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.

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.

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.

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.

"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.

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.

Why Nonprofits Need Newspapers

Georgetown University fellow Pablo Eisenberg writes about the mutually beneficial relationship between journalism and the nonprofit sector in a new article in the Carnegie Reporter entitled "Why Nonprofits Need Newspapers."

Eisenberg ably makes the case that the nonprofit sector, including foundations and individual philanthropists can help save journalism by providing a redoubt against the pressures of the market, particularly the one we're suffering now.

But with all respect to Eisenberg, he strays off track by arguing that philanthropists haven't shown any interest in saving newspapers. Individual donors, including a group that bid recently for the Boston Globe, indeed have shown significant interest in converting major dailies into nonprofits.

The problem is that the owners won't sell because in a depressed market they can generate marginally more profits by cutting operating costs and, of course, quality. This is exactly why the New York Times Co. pulled the Boston Globe off the auction block last month.

California Watch's Revenue Model

ProPublica invites publishers to "Steal Our Stories." John Thornton, founder of Texas Tribune, asked newspapers to pay for stories, but concluded the effort was hopeless. But another new nonprofit news organization, California Watch, the Sacramento-based reporting initiative to be launched next month by the Center for Investigative Reporting, is barreling full speed into the syndication-fee model.

What makes California Watch different? Robert Rosenthal, CIR's executive director, says California Watch has built something of a reputation even before the official launch of its web site (now set for December), getting stories onto front pages across the state and wants to leverage that position. "Our goal is not to give it away," Rosenthal said in a telephone interview Monday.

There's no way to know in advance whether the strategy will succeed, Rosenthal acknowledged. But that's how it goes these days in the news business, whether nonprofit or for-profit: Every new project is so much spaghetti thrown against the wall. Whether it sticks is left to the vagaries of economics, social trends and, of course, luck.

But one thing is certain, Rosenthal says. California Watch, like so many new nonprofit news organizations, is under tremendous pressure from funders to find a model that works in the now and creates sustainability for the long haul.

So far, California Watch has lined up $3.7 million in nearly equal donations from three foundations -- Knight ($1.3 million), Hewlett ($1.2 million) and Irvine ($1.2 million). But Rosenthal said they all want to see California Watch pursue a business strategy that generates significant revenues from royalties, advertising and other activities that typically are reported as program service revenue on a nonprofit's Form 990 federal tax return.

How much is still an open question, Rosenthal said, but a reasonable range might be anywhere from 25 percent to 40 percent of total revenues, he said. And the more, the better to create a virtuous cycle in fundraising. "That makes it easier to get funding from the foundations or wealthy individuals," he said, adding that $120,000 of the Knight grant is earmarked for development of a business strategy.

California Watch also plans to adapt standard nonprofit strategies to the digital age. Like his peers at the ProPublica, Rosenthal hopes to pursue smaller donors, perhaps with a strategy built around communities organized on Facebook or Twitter. Rather than ask for donations up front, California Watch plans to demonstrate its good works to community members and then solicit their support. "I can go to you and show you we did this, and it made a difference -- help us," he said.

Looking to the challenges ahead, Rosenthal, a former executive editor of the Philadelphia Inquirer, said he was confident that California Watch could do great journalism; building a successful business model will be the bigger challenge.

"The landscape is moving so quickly," he said.

My Day At CUNY

It wasn't the whole day -- I had to head back to DC mid-afternoon -- but I was at Jeff Jarvis' NewBiz Conference long enough to get a full dose of the energy and possibilities for new ways to support great journalism.

For those uninitiated in Jarvis' work: Jarvis and his helpers have spent a great deal of time and effort building new business models that might replace newspapers as primary producers of news.

Jarvis' pride and joy are Hyperlocal and New News Organization. The models play out a deeply researched but debatable set of assumptions to the conclusion that old-fashioned news beat coverage (or something recognizable) can be underwritten by a fully for-profit business.

The work is to be applauded. But to my disappointment, Jarvis today gave short shrift to his work on a nonprofit model, barely mentioning it in his remarks. Why? Jarvis is an evangelist for for-profit models, and I think it just isn't his thing.

But I hope that in the future he'll talk more about the role of nonprofits as contributors and partners within the news ecosystem. In fact, his own work on the for-profit New News Organization acknowledges the role nonprofits can play -- it includes a revenue line item of $35,000-a-year from a "donation system for watchdog journalism." Note to Jarvis: That's exactly the role nonprofits are built to play.

Jarvis did get a friendly reminder of the potential for nonprofits from David Cohn, founder of Spot.Us and a helper in organizing the conference. During the Q-and-A session, Cohn suggested to Jarvis that non-profits should not be "ghettoized" by the CUNY business models.

"There are ways for-profits, nonprofits to partner, and that keeps costs down," he said.

The FTC, Here To Help

You know the old saying about how we're from the government and we're here to help you? That's what came to mind this past week as I read the Federal Trade Commission's notice for its upcoming workshop on journalism in the digital age.

The notice makes the case that "news organizations" (which it notably does not attempt to define) are suffering at the hands of aggregators and other online actors that have drained the fun and profit from news gathering. Among the solutions it wants to examine are some that would seem to support nonprofits -- tax treatment and greater public funding, for examples.

Memo to FTC: No thanks.

It's not that any of the solutions listed by the FTC are so bad -- though I don't much like the idea of government funding non-broadcast news operations -- it's that they provide fresh fodder for misinformed critics who have come to the conclusion that nonprofits pose a threat to for-profit news sites and journalism generally.

Mention "nonprofit" to some of these folks, and you're likely get an allergic reaction. No sooner had San Francisco investor Warren Hellman ponied up $5 million for the Bay Area News Project than somebody complained errantly that the new venture would rely on unpaid college students, forcing other media to cut staff to remain competitive. News flash: Old media aren't competitive in the online age, and that isn't the fault of Warren Hellman or any nonprofit. Others fretted that donated money like Hellman's comes with agendas and strings attached. And advertising dollars don't?

