Here come the nonprofit newspapers?

Senator Benjamin Cardin takes David Swensen's suggestion and introduces a bill to make it easy for newspapers to become nonprofits:

Cardin's Newspaper Revitalization Act would allow newspapers to operate as nonprofits for educational purposes under the U.S. tax code, giving them a similar status to public broadcasting companies.

The tradeoff is that newspapers would be unable to endorse candidates and legislation, but when you think about the quality of the average newspaper editorial page this doesn't really seem like such a bad deal. Opinion is cheap and plentiful on the web.

But the problem is how to get from here to there. The takeaway from Swensen's original proposal wasn't the abstract notion of turning a newspaper into a non-profit; indeed, a handful newspapers and newswires (the Guardian, the AP, the NYT, the St. Petersburg Times) have come up with hybrid or ostensibly non-profit ownership structures already. The problem was endowing a newspaper like a university. Here's a bit from Swensen's old NYT op-ed:

How large an endowment would a newspaper need? The news-gathering operations at The New York Times cost a little more than $200 million a year. Assuming some additional outlay for overhead, it would require an endowment of approximately $5 billion (assuming a 5 percent annual payout rate).

Making this happen requires more than a law. It requires an angel. And it might require an angel with more than $5 billion, since the New York Times already has shareholders who have paid the present value of expected future profits for a piece of the company. If the Times were to incorporate as a nonprofit, those shares would by definition become worthless. Doesn't this mean anyone who wants the Times to become a nonprofit would have to buy out the current shareholders?

Still, it is good to see Cardin taking the initiative with an interesting idea, and it will be interesting to see what comes of this bill.