate gambit to keep itself afloat.

The proposal, outlined in an Op-Ed column written by outside financial analysts, could also represent one of the first serious efforts by the legacy media to grab a slice of the federal bailout pie.

The column is an admission, by proxy, that newspapers' Jurassic-era business model no longer works:

"In the past decade ... as Americans embraced the Internet, newspaper circulation has declined every year. Advertising revenues, which are tied to circulation levels, fell even faster. Classified ads, in particular, suffered as the Web offered cheaper, easier and more effective alternatives."

The piece even hints at the mismanagement at the Times, noting that profits there have dropped twice as fast as at the Washington Post.

The Times' Op-Ed solution? The authors propose that the Times be supported by an endowment, much like some institutions of higher learning. Not surprisingly, the column was written by two Ivy League officials: David Swensen, the chief investment officer at Yale, and Michael Schmidt, a financial analyst there.

"By endowing our most valued sources of news we would free them from the strictures of an obsolete business model and offer them a permanent place in society, like that of America?s colleges and universities. Endowments would transform newspapers into unshakable fixtures of American life, with greater stability and enhanced independence that would allow them to serve the public good more effectively."

Essentially, the authors argue that the Times, the Washington Post, and other legacy media are too important to allow them to fail, which sounds remarkably similar to arguments used to rationalize the federal bailouts of major financial institutions and the auto industry.

Swensen and Schmidt calculate that it would take an endowment along the lines of $5 billion to finance the Times operations. (They do not specify whether or not that figure includes the cost of the Times's Obama inauguration party, or of Times staffers treating each other to drinks and meals.) The authors note:

"Only a handful of foundations and wealthy individuals have the money required to endow, and thereby preserve, our nation?s premier news-gathering organizations. Enlightened philanthropists must act now or watch a vital component of American democracy fade into irrelevance."

But, in today's economy, it is highly unlikely that even "enlightened" philanthropists can plop down five super-sized large. The only realistic source of such funding would be the federal government, where five billion would almost amount to a drop in the bucket in the deluge of federal bailout money that apparently will soon be flowing from Obama's Washington.

Further, I would argue that the Times, in order to survive, first has to admit that it has failed in, not one, but two marketplaces:

-In the business marketplace, the Times failed to scrap its old model, and missed the internet boat by failing to embrace the pre-eminence, and opportunities, of the new technologies.

-And, more importantly perhaps, the Times has failed in the marketplace of ideas. By slanting its coverage so sharply to the left, it has alienated a large segment of its market, restricting its potential profits.

Until, the Times reorganizes to make itself competitive in both marketplaces, any attempt to prop it up, whether from private funding or from federal bailout money, will simply amount to good money turned into red ink.

The Times Op-Ed opens with a quote from Thomas Jefferson:

"... were it left to me to decide whether we should have a government without newspapers or newspapers without a government, I should not hesitate to prefer the latter."

Perhaps the authors should keep in mind other words from Jefferson:

"The advertisement is the most truthful part of a newspaper."

and

"The man who reads nothing at all is better educated than the man who reads nothing but newspapers."
See also: Boston Globe: 'Bailout Journalists!'

William Tate is an award-winning journalist and author

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