But I digress. Nonprofits offer a viable solution to the decline of socially responsible journalism. By design, they put mission ahead of profit. And as a result, they will live or die based on their commitment to transparency. To the extent that government gets involved, it introduces the appearance of special favors and creates potential for political interference. That's the death of transparency.

To be clear, I don't object to the notion of government oversight. A little can go a long way -- witness the FTC's late-1990s antitrust investigation of Intel Corp. At the time, Intel dominated the computer chip market, and along with Microsoft Corp., seemed capable of devouring anything in its path, much as Google appears today. But just before trial began in 1999, Intel signed a settlement with the FTC in which it admitted no guilt and basically agreed to be nicer to the smaller kids in the technology sandbox.

Based on this experience, we can assume that what the FTC workshop really hopes to accomplish is to once again nudge the bullies into being nicer. I would submit that there are better ways to accomplish this goal. One might be to bring in witnesses who can explain how the nonprofit model works and how it complements the work of for-profits in journalism and other sectors.

My nomination would go to Duke's Jay Hamilton, author of All the News That’s Fit to Sell, which is cited in the FTC notice. In the book, Hamilton makes the case that journalism, especially about public affairs, is becoming a public good. He writes:

The point here is that since individuals do not calculate the full benefit to society of their learning about politics, they will express less than optimal levels of interest in public affairs coverage and generate less than desirable demands for news about government.

I do agree with the FTC that the stakes are high because unlike the great oil and steel trusts of old, the big powerhouses of the Internet are in the business of ideas. As Bill Kovacic, then a law professor at George Washington University and now an FTC commissioner, told me during the Intel case: "I think the impact is so important because its impact on information services affects everything we do."

Texas Tribune Launches Tomorrow

After much anticipation and a lot of fundraising (more than $3.5 million), Texas Tribune launches tomorrow, going toe-to-toe with the biggest newspapers in the state to cover cover state politics and policy. But unlike its for-profit competitors, Texas Tribune will give away its stories to anybody who wants to publish them.

Backed by Austin venture capitalist John Thornton, Texas Tribune already has generated a lot of media interest. The latest comes courtesy of The Washington Post's Howard Kurtz, who highlighted the new online-only publication in his Media Notes column on Monday.

The big questions, Kurtz notes, are: Could this become a model for non-commercial journalism? Will Texas media outlets use the Tribune's stories?

Thornton's response: "There is a certain wait-and-see attitude that I don't blame them for," Thornton says. "What if we suck?"

Here's a YouTube video showing behind the scenes.

Old School: Nonprofits on Education

Who'd have guessed it? While the nonprofit model has been getting lots of attention lately as a haven for socially responsible journalism (see links in the right hand column of this blog), a network of community-based journalism nonprofits has been covering local schools and higher education since AOL was the cool way to go online.

One such nonprofit, the Philadelphia Public School Notebook, has been digging up stories and holding officials to account since 1994. Now largely focused on its online presence, the Notebook still puts out a quarterly print magazine fice times a year.

The Notebook recently got a nice mention in the New York Times Magazine, in which author Michael Sokolove calls Notebook editor Paul Socolar "something like the journalist of the future. He is earnest, dedicated to a cause, foundation-financed and, to this point, read by a narrow audience."

The Knight Foundation apparently agrees. In December 2008, it gave a $200,000 grant to the Notebook "to take the magazine digital and add breaking news and user-generated content from a larger audience."

Others are joining in. Two thousand miles away, Education News Colorado began covering higher ed almost two years ago. "There are three of us working on the site full-time, with over 50 years of newspaper journalism among us," editor Alan Gottlieb told me in an email.

But will these nonprofits replace newspapers? Probably not any time soon, concludes the Times Magazine article, What’s a Big City Without a Newspaper? While it says that the Notebook "breaks stories and is notably well written," it also notes that "a broad audience and impact, two goals of traditional journalism, have been hard to attain."

Chicago's L3C Newsroom

For those keeping track of such things, take note: Journalism is about to get its first low-profit, limited liability corporation, or L3C.

The new Chicago News Cooperative, unveiled on Thursday by former Chicago Tribune managing editor Jim O'Shea, will begin life as a nonprofit, but will change over to an L3C after Jan. 1, when a new Illinois law takes effect, according to a Tribune report today.

The L3C is a hybrid corporation that straddles the line between for-profit and nonprofit enterprise. Vermont last year was the first state to pass a law allowing formation of L3Cs, and Illinois this month became the most recent. Several other states are considering similar legislation, as is Congress.

The Chicago News Cooperative doesn't appear to have investors yet. But it does have a major donor in the John D. and Catherine T. MacArthur Foundation. And it has a paying customer in the New York Times, which is planning a beefed-up Chicago-area edition, much like the Bay Area edition it announced earlier this month. There, the Times will partner with Warren Hellman's nonprofit Bay Area News Project.

Speculation and interest in the L3C model in journalsim has run high. Some have looked to the L3C model as a solution for newspapers because it allows a corporation to take on investors who are willing to accept varying rates of return - or possibly none at all. Foundations would be assured that their investment would qualify as a program-related investment - a crucial distinction under tax law - while socially responsible investors might be willing to settle for, say, a 3 percent return.

While CNC will partner with a newspaper, it remains unclear whether the model can be applied successfully to newspapers themselves. Jay Hamilton, director of the DeWitt Center at Duke University says newspapers likely may be reluctant to switch because of the legal uncertainties involved. Others who have written about the potential for L3Cs include Poynter columnist Bill Mitchell.

Perhaps the most attractive aspect of the L3C is that it automatically designates the company's activity as a "program related investment." Those are the magic words for a foundation, which must prove to the IRS that its grant furthers its mission and also benefits society.

