Philadelphia Inquirer tests new model, with nonprofit and for-profit benefits

The Philadelphia Media Network, parent of the Inquirer, was donated to a local foundation in a unique structure that allows it to take advantage of both nonprofit and for-profit status.

The 185-year-old Philadelphia Inquirer, the third-oldest newspaper in the United States, has been donated, along with its sister publications – the Philadelphia Daily News and website Philly.com – to the Philadelphia Foundation, a community-focused philanthropy with $370 million in assets.

But this doesn’t mean the parent company of the three news outlets, Philadelphia Media Network (PMN), will become a nonprofit. The tax-exempt structure often gets tossed around the media industry as one path to greater editorial independence (from owners or shareholders) and lower financial pressure (from profits) among newspapers that have been losing advertising revenue and staff.

Instead, says H.F. “Gerry” Lenfest, PMN’s former owner, the media company will remain very much a for-profit business, but a relatively new type called a Benefit Corporation, a legal designation now available in 31 states for profit-making companies that also strive to provide a public good.

One of the benefits of incorporating this way is that it allows companies to reinvest some profits in the corporation instead of passing them to shareholders, according to Mr. Lenfest.

PMN is now owned by the Institute for Journalism in New Media, a new nonprofit journalism training affiliate of the Philadelphia Foundation that Lenfest endowed with $20 million.

This unique and unprecedented restructuring, says Mr. Lenfest to The Christian Science Monitor, will offer the “best of both worlds” to the award-winning news outlets, and it will serve as an interesting experiment for a beleaguered media industry that’s hungry for new business models.

While PMN’s for-profit status will allow it to raise capital, sell advertising, and make political endorsements – activities that are restricted for nonprofits under IRS rules – its affiliation with a nonprofit, the journalism institute, will afford it the benefits of philanthropy status, which include accepting tax-exempt donations and grants.

“Long-term, what Mr. Lenfest has created may very well illuminate a new path forward for other for-profit newspapers to benefit their respective communities through an innovative restructuring that encourages the development of journalism in the digital age,” says PNM in an announcement.

There are nonprofit journalism organizations out there that rely on grants and other types of donations for revenue, such as The Christian Science Monitor, ProPublica, and The Texas Tribune. There is also at least one example of a nonprofit, Poynter Institute, that owns a major for-profit newspaper, the Tampa Bay Times. But the two are financially linked, with overlapping boards.

According to PMN, under the new structure, it will have its own management team and its own board of directors to allow for editorial independence.

The media industry will be eager to watch how the new structure works out in Philadelphia. Though for now, as Philly.com points out, there won’t be any drastic changes.

“This new structure offers no quick fix, no imminent balm to the economic woes that confront legacy news companies. PMN remains a self-governing, for-profit company, needing ultimately to fail or succeed on its journalistic merits and financial performance.”