Could U-T San Diego become the first ‘community-owned’ major metro paper?

Philanthropist Malin Burnham has a plan: Get a local nonprofit to buy the publication

It’s a buyers’ market for newspapers. The long, secular decline in advertising revenue has brought an even sharper decline in newspaper valuations. And now, it’s bringing interest in new ownership models.

In San Diego, Malin Burnham, an 87-year-old retired real estate mogul, confirmed last fall that he was pursuing a plan to bring U-T San Diego, the city’s daily, under nonprofit ownership. It was a variation on an idea that has become familiar in recent years: the wealthy local businessman-philanthropist rides in to save the local paper, either as a nonprofit or commercial venture.

Burnham’s approach, though, is a bit different. He now says he doesn’t want to wait the months, or even years, that the IRS might take to certify a new nonprofit. Instead, he’s been talking to existing nonprofits in San Diego about buying the U-T.

Under his plan, the U-T itself would remain a for-profit (and profitable) enterprise. Still, it’s a vision that would make one of the larger metro dailies in the US into a “community newspaper—owned by the community,” Burnham says.

He says he has talked to three of San Diego’s biggest nonprofits about overseeing the purchase: the San Diego Foundation, the Jewish Community Foundation, and National University. A deal could involve more than one of those organizations, Burnham says, though the San Diego Foundation seems the most likely candidate. It has $674 million in assets, and focuses, like most community foundations, on civic engagement and grants to local charities. A foundation owner wouldn’t actually put up its own money: Burnham wants to raise the purchase funds from a small group of investors.

Executives at the San Diego Foundation declined to be interviewed about Burnham’s idea. In an email statement, foundation CEO Kathlyn Mead said her organization has been talking to Burnham about his plans and is generally supportive of his efforts, though the talks are still in the early stages.

“Papa” Doug Manchester, the current owner, did not reply to a request for comment — though he told his own paper in the fall, when Burnham’s plans first surfaced, that he is open to the concept.

Burnham would not discuss how much money he might need to buy the paper. Manchester reportedly paid more than $110 million when he bought the paper, then called the San Diego Union-Tribune, in 2011 from Platinum Equity. That firm paid less than $50 million in 2009 to acquire the paper from its longtime owner, Copley Press. Those deals involved the paper’s valuable real estate in the city’s Mission Valley neighborhood; Burnham’s, reportedly, would not.

As for editorial outlook, Burnham says a nonprofit-owned U-T would “support things that are going on the community,” without taking a partisan line. “None of our nonprofit foundations in San Diego have ever taken political sides, one way or the other. We want fair reporting, and we want quality.”

That’s not meant as a dig at Manchester, he says. But one of the complaints about the U-T’s current owner, a real estate developer active in conservative politics, is that, as David Carr wrote in 2012, the paper can seem “like a brochure for his various interests.” John Lynch, Manchester’s business partner and the former CEO at the U-T, told Carr the paper’s stance was “pro-conservative, pro-business, pro-military.”* A staff editorial that year predicted that Barack Obama’s re-election would lead to “$8-$10 a gallon gasoline,” “death panels,” and “late-term abortions paid for by taxpayers.” 

Manchester’s U-T also has a reputation in San Diego for news judgment that seems to echo its editorial stances, such as its crusade for a new, publicly financed downtown stadium for the San Diego Chargers. Tim Sullivan, a sportswriter now with the Louisville Courier-Journal, was fired by the U-T in 2011 after questioning the stadium project. 

If Burnham can pull off the transaction—if the money can be raised, a local foundation is a willing owner, and Manchester is ready to sell—what might the paper’s prospects be? There are reasons for optimism, and for wariness. 

The advantages: An established nonprofit already knows the logistics of running a tax-exempt organization. And an organization with a history of charitable works could bring goodwill and community buy-in that a new journalism-focused nonprofit might never be able to attain.

Burnham’s plan for the U-T’s finances could help build that goodwill. He wants the U-T to give all of its profits to its nonprofit owner, to be spent on its local charity work. 