While L3Cs are relatively new in the United States, they're old hat in the United Kingdom, where they're called "community interest companies." Although Vermont remains the only state to authorize the L3C, L3Cs formed in Vermont can operate in any state or territory. States such as Georgia, Michigan, Montana and North Carolina are considering similar legislation, according to a recent post in the California-based Nonprofit Law Blog.

What's In A Name? More Than $1M for TT

When John Thornton hired Evan Smith away from Texas Monthly to help him launch Texas Tribune, he knew he was getting a top-notch journalist. But as it turns out, he's also getting a major fundraising draw in the bargain.

Since Smith came aboard in July, the Tribune has raised nearly $1.5 million and already has hit its year-end target of $3.5 million, Thornton told me this week. The increase in donations following Smith's move was notable, he said, adding that he didn't anticipate Smith's celebrity power.

Thornton, who threw in $1 million of his own money, said that with the exception of a $250,000 grant from the Knight Foundation, all of the $3.5 million raised so far, has come from in state.

A lot of the money is coming from small donors. Thornton has signed up several hundred individuals. And, interestingly, he's gotten about three dozen corporate sponsors to throw in $2,500 apiece.

Thornton said he purposely kept the corporate sponsorship level to encourage participation and maintain editorial independence.

"If we have 50 and if Ev writes a nasty story about somebody, if it's somebody who gave us $2,500, so what?" he said.

Texas Tribune goes live on Nov. 3.

Investigate West Gets Foundation Grant

InvestigateWest, a nonprofit that opened shop in Seattle in July, has won its first grant from a foundtion -- $40,000 grant from The Bullitt Foundation, operated by the family that started KING 5 TV. InvestigateWest says it will use the money "to do in-depth, independent environmental reporting."

Here's a link to the story.

Downie Report: Affirmation and a Question

The forthcoming report on "The Reconstruction of American Journalism" by Len Downie and Michael Schudson offers both affirmation and a question for the nonprofit model.

First, the affirmation. In an op-ed in today's Washington Post that summarizes the report, Downie and Schudson make the following conclusion:

Accountability journalism in particular requires significant reporting resources with strong professional leadership and reliable financial support, which the marketplace no longer can be expected to sufficiently supply.

With this sentence, Downie and Schudson join the growing consensus that journalism -- the kind of accountability, watchdog and investigative reporting that helps provide checks and balances in a democracy -- has become a public good in the digital age. We all need it, but few are willing to pay for it in the form of a subscription.

So what to do?

Among other things, Downie and Schudson recommend creating a national "Fund for Local News" with fees collected by the Federal Communications Commission. I'm not so high on this idea -- I'm of the school of thought that government funding can't help but come loaded with potential for hidden political agendas and other challenges to transparency.

They also call for a more robust nonprofit sector in journalism, which they would accomplish with clearer IRS definitions for "new or existing news organizations." I'm all for this. But here's the question: What exactly is a nonprofit news organization? And who's going to tell the NRA -- the National Rifle Association or the National Restaurant Association, take your pick -- that their newsletter doesn't qualify?

This is an issue of journalistic standards, but goes quickly to the question of nonprofit governance. More and more nonprofits, both new and old, are doing journalism. Some of it is really good, and we know it when we see it. But putting a definition into the IRS code could be highly problematic.

The solution, I think, is for the broader nonprofit community to address this issue in a proactive way. Even if it can't produce a bullet-proof definition, it can identify practices and procedures that create a fairly bright line between journalism and advocacy.

At first glance, this might seem like a call to navel-gazing. But the lack of a defintion already is creating problems in areas like prize eligibilty and, more importantly, in deciding who gets access to places like the Capitol and the White House. Finding a solution sooner than later will help the nonprofit sector get past questions of legitimacy and credibility and get on to doing the kind of journalism that is most endangered in the digitial age.

ProPublica Adviser Manages Expectations

You might expect the consultant just hired by ProPublica to be optimistic, if not ebullient, about prospects for a tech-savvy, grassroots fundraising effort to help sustain the nonprofit for the long haul. But Madeline Stanionis, CEO of Watershed Co., pronounces herself "skeptical." "I've never drunk the Kool-Aid," Stanionis told me in a phone interview Wednesday.

Why the skepticism?

It has to do with donor expectations.

Stanionis thinks 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.

Stanionis is confronting the central dilemma facing journalism start-ups, nonprofit and for-profit alike: How to create a strong, independent editorial voice while also keeping the revenue flowing. For ProPublica, the stakes are particularly high. Though it has a rolling, three-year commitment for as much as $10 million a year from Herb and Marion Sandler, it needs to build a long-term revenue plan.

Enter Stanionis, whose clients have included The Nation and Mother Jones. ProPublica hired her firm and another to focus on large grants -- New York-based Community Counselling Service Co. -- with a $1 million grant from the Knight Foundation. Like most grants from Knight, the money comes with the condition that ProPublica share the knowledge it gains. But how that will happen isn't clear yet, said ProPublica general manager Dick Tofel. "(We) need to identify outputs relevant to others before we can determine how to share them," he told me in a recent email.

Indeed, Stanionis said she's just getting started, but some things she has sorted out. For one thing, her previous journalism clients are different in that they have well-established brands that "border on a personal relationship with readers." But ProPublica, like new, regional nonprofits such as MinnPost, Voice of San Diego and Texas Tribune, has positioned itself as a non-partisan, non-ideological investigative news source. It can be difficult for an outfit with that kind of professed independence to tell readers it needs their help. "You have to be okay with saying over and over again, 'We need your support,'" Stanionis said.

There's also the issue of managing reader/donor expectations. There's definitely room for a two-way conversation with readers in which they provide data and other inputs, Stanionis said. But that doesn't mean they get to dictate what stories get reported and written. "The nuance is important," she said.

