Recession could fuel new era of local newspaper ownership

For nearly 40 years, newspapers have been acquired by publicly traded corporations or ever-expanding privately held, but highly leveraged, companies. The inexorable, greed-fueled feast might finally be coming to an end.

An industry-transforming recession has exposed the decay of decades of corporate and profit-driven newspaper ownership.

In the detritus comes real opportunity. Some of the remaining Bigs are going to have no choice but to get out of the newspaper business or shed a number of what corporate types call "properties." This jettisoning of newspapers and the near valueless Wall Street assessments could give rise to an era of independent and local ownership.

One of the many intriguing ideas that could again place newspapers in the hands of local ownership is a new take on a tested business model: low-profit, limited-liability corporations. The new incarnation is called an L3C.

The L3C might be the perfect pairing for journalism and business. It would permit a company to act as a nonprofit and attract investors but allow for modest earnings. Even better, the overriding reason for an L3C is the public role it endows. This is a model made for the mission of newspapers.

Victor Pickard is examining L3Cs as senior research fellow at Free Press, a national media-reform organization. He said that L3Cs could free up newspapers to focus on serving communities with quality journalism.

"The low-profit model would let newspapers focus on their social good — that is, newsgathering — and not just the bottom line. It takes from the nonprofit and for-profit worlds: giving a return to investors, creating new avenues for philanthropy and focusing on local community service."

This does not mean an L3C newspaper would no longer have to worry itself with traditional revenue streams such as advertising and subscriptions and single-copy sales. These would be part of the revenue mix.

Having a revenue stream that consists of what is in place with the addition of civic-minded investors is a much less radical and intimidating change to the traditional newspaper business model. It keeps what newspapers have with advertising and circulation dollars, strengthens it with an infusion of new money and is built on a foundation of broad and aggressive journalism.

Of course, there are hurdles to the L3C model. Only a handful of states offer it and there is no federal statute. L3Cs might not be attractive to newspaper owners like my family, which owns The Seattle Times. Switching to an L3C would mean giving up control. Other owners might have creditors or investors that are not keen on the notion of low profits.

There are real opportunities for the first L3C newspaper. Tribune Co. is in bankruptcy and its newspapers might soon be controlled by the company's creditors. Any of these newspapers, which include the Los Angeles Times and the South Florida Sun-Sentinel, could attract a local ownership group that utilizes the low-profit model.

I have written in previous columns, what does not work for The Times might for another newspaper. The more options the industry has, the better.

Newspapers will be better off out of the stifling grip of investors narrowly interested in profits. The time is right for newspapers to explore new ownership structures. The low-profit model might be part of the solution.

Ryan Blethen's column appears Sunday on the editorial pages of The Times. His e-mail address is: rblethen@seattletimes.com