Wednesday, December 30, 2009

The Legacy Media Flu

The AP's Andrew Vanacore has an easily digestible story about the problems about to befall nation's local TV stations -- and how they could spell the end of "free" TV.

Turns out, the nation's big four TV networks are pondering ways that they can cut local affiliates out of the revenue stream by selling their signal directly to cable TV providers. Vanacore writes:

Pay-TV providers are paying the networks only for the stations the networks own. That amounts to a little less than a third of the TV audience, which means local affiliates recoup two-thirds of the fees. If a network operated purely as a cable channel and cut the affiliates out, the network could get the fees for the entire pay-TV audience.
He goes on to say: "If forced to go independent, affiliates would have to air their own programming, including local news and syndicated shows." But I'm not so sure about the news part. Given a choice between paying the cost of producing local news and airing another segment of "Wheel of Fortune," I don't think there's any doubt that they'll do what they need to stay afloat.

The forces undermining the local broadcast model are different than those that are pummeling the newspaper advertising-and-subscription model; the relationships among networks, stations, cable companies and advertisers aren't as easily disrupted by the Internet. But the bottom line for local civic affairs coverage is pretty much the same: The local news that broadcasters have provided as a public service -- though arguably not in the same depth as newspapers -- is going to get cut back even more. Call it the legacy media flu -- there's no cure, just the hope to survive.

So what to do? In the world of words, nonprofits have emerged to help fill the void left by newspapers, and they have been particularly successful at the local and regional level, as reported earlier this month.

This is where I leave my comfort zone, as I have no professional experience in the broadcast arena. But it seems to me that there is a natural opportunity for nonprofits to help fill the void in broadcast as well by shouldering some of the cost of producing local TV news. At the same time, local stations would do well to seek out and nurture these relationships.

It's already happening at some local stations. On Dec. 18, KHOU in Houston aired a segment about members of Congress taking trips at the expense of interest groups. The report was based almost entirely on reporting by Andrew Kreighbaum of the Texas Tribune, a new nonprofit based in Austin. The only significant cost to KHOU (owned by Belo Corp., which also owns the Dallas Morning News) was the time it took to interview Kreighbaum and have its own reporter do a voice-over.

Sunday, December 20, 2009

A Perception Issue

Perhaps the most pervasive criticism of the nonprofit model in journalism is that it allows a wealthy person or people to control a media outlet, putting out bias and opinion under the guise of news. So when I see somebody address that red-herring complaint with reason and logic, I like to point it out.

In a Q&A in the current edition of Nonprofit Quarterly, Mark Jurkowitz of the Pew Project for Excellence in Journalism compares the nonprofit model with the traditional newspaper advertising-and-subscription model, he and concludes that the beef about influence is "a perception issue."

That is, the problem is not with the revenue source, but how a newsroom is governed within the larger organization that acts as publisher -- and the extent to which its independence is protected. He says:

In any given situation, you can establish procedures and standards for minimizing the risk of conflict. Newspapers have always set up firewalls separating the editorial product from the publisher.

And another thing -- Jurkowitz notes that all media are perceived as being biased, according to polls. So the problem is not so much the business model as it is the news industry's ability to persuade readers that it can report events or conduct investigations without bias. And as Alan Mutter suggests, in the online world, news organizations might generate more readership if they actively insert a point of view in their reports.

I agree with Mutter that the old newspaper model of objectivity won't translate online. But I do think there should be a set of standards for the conception, reporting and writing of anything that its authors deign to call journalism. "News" feeds through Twitter and Facebook are great fun, but ultimately, I think readers will gravitate to sources that have proved themselves trustworthy over time.

So if there is a call to action here, it goes to those who work for and support nonprofit news outlets. Collectively, they need to address not just the perception problem, but also to face down their own institutional biases. The latter will depend upon their willingness to build organizational structures and cultures that improve upon those that have come before.