So what kind of grassroots strategy will work for ProPublica and other nonprofits? What might help, Stanionis said, is if a reward for donating is something "fun" -- like the ACLU membership card. But as CUNY's Jeff Jarvis also warned, Stanionis knows that focusing too much on premiums and other rewards carries risk of drift from the mission, which is a nonprofit's primary reason for existing.

"It becomes a coffee cup and totebag machine," Stanionis said. "Is that what we want to be doing? Is that where we want to be in 20 years?"

A Lesson from Chi-Town

Like a lot of people who are concerned about the future of journalism in the digital age, I'm still wondering what we're supposed to have learned from the demise of Chi-Town Daily News last month. So I called one of my favorite editors of all time, Jacqui Banaszynski, who sits on the nonprofit's board.

Turns out, Jacqui also is struggling with this question.

The need to raise money to replace Chi-Town's start-up funding from the Knight Foundation was well understood by the board, she told me. But what could have been done differently to keep Chi-Town going? That's much harder to pinpoint, she said.

Among the headwinds Chi-Town and founder Geoff Dougherty faced were the severity of the economic downturn, she noted. It also "was trying to keep the geography in journalism in a new digital and citizen-choice environment. No one has yet figured out the pay model for that."

But she also wonders, as I have, whether the skill set of a journalist necessarily translates to that of a nonprofit executive. As Jacqui said, "I’d hate to be judged for my success as a businessperson and fundraiser when what I really am is a journalist."

She suggests that foundations such as Knight that have invested so heavily in Chi-Town and other startups take an extra step -- help them develop the kinds of expertise they will need to sustain themselves. While ProPublica did get a $1 million Knight grant to get that kind of help, the rest are pretty much on their own.

"So if there’s a cautionary note here, maybe it’s to make sure new ventures are a partnership of people who know how journalism works and how money works," she told me. "Maybe the gracious foundations who are out front in their efforts to protect the vital role of journalism in society need to dedicate part of their funding support to develop business acumen while these start-ups find their footing."

A Model Partnership in Charlottesville

A great post at the Nieman Lab site today by my colleague Mac Slocum. He writes about the partnership between The Daily Progress, the daily paper in Charlottesville, Va., and a local journalism nonprofit, Charlottesville Tomorrow, which focuses exclusively on growth and development issues.

Mac's article shows several of the strengths of the nonprofit model and its potential for partnering with traditional media that no longer can afford to perform basic watchdog functions for their communities.

A key point of Mac's article is that this was no shotgun marriage. It was relationship built on hard work and mutual respect. And, Mac notes, Charlottesville Tomorrow took several crucial steps to gain credibility: It put in place appropriate governance procedures; it took fundraising and financial management seriously, and it built a track record of good work.

This model might not work in every community, but it shows what role nonprofits can play at the local level in providing a service that technological and economic forces have revealed as a public good.

Fun With The CUNY Model

Advance warning: This post contains some dated and self-promotional material, but I did want to point to an article posted recently by Matt Sollars on the CUNY News Innovation site.

For the article, Matt asked me last month to look at CUNY's not-for-profit model and make an amendments I saw fit. When he and Jeff Jarvis rolled out their "New Business Models For News" project at the Aspen FOCAS09 conference in August, the first thing that struck me was the high expectation for advertising support (something like 50% of revenues by Year 3). But the more I looked, the more I thought that the model needed to reflect the maturation of a nonprofit's membership program.

Though community-oriented journalism nonprofits such as MinnPost are a recent phenomenon, nonprofits have been doing membership campaigns for a long time. And one common experience is that big donations tend to drive smaller ones. Call it a socialization effect or whatever you like, but people often follow the example of leaders in their community. Ultimately, the membership gift chart starts looking like a pyramid, beginning with a few big gifts at the top and filling out with growing numbers of smaller gifts at the bottom.

So back to the CUNY model: I used a typical pyramid from the Hank Rosso text on fundraising as a guide to adjust the number of donors over the first three years. It bumped up the potential revenues from membership campaigns by about $200,000 for an overall budget of about $3 million.

Of course, as helpful as the CUNY models are in helping us envision new journalism enterprises, they are at best informed speculation. The more important aspect of the membership campaign is that it helps keeps nonprofits attuned to the needs of the communities they serve. In that regard, a well-executed campaign is about more than money.

Frank Daniels' Speeding Ticket

Not long after I landed my first reporting job at the Raleigh News & Observer in 1988, the publisher and primary owner, Frank Daniels Jr., walked into the newsroom one day, handed the cop reporter a speeding ticket he had just received on Interstate 40 and told the reporter to write about it for the next day's paper. As far as I know, it was the only time Frank ever demanded that a news story be published in his own newspaper.

Frank stayed away from his newsroom for one simple reason: He knew that meddling was a bad idea. No reporter or editor worth his or her salt would ever want to be associated with a newsroom where the publisher determined what beats got covered and what stories got written. If Frank's paper appeared to harbor biases or pick on certain politicians, that was a matter to be settled between the journalists and their sources. With that philosophy, Frank ran what was widely regarded as one of the nation's best regional newspapers.

For the sake of argument, let's assume that rather than sell the N&O to the McClatchy chain as he did in 1995, Frank created a foundation that ran the paper as a nonprofit. Would Frank then have started ordering up stories that he thought had been overlooked by his star reporters and editors?

I don't think so.

The point here is that journalistic bias is a function of human intention, not the business model under which the story is produced. For-profit, nonprofit, it does not matter. If a reporter or editor has an axe to grind, he or she is going to find a venue to grind it.

I offer this reminder as a coda to stories that followed Warren Hellman's announcement that he would put up $5 million toward a new, nonprofit newsroom to cover news in the San Francisco Bay Area. Among them was a critique from Slate's Jack Shafer that the recent wave of new nonprofit news organizations is somehow tainted because it doesn't meet some market-based test of acceptance. Shafer's rule of thumb seems to be: If it doesn't sell ads, it doesn't merit publishing.