“We anticipate that profits of community newspapers will continue to decline, but we also believe that the demand for news will not shrink,” he said. “We can live with smaller profits than they’re now getting, by far. If we had half of the profits, we’d be doing quite well.”

Now the questions: To begin with, ownership by a community foundation would be a new strategy for an American newspaper of the U-T’s scale. There are newspapers with nonprofit ownership—Poynter’s Tampa Bay Times, most prominently—and plenty of new media startups (and some older outlets) that are structured as nonprofits. The Day of New London, CT, is held by a public trust, and the paper’s profits are distributed as grants through a local charitable foundation created by the paper’s founder. But no other major metro papers operate under the wing of community foundations whose charitable interests have nothing to do with journalism.

There is a recent history of those foundations holding some stake in news organizations, though, and it’s not especially encouraging. In 2009, the matriarch of the family that owns the Reading Eagle died and left a 27 percent stake in the paper to the Berks County Community Foundation, making the foundation the largest shareholder. Four years later, the shares were sold back to the Reading Eagle Company in a court settlement.

In El Paso, TX, the local community foundation purchased a for-profit news website in 2009, intending to set it up as an independent nonprofit. After running into IRS delays, the group shut the site down last year. 

And in Santa Barbara, CA, Mission & State, an investigative and longform news site, launched with support from the Knight Foundation and the Santa Barbara Foundation. Last year, the foundation decided to contract out management of Mission & State to Noozhawk, a for-profit local news site. Many in the community, including Noozhawk’s local media competitors, objected, and in July the foundation pulled the plug on Mission & State.

“Community ownership” also holds the potential for organizational conflict. If Burnham succeeds, the U-T’s nonprofit owner will likely have a board made up of some of the pillars of San Diego’s business community—in that respect, people a lot like Doug Manchester, the current owner. These board members might have conflicting interests, or they might be united on matters that place them at odds with the U-T newsroom.

Kevin Davis, the CEO and executive director of the Investigative News Network, a consortium of more than 100 nonprofit news organizations, is skeptical of the idea of foundation ownership in San Diego. The IRS moves much faster on approving new media organizations than it did a few years ago, he said, and starting an independent nonprofit is the best way to prevent conflicts over governance. 

“If the intent is to make sure the community owns their newspaper and no one can sell it out from under them, and the motivations for how the paper is structured and the content that it has are community-driven and civic-minded, if I were asked I would probably advise they pursue their own nonprofit status, so they can maintain control,” Davis said. “Community foundations have not necessarily proven themselves yet to be effective stewards of these types of projects, in my opinion.”

And, of course, the U-T would still face the fundamental challenges of being a local newspaper—even one that’s now profitable—in the current media climate. 

“The fact that a news organization is nonprofit doesn’t remove all the realities of being a community news organization from that entity,” said Eric Newton, a senior advisor at the Knight Foundation. “Nonprofit news organizations have to have excellent journalism, they have to have community engagement, and they have to have creative ways of getting new revenue streams, just like any for-profit news organization.”

Burnham is aware of these issues. He said there would be a “firewall” between the nonprofit owners and the for-profit newspaper, with no one allowed to serve both organizations and no pressure from ownership on editorial matters.

“I’m not an expert in this. I’m not going to run the paper,” he said. “We’re going to keep the professionals we’ve got and bring some new ones in.”

And if the journalism track record of community foundations is spotty, the record of most for-profit companies as newspaper owners over the past decade doesn’t offer much reason for confidence, either. Nonprofit ownership, might, at the very least, give the newspaper a little cushion as it tries to figure out the digital era.

“It’s an experiment,” said Newton. “That’s the thing about experiments: Experiments can fail. But it’s not really a failure if you learn something.”

* Correction: This sentence originally identified John Lynch as the paper’s CEO; he is the former chief executive.

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Tony Biasotti is a freelance writer in Ventura, California. Find him on Twitter @tonybiasotti.