Thursday, December 10, 2009

A Study In Fundraising And Sustainability

I’ve been studying journalism nonprofits one way or another for about five years now, and I confess that in all that time, I’ve looked at their business models really as being slightly different iterations of the same species. But now, I’m not so sure.

As part of my graduate studies in nonprofit management at George Washington University, this fall I took a closer look at the finances of a dozen journalism nonprofits, keeping in mind the most pressing question for many: How can they diversify revenues and achieve some level of sustainability?

I acknowledge up front that my method was not perfect – I’ll explain at the end – but I think I’ve discovered what may be two critical distinctions within the group I studied.

First, the six nonprofits that served geographically defined communities – whether they be cities, states or regions – generally did a better job of diversifying their revenue sources than did those that attempted to speak to a national audience.

Second, among these “regionals,” there appeared to be some correlation between bigger budgets and greater diversity in revenues sources. This pattern suggested to me that there is a happy dynamic at work here – a virtuous cycle in which diversity of revenue helps create institutional heft that in turn attracts additional philanthropy in the form of major individual gifts and foundation grants.

What are the diverse sources that these nonprofits are tapping? For lack of a better descriptor, I lumped them together under the heading of “transactional” revenues – advertising, subscriptions, memberships, royalties, event ticket sales, contract research, and anything else that didn’t go under the “direct public support” line on Form 990. Some of these sources are taxable, some are not, and the difference was not always clear. Different nonprofits treated similar revenues in different ways. But I digress.

If this trend holds true, I think it would portend a relatively bright future for the nonprofit model as a major contributor in places like city halls and state capitals where newspaper bureaus have been emptied out. These are the places where the disintegration of the newspaper business model is most obvious to readers – and where for-profit alternatives have a hard time realizing returns on investment. Here, the case for philanthropy is clear – and so is a nonprofit’s potential to supplement its revenues with advertising and other market-driven revenues streams as it scales up its operations.

The trend also suggests a cruel and ironic corollary: The journalism nonprofits that can demonstrate the least dependence on foundations and large gifts may be the most likely to succeed in winning them.

At the same time, studying the finances of six “nationals” I studied caused me to look at those organizations in a wholly different light.

Like the regionals, journalism nonprofits with national aspirations are feeling pressure to diversify their revenue base beyond foundations and founding donors. And at least some are looking to the regionals’ success for tactics they can replicate – witness ProPublica’s hiring of Watershed Co., a consultancy with expertise in online and grassroots fundraising. But from what I’ve seen, most depend on major gifts and foundation grants regardless of size.

As I reported here in September, Madeline Stanionis, Watershed’s CEO, pronounced herself “skeptical” of prospects for building a national network of small donors. As Stanionis said at the time, donors to political and other “citizen-powered” campaigns have been conditioned to believe that the candidate or institution that receives their donations will respond directly to their demands. But journalism does not — and should not — operate that way, she said. “I just think trying to force a journalistic endeavor into a hole created by these campaigns is not correct,” she said.

My suspicion is that the “nationals” also suffer from being one too many levels of abstraction from readers’ lives. Their reports, however compelling in their conclusions, don’t explain to the reader why city sewer rates are so high or why the state legislature just slashed school spending. As Mike Worth, my graduate advisor and GW’s former vice president for development, remarked: “The problem with the case (for philanthropy) is that it’s intellectual. Nobody ever died from lack of public journalism.” The latter might be debatable, but I think he’s got it right.

What’s the lesson here? I think there are two, either (or both) of which may be a blinding glimpse of the obvious.

First, the nationals have a solid track record of tapping foundation support and keeping it flowing over a long period. Here, I’m thinking of the Center for Public Integrity, which has relied almost exclusively on foundations and major gifts since Chuck Lewis founded it 20 years ago. Why tamper with success? The only real benefit from the time and effort required to build a grassroots network may be the added credibility of having to answer to an audience. This is doubly true for those such as CPI and ProPublica that specialize in investigative work and also claim to be nonpartisan and/or non-ideological.