I think back to the stories I used to write at the N&O. A lot of them were about marketing abuses by one of the major drug companies based in nearby Research Triangle Park. The CEO, a friend of Frank's, once called asking him to pull me off the beat. Frank's answer, relayed by my editor, was to tell the CEO to go to hell. The truth -- that the marketing abuses hurt people -- didn't sell ads. But by telling it, the N&O did its community a service that never could translate into an ad rate.

Frank understood the value of public service better than most, and that's what made him a great publisher. Will Hellman get it as well? I don't know him, so I can't say. But I do know John Thornton, founder of Texas Tribune, also mentioned in Shafer's piece, and I can say that he certainly does. Why would he plunk down $1 million of his own money to create his own vanity press? If that's all it amounts to, then nobody will read it. John's a smart guy, and he gets it, the same as Frank did.

So where does that leave us? Should we mourn the era of corporate media ownership that brought us the Los Angeles Times' Staples Center fiasco? Do we think there will be less publishing-side pressure on for-profit newsrooms now that so many newspapers are in bankruptcy or otherwise on their way to extinction? Or should we wring our hands about the undue influence of nonprofit publishers who long for the day when their local newspaper actually carried reviews of the ballet?

I'll take the latter. The nonprofit model isn't the only answer. But it is an answer to the problem of underwriting socially responsible journalism in the digital age. If nothing else, the nonprofit model offers a range of alternatives to addressing the problem of newsroom bias.

For one, there are unique governance structures. Many of the startup nonprofits of note have installed journalism advisory boards to oversee the work product. Could you imagine a regional paper like the N&O bringing in renowned journalists from places like the Washington Post or New York Times to evaluate their work? Of course not. But that's what nonprofits are doing.

And then there's the fundraising. Fundraising in every form -- whether memberships, foundation grants or corporate sponsorships -- is a test of a nonprofit's ties to its community and an opportunity to make the case that it provides value even to those who choose not read or to donate. Fundraising 101 teaches nonprofits that the path to success and sustainability is to build a diverse base of support. And that's exactly what successful journalism nonprofits are doing. Sure, donations come with conditions. But so do subscriptions. Would you keep subscribing to a paper that never got delivered in the rain or that dropped the cartoon that you and your spouse share over breakfast? Of course not. Fundraising keeps nonprofits connected to their communities.

The hard truth is that there is no way to outlaw bias, either real or perceived, from newsrooms. It has been a fact of life as long as there have been journalists.

Texas Tribune Gets Knight Grant

Hats off to John Thornton and Texas Tribune for securing $750,000 in grants, including $250,000 from the Knight Foundation. The grants are a big-time validation of John's vision for his site - and for the nonprofit model at the state and community level.

Hellman's $5 Million For Bay Area Nonprofit

Big news from the San Francisco Bay Area: San Francisco businessman Warren Hellman will put up $5 million to help launch the nonprofit, which will work in partnership with KQED, the largest public broadcasting outlet in the area, and the Graduate School of Journalism at the University of California at Berkeley, according to a report in today's New York Times.

There's a lot of interesting aspects to this deal -- not the least of which is mention of the Bay Area News Project functioning something like a West Coast bureau for the Times, according to a report in the San Francisco Chronicle.

There's also coverage by the Associated Press, the San Jose Business Journal, and the BayNewser. And here's a link to the news release on PR Newswire.

Futurity and Almost-Journalism

More knowledge is a good thing, especially when it comes from top-flight research institutions. But the launch of Futurity, a nonprofit news service specializing in science and medicine, underscores what Dan Gillmor describes as the challenge of the "almost journalist."

Futurity was created by universities frustrated by the disappearance of newspaper reporters and column inches dedicated to covering their work, according to a recent report in the San Jose Mercury News.

Many of the articles on the Futurity site are written by the universities' public relations departments. And while the articles might be factually accurate, the problem with almost-journalists is that they don't always apply the principles of journalism to their work, Gillmor wrote in an article last year. Foremost among them is applying some standard of fairness -- or as others might call it, skepticism.

This is the chief problem with Futurity, according to former science reporter Charlie Petit, who is quoted in the Merc article. "The quality of research university news releases is quite high. They are rather reliable," Petit tells the Merc. "But they are completely absent any skepticism or investigative side."

How to solve this problem is not entirely clear. Petit suggests clear labeling of articles as a start. Kaiser Health News, a project of the Kaiser Family Foundation, has a national advisory committee of distinguished journalists to oversee its work. Gillmor is less specific, but says the problem is one that should be addressed by journalism educators.

Whatever the solution or solutions, they are certain to be put to the test as more and more advocacy nonprofits, think tanks and universities fill the void left by newspapers. According to Gillmor, almost-journalists will find that adhering to the standards of journalism ultimately will help them raise their game.

"By doing so, they can strengthen their own arguments in the end. At the very least they are clearer, if not absolutely clear, on the other sides’ arguments, however weak," he writes.

ProPublica Gets Professional Help

A frequently misunderstood aspect of nonprofits is that fundraising is a tin-cup substitute for a smart business plan. That misunderstanding gained traction in some circles a couple of weeks ago when Geoff Dougherty, editor of the Chi-Town Daily News, announced that he and his staff were leaving to start a new, for-profit publication with the backing of unnamed "angel" investors. In his post, Dougherty said CTDN needed $1 million to $2 million per year to "do a great job of covering a city as sprawling and complex as Chicago," but could raise no more than $300,000 per year.

Electing to operate as a nonprofit, whether producing journalism or another type of public service, dictates that a robust fundraising effort must be part of the business plan. The plan must generate enough revenue to achieve the organization's mission while also guarding against overdependence on any single source of support.

