Here’s how Philadelphia Media Network’s new ownership structure worksJanuary 12, 2016 Category: Featured, Funding
DisclosuresA previous version of this story incorrectly stated that PMN can accept charitable donations. It cannot. It also incorrectly stated that the Institute's grants toward PMN will be coming from the Philadelphia Foundation's Special Assets Fund. Rather, the Institute's grants towards PMN will come from charitable public donations.
Philanthropist H.F. “Gerry” Lenfest has donated a smooth $20 million to a newly-established nonprofit affiliated with the Philadelphia Foundation called the Institute for Journalism in New Media.
Then he reached his hands a little deeper into his pockets and donated the Inquirer, Daily News and philly.com, too.
“I have more money than I ever thought I would have. How many homes, how many boats, how many whatever can you buy until you run out of money? Money is a responsibility,” Lenfest said at a press conference held rather symbolically at the Constitution Center. “I’ve tried to do right by it. Perhaps the greatest opportunity came with the ownership of these newspapers.”
Lenfest said he had considered converting PMN into a nonprofit, but a 501(c)(3) tax status would have prevented the papers from being able to make political endorsements. He formed the Institute instead (a 501(c)(3) that can accept grants) funneled $20 million into its endowment and transferred to them ownership of PMN.
“It’s a perfect combination for the future of journalism in Philadelphia,” Lenfest said. “What would this city be without the Inquirer and the Daily News? Ask yourselves.”
The move comes fresh off the heels of a series of company layoffs late last year and questions were raised about how the city’s legacy papers might keep their heads above water. Lenfest is hoping the answer could lie this unique organizational structuring.
This is how it the structure works:
- PMN was converted to a Delaware Public Benefit Corporation, which means it’s a for-profit corporation with a social mission.
- Even though it’s now a subsidiary of the Institute, PMN is still a for-profit business with its own board and is still responsible for generating its own revenue.
- That’s OK, because the Institute is actually an endowment arm operated by the Philadelphia Foundation’s Special Assets Fund, a pre-existing affiliate of the foundation.
- The Institute is able to support PMN directly by funding public interest media projects with grants. Those grant dollars will come from charitable public donations.
- An important note: While PMN is technically owned by the Institute, editorial control is in the hands of a separate trust comprised of PMN’s Board of Directors. The Institute does hold non-voting shares of PMN, but will have no role in the company’s business or editorial functions. Likewise, the Institute is independent and can accept its own donations.
Still doesn’t make sense? Check out this nifty infographic.
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Essentially, the Philadelphia Foundation owns a special assets fund that owns the Institute which now owns PMN.
The model is unique — Poynter owns part of the Tampa Bay Times, though that deal did not involve a local community foundation — so there’s no index of how this might turn out for the attached organizations.
As for the Institute, it does have a purpose outside of channeling funds — it’s a nonprofit committed to sustaining the impact of local independent journalism and educating journalism students. The Institute is governed by a board of managers that includes reps from Temple University, the University of Pennsylvania and Drexel University, Lenfest, Philadelphia Foundation President Pedro Ramos and two deans from Columbia University.
“I think the essence of a community foundation is connecting a specific region’s philanthropic capacity to that community’s needs,” Ramos said. “Every community, especially every metropolitan area, depends on strong independent journalism. [It’s] a critical asset to the community, so it couldn’t be a tighter fit to our mission.”