An independently owned San Francisco Chronicle would be allowed to operate as a nonprofit similar to public broadcasting stations under legislation proposed today by Senator Benjamin Cardin.
The legislation would allow newspapers to choose tax-exempt status. If they did so, they no longer would be allowed to make political endorsements, but would face no limits on news coverage of political campaigns or of any other topics.
Not only would advertising and subscription revenue be tax-exempt but–importantly for the push for a nonprofit takeover of The Chronicle–contributions to support news coverage could be tax-deductible.
“The business model for newspapers, based on circulation and advertising revenue, is broken, and that is a real tragedy for communities across the nation and for our democracy,” Cardin, a Maryland Democrat, said in a written statement.
“This may not be the optimal choice for some major newspapers or corporate media chains,” he added, “but it should be an option for many newspapers that are struggling to stay afloat.”
In his statement, Cardin specifically mentioned The Chronicle, which reportedly has been losing more than $1 million a week and is in the midst of making substantial job cuts in the ranks of its reporters, editors, photographers and graphic artists.
Last month, Hearst Corporation, owner of The Chronicle, demanded that the Newspaper Guild, the union representing Chronicle journalists, agree to the concessions under threat of a sale or shutdown of the 144-year-old paper.
While in negotiations with Chronicle management and Hearst, Guild leadership has been reaching out to San Francisco business leaders about piecing together a group to takeover ownership of the paper and operate it as a nonprofit.
Those discussions took on greater urgency last week following revelations that Speaker of the House Nancy Pelosi, a San Francisco Democrat, had sent a letter to U.S. Attorney General Eric Holder requesting that the Justice Department consider relaxing antitrust law enforcement in the newspaper industry.
The move–which came after Pelosi met with representatives from Hearst and The Chronicle–led to speculation that the newspaper’s owner is eyeing a deal with Dean Singleton, whose Bay Area News Group owns the suburban Marin-Independent Journal, Contra Costa Times, Oakland Tribune and San Jose Mercury News.
Some observers fear Hearst, which claims to have lost more than $50 million operating The Chronicle during last year alone, and Singleton, whose suburban papers are suffering under the debt he took on to acquire them, are looking to return to profitability by carving up the Bay Area, cutting back spending on news gathering, and sharing costs such as printing, distribution and ad sales.
The Associated Press reported today that the head of the newspaper industry’s trade group called Cardin’s bill for nonprofit ownership a positive step.
John Sturm, president and chief executive officer of the Newspaper Association of America, said The AP that the Cardin proposal “recognizes changes in the law might be necessary to provide a boost to newspapers trying to weather this difficult economic period.”
Unfortunately for those worried about a Hearst-Singleton monopoly in the Bay Area, Strums word could be read just as easily as making the case for giving newspaper chains like Hearst and Singleton’s MediaNews Group a pass on complying with antitrust laws, as Pelosi seemed to urge in her (PDF) letter to the Attorney General.
An alternative is a nonprofit takeover of The Chronicle, but that would be a hard pill to swallow for Hearst. In 2000, the company agreed to give its San Francisco Examiner to the Fang family, and subsidize its operations at a cost of $66 million over three years, to secure Justice Department approval of its $600 million acquisition of the San Francisco Chronicle.
But the company has been losing big money on The Chron ever since. And, given its stated interest in developing its real estate beneath and surrounding The Chronicle building at Fifth and Mission streets, Hearst might see turning over the paper to a nonprofit, and subsidizing it with tax-exempt contributions, as a financial winner, provided it can do as it likes with its real estate.
This should be interesting to watch. Stay tuned.
