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Nonprofit Structure Sends Lifeline To Local News

By Andy Segedin - March 16, 2016

H.F. “Gerry” Lenfest, former owner of the Philadelphia Inquirer, made headlines of his own in January when he gifted the paper along with the Daily News and Philly.com to a local foundation. The unique arrangement is seen by Lenfest as a means of preserving independent journalism in the region.

Philadelphia Media Network (PMN), the holding company of the three publications, was donated to a newly created Institute for Journalism in New Media on Jan. 12. The institute will operate under The Philadelphia Foundation. PMN was also converted into a public benefit corporation in the move and Lenfest committed $20 million to the institute’s endowment. A representative of the foundation deferred comments to PMN and the institute.

Lenfest didn’t expect to be the sole owner of PMN. He and his partner, Lewis Katz, purchased the publications in 2014 for a reported $88 million. Katz died in a plane crash a few days later.

Declining circulation revenue and advertising were hitting PMN hard and Lenfest believed that a continued downward trajectory would end the publications and adversely impact news coverage in the region. “I tried to figure out what could possibly be the salvation, because I don’t believe that the .coms will ever have the revenue to do the depth of journalism that has been done in print journalism in the past.”

Establishing a 501(c)(3) became a viable option, with Lenfest believing that, if museums and schools are worthy of philanthropic support, journalism could be, too. The Poynter Institute in St. Petersburg, Fla. has operated under a similar structure since 1978, when Nelson Poynter willed the institute his controlling stock of what is now the Tampa Bay Times. Lenfest said that Poynter was considered as a potential model at one point, but running a school was eventually decided against.

PMN will instead serve as a for-profit operating subsidiary of the institute. PMN will have its own board of directors and the institute will have no authority over PMN. The institute will have a board of managers comprised, in part, by university officials from institutions including Columbia University, the University of Pennsylvania, Drexel University and Temple University. The Philadelphia Foundation will have the ability to put one person on the board and Lenfest will serve as initial chairman.

The institute will have three primary functions, according to Lenfest:

* Assisting PMN in its continued pursuit of journalism by soliciting grants. The institute is not able to provide operating support to PMN, but can help raise funds for projects with specific public purposes. Lenfest likened the relationship to the Ford Foundation’s work with the Los Angeles Times and Washington Post.

* Help develop digital tools. Lenfest worked with Drexel University on a $1.3 million mobile-app project. The app will carry over to the institute and whatever technological developments made at the institute will be provided free or at cost to media providers in and outside the city.

* To pay for the expense of the institute and fundraising. One idea being floated around early on is membership, with individuals paying a certain fee to be a member of the institute and receiving a subscription to a PMN publication as part of their membership.

“This is not a cure-all,” Lenfest said of the move. “We’ve created a structure that will succeed or not succeed depending on how well it’s developed, how much money is raised and how much the new executive director of the institute can coordinate with universities and others.”

Lenfest said that he believed other publications could follow PMN in seeking salvation in the nonprofit sector in a similar fashion. “Newspapers in a community that is struggling with support from the public or institutions, they could create a nonprofit organization under the umbrella of a community foundation,” said Lenfest.

Down In Tampa

Tina Dyakon, director of advertising and marketing for Poynter, described the institute’s relationship with the Tampa Bay Times as “arms-length.” The two operate with separate staffs in separate buildings and there is a limited professional relationship between the two. The paper, until 2010, made dividend payments to the institute, which were suspended during the height of the recession. The dividends topped off at $6 million annually, according to Poynter’s website.

The payments are expected to return at some point, but the suspension has prompted Poynter to evolve toward being more self-sustaining. The Poynter Foundation has been launched as a fundraising arm to branch out into different revenue streams.

Crossover is limited to the two bodies’ boards, according to Dyakon, with Paul Tash, chairman and CEO of Times Publishing Company, serving as chairman of Poynter’s board and Poynter’s president, Timothy Franklin, serving on the Times’ board. “Poynter serves to journalism more global in nature,” Dyakon said. “It’d be fair to say that we’re rooting for them. We understand the high quality of journalism that they are doing.”

Dyakon saw one parallel right away when she heard the news about PMN and The Philadelphia Foundation: the desire to keep the region’s journalism free and independent. Beyond that, Dyakon noted the differing structures of the two arrangements, with PMN and the foundation more closely intertwined than the Times and Poynter. “I think that’s going to be interesting to see,” Dyakon said of future moves in the industry. “If I had to guess, I think we’re going to see a lot of different models to support high-quality journalism.”

Two elements of the PMN deal jump out to Rick Edmonds, Poynter’s media business analyst. One, a for-profit company operating under a nonprofit is more straightforward for tax purposes if the nonprofit is a healthcare provider or school, like Poynter, than the think tank Lenfest is moving toward. Edmonds also opined that, while a $20 million endowment is a strong start, the amount would need to multiply to reach Lenfest’s goals.

Poynter has faced its own challenges in finding support since the suspension of its dividend payments, Edmond said, relying more on earned revenue than in the past. Models similar to that of Poynter have been limited to smaller publications such as the Union Leader in New Hampshire and Anniston Star in Alabama, Edmonds said.

Given the difficulty in making such a move without a single or united ownership, Edmonds does not envision nonprofits being the new frontier of journalism. “I think it will be considered and I think we’ll see some more, but I’m quire sure it won’t sweep through the industry.”

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