Changing the Model - Newspapers as Not-for-profit

The death of newspapers has been an interesting topic in the news lately (notice that I couldn't find a newspaper with the article... Only another blog), and I included them in a previous post on my investment blog about the decline and bailout of the financial and automotive industries.

However, we have heard some interesting discussion about possible solutions. One in particular which I thought was rather insightful was the idea of making newspapers into not-for-profit entities. This idea comes from Jefferson's fundamental idea:

"The basis of our governments being the opinion of the people, the very first object should be to keep that right; and were it left to me to decide whether we should have a government without newspapers or newspapers without a government, I should not hesitate a moment to prefer the latter." ~Thomas Jefferson

While a good idea there are some serious considerations:

• Government bailout (and part ownership) of media has some potentially devastating Orwellian consequences (in the extreme, think 1984) due to conflict of interest.
  
• Newspapers and media should be considered a public service as the dissemination of information is of paramount importance to the operation of a free society. (Even right wing conservative supply side economists must agree that free flowing information is a major component of the assumptions in economic theory).
  
• Not-for-profit does not imply no revenue streams. Depending on the government definitions and regulations regarding NPOs, certain fees (to a cap) are excluded from taxation (sales revenue below a certain number, membership dues, etc).
• A broken business model is a broken business model. There will be no tax to pay if there is no profit to begin with. And there will soon be no profit with declining revenue.
  
• Using Profitability Analysis, there needs to be fundamental cost cutting in the way of distribution methods as well as a look at the advertising revenue streams (the bulk of the revenue is from advertising rather than subscription fees).
  

While a bit of fantasy, this strip from LICD highlights the drastic change in models required:

Sohmer has already received a great deal of criticism for the "practicality" of his idea, but I think what is highlighted is the dramatic nature needed to implement the change. As previously discussed, the newspaper industry finds itself in a crisis change situation.