The second lesson is that any effort to build a grassroots network at the national level is going to require a lot of refinement. There are simply too many competing news sources and too many requests for support. Breaking through all that background noise is an enormous challenge. Best of luck to those that try.

Now here’s the big exception to the rule: Mother Jones. Among the nationals, MoJo stood out in its time-tested ability to pull revenue from all kinds of sources – advertising, memberships, events and investment income. Steve Katz, the magazine’s chief fundraiser, tells me that the model is an outgrowth of a deliberate effort to define and serve a particular constituency.

In an email, Steve told me that MoJo has “worked mightily to make the case that you won’t find our kind of point of view anywhere else, and that our journalism is also rooted in a ‘value proposition’ a.k.a. a point of view a.k.a. a politics, and hence our journalism – which must stand on its own as professional grade work – is also about changing the world.”

I’ll buy that. But I also think that if you take Steve’s view to its ultimate conclusion in our current economic and technological environment, it points to a tough road ahead for news organizations trying to replicate the newspaper model of objectivity in the online world. The new national news organizations most likely to prosper are those that already have a built-in constituency – or a primary purpose other than producing journalism.

Here, I am thinking of David Westphal’s reporting on Human Rights Watch and its transformation from journalism source to journalism producer. As David noted in his recent testimony at the Federal Trade Commission: “A key point here is that not all of the new players are news organizations.” This trend raises important questions about governance and process within nonprofits – how they try (if they try at all) to insulate their news-gathering operations from their advocacy, much as newsrooms were separated from advertising departments at newspapers.

Where does it all go from here? In my view, the nonprofit model will shake out into two, three or maybe four discrete models, depending on reach and mission. Like cousins, at first glance, they’ll look somewhat alike and may get together once a year for reunions. But each will have its own distinct direction, habits, inclinations – and contributions to the public debate.

A brief word about my method and how I selected the 12 nonprofits for my study. Frankly, it wasn’t very scientific; it was more an exercise in putting together a fact pattern. I began by listing the nonprofits I knew that 1) existed primarily to produce journalism and 2) had revenues of $100,000 or more a year, and 3) had filed their Form 990 tax returns someplace where I could find them online.

The list worked out to an even dozen, with six that I considered to be national in reach (ProPublica, Center for Public Integrity, Center for Investigative Reporting, Mother Jones, The Nation, Grist) and six that were primarily regional (Texas Observer, High Country News, MinnPost, Voice of San Diego, Chi-Town Daily News, New Haven Independent).

From there, I assembled all available revenue data from 2002 onward a developed an annual average for each nonprofit’s revenues and the percentage of revenues derived from “direct public support.” Then I plotted them on two graphs, one for regionals and the other for nationals.

Tuesday, December 8, 2009

The "Old McKinsey Magnifying Glass"

Check out the Brent Arends story this morning on MarketWatch. A former consultant at McKinsey & Co., he pivots from some of the testimony at last week's Federal Trade Commission hearing to show how dire the future is likely to be for professional journalists -- and how hard it will be to groom succeeding generations -- under the emerging online advertising model.

So long as news tries to live off online advertising alone, the future for journalists is not bright. Journalism may become like acting or being a musician: There will be fewer full-time jobs, and they will pay poorly. A lot of news writing will end up being done by amateurs, those with day jobs or by kids just out of college, sharing rooms in Brooklyn, N.Y., before they go on to "real" careers.

As if this alone wasn't disturbing enough, Arends uses his "old McKinsey magnifying glass" to concludes that journalism will conform to the 80-20 rule. That is, 20 percent of the stories will be the only ones that make money. Guess which ones those are?

What gets lost in the 80 percent that is swept away are the stories that we need for a functioning democracy -- how your congressman voted, which state legislator held a fundraiser before the big vote and why your sewer rates are five times the national average. It's not that for-profit sites can't deliver this stuff -- it's just not profitable.