Few understand this reality better than the folks who run ProPublica, the New York-based startup that has been given a $30 million, three-year lease on life by Herb and Marion Sandler. Faced with the prospect of filling a $10 million-a-year budget gap, ProPublica has hired two of the biggest guns in the fundraising world with help from a $1 million Knight Foundation grant.

One is New York-based Community Counselling Service Co., which will advise "how best to conceptualize, structure and execute fundraising from institutions and individuals capable of making larger gifts, as well as laying the groundwork for hiring our own director of development next year," ProPublica GM Dick Tofel said in an email interview.

The other is Watershed Co. , a specialist in online fundraising, which will "look for us at the potential for small gifts in large numbers," Tofel said.

Both CCS and Watershed come to ProPublica with lists of well-known clients, and they have experience that can help move ProPublica -- and ultimately, other journalism nonprofits -- into a new sphere of fundraising professionalism and partnerships.

Among CCS's clients is Habitat for Humanity.While Habitat may be best known for building low-income housing, it also has gained renown within the nonprofit world for working closely with the communities it serves and for successfully involving deep-pocketed corporate partners in its mission. Building houses and writing investigative news stories are decidedly different activities, but CCS no doubt will examine how it can apply the experience of its other clients to ProPublica.

Watershed is headed by Madeline Stanionis, who has been a leader in applying technology to fundraising. For example, in a Feb. 26 article in the Chronicle of Philanthropy, Stanionis talks about the growing potential for philanthropic micropayments made over mobile phones now that carriers are taking less of a cut. In the article, Stanionis relates the success that one of her clients, the Humane Society of the United States, found by using text messages to solicit year-end gifts. Such experience could translate well to online journalism, as more publishers connect with readers through phones rather than computers.

For smaller startups, a strategic fundraising plan may be less elaborate than what ProPublica can afford, but creating one is no less vital to the organization's long-term viability, according to Voice of San Diego's Andrew Donohue. There's more foundation money available for journalism start-ups than ever before, Donohue told me in an email. But he added: "We've learned that this isn't money you should rely on for your long-term. It's start-up money to get you going. You've got to be absolutely obsessed with finding as many revenue streams as possible to sustain and diversify you for the future."

VOSD is working on developing some as-yet-undisclosed "nontraditional" sources of revenue, Donohue said. "This seems to be the stage that the early nonprofit news organizations are reaching right now: We've proven we can do the journalism and attract the early money. Now we've got to be preparing to wean ourselves off of foundation money or diversify from our original donors."

Exactly where will ProPublica go with all the high-dollar advice it's getting? It's too early to say. But whatever it does is likely to be emulated by other journalists who have chosen the nonprofit model and are willing to put some creative energy behind their business plans.

New Nonprofit in Orange Co.

Here's one that escaped my attention this week: A group that includes prominent lawyers, former state lawmakers and former newspaper reporters plans to launch a nonprofit online news site called Voice of OC, according to a report in the Los Angeles Times' TV Insider.

Joe Dunn, a former Democratic state senator from Santa Ana who chairs the board of directors, told the Insider that the group hoped to support a $600,000 annual budget. The group decided to launch the new site after conferring with the group that runs the highly regarded Voice of San Diego.

Buying Time in Chi-Town

Like many, I was disappointed to read Friday that the editorial team behind Chi-Town Daily News was giving up on its nonprofit business model in order to launch a new, as-yet-unnamed, for-profit news site about city news. In a blog post, editor Geoff Dougherty says the reason was that CTDN simply couldn't raise enough cash "to do a great job of covering a city as sprawling and complex as Chicago."

I don't know Dougherty, but I must say that I admire his ambition. He figures he needs $1 million to $2 million a year to do the job right. I'd bet that's still a fraction of what the Chicago Tribune or Sun-Times spends covering city government. But he's been at it with CTDN for four years now, and he still hasn't been able to raise more than $300,000 a year. Dougherty wants to get to the promised land, and he wants to get there now. I understand that.

The hard truth, though, is that it takes more than four years to build a donor base and diversify sources of revenue to sustain a nonprofit. The fact that Dougherty got to $300,000 in just four years is a major accomplishment. Sure, it's easy to look at an outfit like ProPublica and wish that you, too, could find a benefactor willing to put up $10 million a year to pay for your newsroom. But that kind of one-stop shopping isn't a business model; it's a lightning strike. -- something that the people who run ProPublica know better than anybody. In fact, ProPublica is using a $1 million grant from the Knight Foundation to hire a fundraising firm to help it figure out how to sustain itself when its initial funding taps out, according to general manager Dick Tofel.

I don't doubt that Dougherty and his team knocked on every door they thought possible before giving up on CTDN. But the great strength of the nonprofit model, I believe, is that it puts the needs of the newsroom ahead of all others. More importantly, it treats socially responsible journalism not as a product, but as a cause greater than any individual institution that serves it. When you bring on investors, they come first, even if they are "angel" funders. Maybe not this year, or the next, or even the third. But someday, they're going to demand a return.

So the question that lingers in my mind is this: What exactly is Dougherty getting from his new investors? As far as I can tell, he hasn't cracked the code of making a profit by selling socially responsible journalism. The fact is, it is likely to remain a money-losing proposition. So if he's using the money to do what he says -- scale up his news operation -- he's merely buying time until the next instance that his ambitions exceed his revenue base.

I wish Dougherty well, and I do think that we will see more hybrid organizations that blend nonprofit and for-profit activities. But if he plans to stay true to his mission -- providing "vibrant public affairs coverage" -- he's going to have to ask permission of his investors. Then we'll see exactly how angelic they are.

A postscript: In his post on Friday, Dougherty said he was in talks with some local nonprofits that might buy the CTDN website and continue its neighborhood reporting program. This is a reminder to self to check back in three years and compare what the new CTDN looks like next to Dougherty's next venture.

