Thoughts on the Future of News

Following on from my previous post about supporting online journalism via community funding, I explored the notion of philanthropic donations to newspaper organizations. While spot.us is focused on what I call ‘micro-philanthropy’, where individual news consumers donate small amounts to support local journalism, what if we had endowments similar to large university endowments. This would be the opposite end of the spectrum when it comes to public funding for online (or offline) journalism.

Harvard University has the largest educational endowment in the world, and currently runs at about 28.7 billion dollars. Of course, this is after losing almost 20% of it’s value due to the ongoing financial crisis. Assuming a long-term interest rate of 4%, we’re talking about 1.14 billion dollars a year available for spending without touching the capital.

The operating costs of the NY Times company (note, this is the entire company which operates a couple dozen large publications in addition to the New York Times) is around 2.8 billion dollars.  I arrived at this figure by taking Q4’s operating cost and multiplying by 4, so it’s very rudimentary but in the right ballpark. Despite this astronomic figure, it would take an endowment of around 56 billion dollars earning 5% yearly to support this massive operation. Unlikely, but not completely out of the question. Remember, this would support a couple dozen publications (NYT, Boston Globe etc), some large websites (About.com) and even the International Herald Tribune. So we’re saving a lot of newspapers here.

Could this model work? It’s an interesting idea, and one that could gain traction only if the costs of running these organizations come down to reasonable levels (i.e. cut print editions?) and one or two large philanthropists step up to the plate and get the ball rolling. Smaller news operations would of course require much more reasonable endowments.

I’m not a huge proponent of artificially supporting newspapers as I think there will always be huge demand for high quality journalism. As such, free market economics should apply and we’ll see the best of the breed survive and thrive. Those that innovate and consistently provide the best quality/value should not require philanthropic assistance. But in order to save a newspaper as iconic as the Times, perhaps this endowment idea has legs. Unfortunately, I think it’s just a continuation of the old, but what we really need is new ideas.

Update: Yesterday’s NYT ran an Op-Ed column talking abut the exact same topic. I read about endowments supporting newspapers last week and was toying with this blog post for a few days. Bizarre coincidence, but the column’s authors outline a very similar proposal. They talk about the costs of the New York Times newspaper only, and peg it at 200M, so the required endowment is “only” 5B.