IRS makes history with by granting non-profit status to daily newspaper
Salt Lake Tribune joins the list of new business models trying to save journalism
Utah’s largest daily newspaper after "years of heavy financial loses" has transformed itself to a history-making entity that could have lasting effects on an industry fighting to stay afloat.
The Salt Lake Tribune obtained IRS approval to shift its business model on Oct. 29 from a for profit corporation to a 501(c)(3) organization. The first daily newspaper in the U.S. to be granted such status, this new designation means the Tribune can now receive tax-deductible donations from donors.
Paul Huntsman, owner and publisher of the Tribune, backed the switch and is giving up his sole ownership role to do so. “The current business model for local newspapers is broken and beyond repair,” said Huntsman. “We needed to find a way to sustain this vital community institution well beyond my ownership, and nonprofit status will help us do that.” The Tribune says it is the first entity of its kind to become a fully nonprofit organization.
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The move by the Tribune is the latest by daily newspapers to survive in the digital age.
Subscribers have left behind print product -- U.S. weekday print circulation has shrunk from a high of nearly 60 million in 1994 to 35 million for combined print and digital circulation according to the Pew Research Center from 2018. Advertising revenue has fallen through the floor going from $65 billion in 2000 to less than $19 billion in 2016.
And of course there has been a human cost. The number of newspaper newsroom employees dropped by 47 percent between 2008 and 2018, from about 71,000 workers to 38,000.
David Chavern, president and CEO of the newspaper industry advocate News Media Alliance, praised the Tribune's innovation in the face of industry-wide decline.
"I am supportive of any strategy that gets digital journalism to a more sustainable place. Becoming a formal non-profit opens up some additional funding options," Chavern told FOX Business.
"However," he continued, "it doesn’t change the underlying dynamics of an industry where a few big tech players absorb most of the value of quality journalism and return very little of that value back to publishers. We have to solve that larger problem no matter what the ownership structure of publishing."
Digital advertising has become an increasingly significant revenue source for newspapers, up to 35 percent in 2018 - but the News Media Alliance claims tech giants Facebook and Google alone account for nearly 60 percent of all digital ad revenue, leaving publishers to battle the rest of the internet over the scraps. "If we produce valuable content then there is no reason that we shouldn’t also ask for full value in return for it," Chavern argues.
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The Tribune said it made its unprecedented move to “bolster its financial prospects during a troubling time for journalism nationwide” but it is part of a trend in journalism. Several local and national non-profit digital news web sites have sprung up in recent years -- such as The Marshall Project which focuses on the criminal justice system and The Texas Tribune which calls itself a "member-supported, digital-first, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues."
In Philadelphia, the Lenfest Institute was founded in 2016 by the late cable TV executive H.F. (Gerry) Lenfest to essentially save The Philadelphia Inquirer. With an initial endowment of $20 million, the Institute was formed and it now operates the Inquirer as a public-benefit corporation.
In the Salt Lake Tribune's case, there will be no owners or shareholders as a non-profit company. For Philly's Inquirer -- while it to can accept financial gifts as a "philanthropic society of Philadelphia citizens committed to securing the future of local news" a benefit corporation, however, does have shareholders who own the company.
As for the future of more newspapers becoming non-profits, Chavern predicted, "I do expect that you will see some additional news organizations pursue this strategy. But I don’t expect that you will see it spread broadly throughout the industry, simply given all of the complexities of managing both for-profit and not-for-profit revenue streams."