An Offer He Couldn't Refuse

Why would an award-winning journalist with a long history of breaking big stories in his home state leave mainstream media to work for an ideologically-driven think tank? According to Mark Flatten, the think tank in question -- the conservative Goldwater Institute in Phoenix -- made him an offer he simply couldn't refuse.

I wrote about Flatten yesterday. In an email interview, Flatten said he took the job in large part because Goldwater wanted a watchdog over government power and spending -- which was what he was doing at the East Valley Tribune -- and would give him the same level of editorial independence. He writes:

During the interview process we were in complete agreement that the reports I produce would have to follow the rules of accuracy and fairness as would be required at a newspaper. When we publish my findings (which should be soon) we plan to include extensive links to original documents so that readers can judge the information themselves. The benefits of doing this are obvious. When I uncover waste, fraud or abuse in government, the people I am writing about will naturally try to dismiss the report as advocacy because of my connection with Goldwater. However, by adhering to the rules of good journalism, and by making it clear to readers where the information came from, the facts in my (reports) will speak for themselves.

Political belief had little to do with the move to Goldwater, Flatten said. He added:

As I like to say half-jokingly, my views tend to be pretty libertarian (small “L”) because I’ve covered government long enough to know it doesn’t do anything very well. I think that is a good fit with Goldwater’s philosophy of being skeptical about government power and spending. I can’t answer whether that was a factor in my being offered the job. As to my decision to take it, the main issue for me was that the people here were clear that they were not looking for an advocate, but rather someone who could report critically about government and follow the rules of good journalism.

Flatten also said he agrees that costly and time-consuming work of investigative journalism "is likely to shift more to non-profit organizations and think tanks to a large degree in the near future."

A Sign Of Things To Come

Here's a press release headline that's likely to be recycled many times: "Nonprofit Institute Hires Investigative Journalist." Just add the names of the nonprofit and the journalist, and you've got another story about the future of watchdog journalism in the post-newspaper era.

Now here's a test: What if the institute in question was a right-wing think tank that got its money from a national group dedicated to cutting health and welfare programs and to opposing safety and environmental regulations? Is that okay? Is it still journalism?

That's exactly the situation in Phoenix, where the Goldwater Institute recently hired former newspaper reporter Mark Flatten to "research, investigate and expose government corruption and abuse," according to a statement from CEO Darcy Olsen. A news article notes that the money to hire Flatten came from the State Policy Network, which describes itself as "the capacity building service organization for America's free market, state-focused think tank community."

Read the rest of this post at Nieman Journalism Lab.

Investing in Journalism the IJNR Way

Talking with journalists involved in nonprofit startups, I've noticed a dynamic that can be best described as a love-hate relationship with money: Many love the idea of being handed a check, but they hate the idea that it might appear to compromise their work in some way.

To these conflicted souls, I offer the example of Frank Allen, director of the Institutes for Journalism and Natural Resources, who has been investing other people's money in socially responsible journalism since 1995 and hasn't lost a night's sleep yet.

A quick bit of background: Allen, a former Wall Street Journal editor, founded IJNR to help journalists uderstand the complexities of the environmental beat. The institutes typically are week-long excursions to places such as the Great Lakes or Oregon's Willamette Valley, where journalists meet with people who deal with natural resources issues from all perspectives - and he does mean all. Reporters hear from conservationists, industry reps, farmers, government officials - pretty much anybody who has a stake. And that's the point, Allen says. Reporters get a complete picture. (Disclosure: I am among IJNR's 600 alumni, having been a fellow with IJNR's 2001 Pacific Northwest Institute.)

Trouble is, the trips are expensive. In its last IRS Form 990, IJNR reported spending $436,551 on programs. So where does it all come from?

I caught up with Allen earlier this week to talk about his nonpofit business model and his efforts to maintain an ideologically broad base of support. Fundraising for IJNR, it turns out, also in an exercise in teaching context and perspective.

But first, some numbers.

About 60 percent of IJNR's funding comes from big foundations; another 20 percent comes from small donors including alumni and small, family-controlled foundations; and 5 percent comes from conservation groups.

Now here's something of a shocker: About 15 percent comes from big corporations such as Georgia-Pacific and Chevron that haven't always been portrayed as good environmental stewards.

"The strategy from the beginning was to see if we could pull together and maintain a broad and credible spectrum of supporters," Allen says.

When courting representatives of a major prospect, whether a foundation or a corporation, Allen says he emphasizes the importance of educating reporters. Most reporters get little time out away from deadline pressure and have few opportunities for professional development, he explains. The message: Money won't buy you a positive story, but it can help open minds. A gift to IJNR is an act of enlightened self-interest.

"It's a cultivation process," Allen says of his sales pitch. "You have to figure out how to get through the door and to the point where your request is welcome."

Sometimes making the case is the easy part. Allen recalled the case of a company that wanted to donate $100,000. But officials insisted that reporters tour their laboratory and that they lead the tour. Allen refused the money. In another instance, the Turner Foundation wanted to make its donation contingent on excluding industry groups. Again, Allen refused. (An interesting coda: Ted Turner's daughter, Jennie Garlington, later applied and was accepted to IJNR without revealing her father's identity. She reported her positive experience, and IJNR got its grant.)

Bottom line: It's not always easy to maintain one's backbone when courting a broad array of funders, but doing so helps build a more important asset - credibility. If you can keep love of money in check, you won't won't hate yourself in the morning for having taken it.

Eight Foundations and a Football

A lot of important questions about foundation-funded journalism are being kicked around these days. Can foundations fill the resource void left by newspapers? Will they try to skew coverage? Is their support reliable? Or is it a fad?

I've been mulling a more basic question: Do foundations know what the heck they're getting themselves into?

I'm not so sure.