Friday, December 4, 2009

"Integrating" News and Advertising

At first, I was horrified as many were at the news out of Dallas that Belo Corp. would "integrate" news and ad departments at its newspapers, including its flagship Dallas Morning News, by having some section editors at their newspapers reporting to sales managers. Would ad people control content? Yikes. I count myself among the many newsroom troops who fought wars to keep this kind of thing from happening.

But as I thought about it a little more, it occurred to me that this is really just another case of the dead-tree news business trying to catch up to what's going on in the online world. Thanks to our new friend the algorithm, editorial and advertising content are inextricably linked in ways that were never possible with the printed page.

In this new world, online journalists might think they can publish any stories they want. But if the stories don't have the right keywords -- or, heaven forbid, if they contain words blacklisted by advertisers -- they won't sell. And if the stories don't sell ads, the publication, however high-minded its editors, will cease to exist. There's really not much room to escape from that reality -- at least as long as the publication's first duty is to turn a profit for its owners.

Nothing wrong with making a profit. But the close connection can preclude online publications from pursuing some topics with the same depth and vigor as did newspapers of yore -- for example, homelessness, poverty or other social ills that don't have a natural appeal to advertisers. And if other publishers take their cue from the leadership at Belo, that might not be the case for newspapers going forward.

In my mind, this is exactly the space where the nonprofit model fills a need that grows with every cancelled newspaper subscription. In a world where algorithms supplant human judgment, it can provide a needed buffer that protects the public interest.

Tuesday, December 1, 2009

Tell Us More, Paul

A major goal of ProPublica, perhaps the nation's highest-profile nonprofit news organization, is to create "nothing less than a new class of cultural institution in this country," Paul Steiger, its high-profile executive editor, told the Federal Trade Commission's conference on the future of journalism this morning.

That's pretty lofty stuff. And it would seem to carry a lot of implications not only for how news is created, but the regard in which a news organization is held by community leaders. Does that mean it would operate like a major metropolitan opera or a symphony? Exactly how would it build that kind of image and gravitas? And what kind of fundraising would it do? How would it work with for-profit legacy media?

I left the morning session still wondering because Steiger didn't address any of those questions with any kind of detail. In his 15 minutes, pretty much all he said about the nonprofit model was that he doesn't think the government should change tax law to help nonprofit news organizations and that other than doing great journalism, fundraising is ProPublica's greatest challenge. Most of what we heard for 14 and 1/2 minutes was the same tale of woe about the demise of newspapers as social watchdogs and what great stuff ProPublica is doing to help fill the void.

I guess I expected more from the leader of what many outsiders regard as the flagship of nonprofit journalism. The model is poorly understood by many, and is often attacked with arguments that don't hold water. One of my favorites is that nonprofits simply will bend to pressure to produce news that big donors want to read -- as if a newspaper never skewed its coverage to please an advertiser.

The big problem is that a lot of journalists and publishers see nonprofits as a kind of shabby, tin-cup substitute for a real news organization. Coming as he did from his stellar career at The Wall Street Journal, Steiger knows better than anybody how the nonprofit model works as a business -- its pros, its cons and how it might play a role (or several kinds of roles) in replacing what is being lost with the crumbling of the newspaper business model. Developing a cultural institution is a great vision for what the nonprofit model can be. But it can't be a throwaway line.

I was impressed last month by CUNY's Jeff Jarvis and his insistence on developing models with specificity. Jarvis' approach is that even if the vision is wrong, discussing in some detail about how it might work is the best way to find what will work. Jarvis spent considerable time developing new business models for news, including one for the nonprofit sector. But he's mostly interested in a for-profit solution. Somebody in with great stature in the news business needs to take up the cause of the nonprofit model and begin explaining what it can do.

Paul Steiger should be that person.