The sorry predicament of the newspaper industry has given rise to a testy argument about journalism's future. In one corner are editors who believe news organizations committed a fatal mistake by giving their content away for free on the Internet. These people think that a successful digital business model demands revenue from users as well as from advertisers. Another camp favors philanthropic support. Newspapers, these establishment types think, should be more like universities, with their independence underwritten by charitable endowments. A third faction, which includes most Web journalists, doubts both those models and looks to online advertising for sole support: despite all the gloom, The New York Times now draws about $200 million in annual revenue from Internet ads—not far short of the cost of its global editorial operations. Without a print edition, the Times would be smaller business, but quite possibly a better one.
What this debate misses, however, is that, unlike most businesses, serious journalism has seldom been about the straightforward pursuit of profit. Nearly all of the most important journalistic institutions in the free world are hybrids of one form or another—for-profit, but underwritten by generous owners or other profitable businesses; not-for-profit, yet entrepreneurial; cooperative, or government-subsidized. While big-city newspapers were for many decades highly profitable, their news-gathering operations have usually required some form of external support. Even at their most successful, top-tier media institutions have never adhered to a simple, or single, business model. They are even less likely to follow one in the future.
In times of yore, the best American newspapers worked like this: public-spirited families with names like Graham (the owners of NEWSWEEK, Slate and The Washington Post), Sulzberger, Bancroft and Chandler built highly profitable businesses by becoming dominant information sources in major local markets. In the pre-Internet era, the quasi-monopoly profits they earned from selling retail and classified advertising allowed them to spend more on editorial quality than was strictly necessary. These families tended to view the newspaper business as a public trust, which they served by building large reporting staffs, indulging six-month investigative quests, maintaining a strong separation between their advertising and editorial sides and defending First Amendment principles. Profitable American newspapers supported robust journalism more than the other way around.
The great newspaper companies got away with not maximizing their profits either by being privately held or by setting up two classes of stock, which insulated them from shareholder pressure. When the families sold out, it was usually to less sentimental concerns such as Gannett, Knight-Ridder and the Tribune, which sought higher profit margins. But these chains were more efficient and sometimes significantly improved the quality of the papers they bought. Even rapacious media barons and public companies can protect journalistic values when motivated. Rupert Murdoch, for example, has consistently lost money maintaining quality at The Times of London. Out of some combination of vanity, competitive rage and sheer love of the newspaper business, he now looks poised to do the same with The Wall Street Journal. Many serious-minded magazines—The Atlantic, The New Republic, The Nation, The Weekly Standard—have similarly survived on the mixed motives of wealthy individuals.
It is also possible to subsidize news-gathering via nonprofit structures. The Guardian, which has emerged as one of the strongest global news organizations, is owned by the Scott Trust, which is tasked with using its endowment and profits from other media properties to keep the paper healthy and independent. The freedom to lose money has not kept the Guardian from being innovative and entrepreneurial on the Web. Pro Publica, a nonprofit funded by a liberal-minded foundation and directed by former Wall Street Journal editor Paul Steiger, is attempting to fill a gap in investigative reporting by supplying it, free of charge, to for-profit media organizations.
Other kinds of amalgams have flourished. The Associated Press is a not-for-profit cooperative owned by its members that runs like a business. Agence France-Press and the BBC both receive indirect government subsidies but try to turn a profit. They have legal protections that allow them to function independently. C-Span is paid for by license fees from cable operators. National Public Radio may be the most convoluted crossbreed of all, combining elements of a cooperative with philanthropic, private and government support.
News organizations that don't maximize profits are examples of what Bill Gates has called "creative capitalism." That is, they attempt to advance social goals while also attempting to make money. With the decline of their traditional revenue sources, capitalists in the news business are having to become even more creative. But they won't find the grail of a new economic model for journalism because there wasn't an old one.