In a recent article in the Chronicle of Philanthropy, Chuck Lewis and Bruce Sievers called upon the nation's major foundations to help preserve American democracy by helping stave off the precipitous decline of our news media. They write:

Philanthropy is in a unique position to take the initiative because it can move quickly and deliver significant resources to key players in the news media, while taking a hands-off stance toward content. Yet, with a few notable exceptions by some of the nation's biggest grant makers - Benton, Carnegie, Ford, Hewlett, Knight, MacArthur, Open Society Institute, and Pew - foundations have not become involved in this arena of public life.

While some might quibble with the assertion of the first sentence, I was more intrigued by the implication of the second sentence. And I wondered: What exactly are those eight big foundations doing to help support socially responsible journalism?

The short answer is: a lot. They are to be applauded for doing so. And others not mentioned in the article are answering the call.

But when you scratch at the surface, it becomes clear that foundations don't agree on how to define the problem at hand. And when measured against Lewis' and Sievers' call to "do the most good by financing the difficult work of journalists themselves," only one of the eight (Knight) appears to have a systematic method of doing just that - or at least one they cared to share on their web site.

Line those foundations' programs alongside one another, and you get a show-and-tell of assumptions about what's ailing American journalism. You also get a sense of the foundations' institutional tolerance and capacity for experimentation within the nonprofit model. Some simply aren't equipped to make the necessary, critical decisions involved in picking winners - and some seem uninteresed in doing so.

For example, the Hewlett Foundation gives millions to journalism practitioners. But most of it goes to proven winners such as PBS' NewsHour, and the money comes out of their "special projects" program area, where they keep the odds and ends that don't fit neatly into their seven areas of concentration.

The Ford Foundation lists 400+ grants under "advancing public service media," but they're all over the map: money for documentaries, for universities, etc.; not a lot for what could be considered old-fashioned journalism. Meanwhile, Carnegie focuses on journalism education. Benton cares mostly about telecom policy and the digital divide. Etc., etc. You get the idea.

Not that different approaches are a bad thing. As Chairman Mao said, let a hundred flowers bloom. But as Matt James of the Kaiser Family Foundation and Kaiser Health News has noted, the philanthropic effort to support journalism needs cohesion and a larger scale - and that may be a greater task than any foundation can take on alone.

This post also may be viewed at Save The News.

The promise of a newspaper’s investigative spinoff

The latest edition of American Journalism Review has an in-depth piece on the thinking behind the San Diego Union Tribune's to spin off (though that's not the official phraseology) its investigative team as an independent nonprofit.

Rather than wait for the ax to fall on her four-person team, investigative editor Lorie Hearn did the deed on her own terms - terms that allow her team to publishing their work in the UT, but also getting the team off the publisher's books.

Rather than wait for the ax to fall on her four-person team, investigative editor Lorie Hearn did the deed on her own terms - terms that allow her team to publishing their work in the UT, but also getting the team off the publisher's books.

As part of the new relationship, the UT will pay the new nonprofit a substantial amount of money. In return, the UT gets first dibs on a specified number of investigative stories. But Hearn also has freedom to shop the story around to other media - and to develop her own philanthropic base. She already has one major donor.

Although the article does not make the connection, it notes that Hearn is negotiating with a representative of Platinum Equity, the Beverly Hills buyout firm that recently bought the UT and currently is bidding for the Boston Globe.

Can this kind of partnership help work, for both journalists and publishers on a broader scale? We'll see. But Hearn clearly sees the arrangement as a win-win.

"I'm not abandoning the Union-Tribune," Hearn tells AJR. says. "I am actually doing this because I want to help it survive."

This post also may be viewed at the Nieman Journalism Lab.

The For-Profit Case for the Nonprofit Model

There's a great new post today at Free Press's Save The News project. It's from Cindy House, formerly of the now-deceased Rocky Mountain News and now of the Rocky Mountain Independent. In it, she talks about the Independent's business model and why the founders chose the for-profit path.

House's post is worth reading because the three-pronged model she describes is truly innovative. The first two elements we know a lot about: advertising and memberships. The third is something not normally associated with newsrooms: The Independent plans to develop a consulting business that will offer "Web design, search engine optimization and editing/writing services to other businesses."

Although House doesn't use the word "subsidize" in connection with journalism, that's exactly what she's talking about. As she says, the owners hope the consulting business will "bring in much-needed capital." She adds: "We keep our expenses low so that whatever revenues come in go right back into content development."

This, ladies and gentlemen, is precisely the argument for the nonprofit model.

To review: Socially responsible journalism has been revealed as a public good because it cannot (or at least has not yet) found an online niche where it can be fully supported. The nonprofit model addresses that problem by opening the door to philanthropic development, as well as for-profit subsidiaries, including consultancies. The nonprofit mission is crystal clear: Whatever surplus may be generated goes right back into newsgathering.

Now back to the Independent. If I read House's post correctly, that's exactly what the owners hope to do.

I deeply admire the courage it took for these laid-off journalists to take control of their futures (not to mention the effort they are making in the public interest). But as a for-profit, the Independent someday is going to have to start paying taxes on its profits. And what if the consulting business is wildly successful, throwing off enough cash that some of the owners suggest that the board declare a dividend? Isn't that what for-profit owners are supposed to do? Yes, the owners agree now that profits go back into the newsroom. But at a for-profit, that might not always be the case. And changing course could prove painful.

There's more ammunition in House's post for the nonprofit model.

The idea of memberships, of course, is one that public radio stations have built development plans around for decades.

Also, House confesses that managing the business model to protect editorial integrity won't be easy. She writes:

(A)s journalists, this is tough for us to wrap our heads around. Traditional newspapers erect a “wall” between the editorial and advertising/business departments to prevent conflicts of interest. As we build up our consulting business, we will have to reshape this wall, perhaps by spinning off a segment that’s separate from the core news magazine.

Nonprofits have developed some fairly sophisticated governance procedures to manage these kinds of church-and-state divisions. They're not perfect, but again, they are designed to serve the mission, not the bottom line.