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Endowment option floated to save newspapers

AS sharp revenue reductions put the future of many US newspapers in doubt, one idea gaining traction is the conversion of newspapers into tax-exempt, non-profits supported by large endowments.

Although viewed by many as a long shot at best, such a radical change could be a savior for the industry and its vital role in a democracy.

That's why the endowment model is drawing renewed attention as newspapers impose massive layoffs, scale back home delivery and make other drastic cuts to counter plunging advertising revenue amid a recession that has compounded the loss of readers to the Internet.

David Swensen, who managed one of the world's largest endowments as chief investment officer at Yale University, said endowments "would enhance newspapers' autonomy while shielding them from the economic forces that are now tearing them down."

"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," he wrote recently in The New York Times.

But first, the idea must overcome skepticism from the very newspapers that stand to benefit. Critics say endowments also could beholden newspapers to their large donors, and giving newspapers tax-exempt status could restrict them from endorsing candidates and running editorials on pending legislation.

On a more practical level, skeptics question whether the millions of dollars needed to create such endowments could be raised during the worst recession in decades.

Four newspaper companies, including the owners of the Los Angeles Times, Chicago Tribune, The Philadelphia Inquirer and the New Haven Register, sought bankruptcy protection in recent months, while the Rocky Mountain News published its last edition last week. Newspapers in Seattle and Tucson, Arizona, are threatened with closure, and the San Francisco Chronicle also faces closure or sale if it can't slash expenses.

Newspapers are having to rethink every aspect of their operations, including their for-profit existence, given their inability to generate enough revenue from Websites to offset the losses in print.

National Public Radio, whose endowment received a major gift of US$194 million from Joan B. Kroc in 2004, relies primarily on funding from member stations and corporate sponsors. Income from its endowment will generate just 6 percent of funds this fiscal year.

Advocates of the endowment model say newspapers have unique assets that play an important role in public service, even if they do little for the bottom line. Major news organizations spend millions of dollars to provide coverage from dangerous and remote places around the world - resources no blogger or casual journalist can match.


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