Duke Conference Report

If you read Steve Coll's New Yorker piece, A Nonprofit Times?, you've got some feeling for the buzz of the Duke Nonprofit Media Conference earlier this month. Now, there's a full report on the conferees' discussions and the progress they made.

The title of the report, The Road Ahead for Media Hybrids, says a lot about where the nonprofit journalism movement likely is headed. There won't be bright lines. Instead, nonprofit and for-profit entities will interact and support each other in ways large and small.

The report identifies four nonprofit models that are emerging:

* Media organizations run as nonprofits, providing "media inputs"
* Low- profit limited liability corporations (L3Cs)
* For-profit media firms with affiliated nonprofit investigative funds
* For-profit media firms with subsidized content

The conferees also addressed the need for the nonprofit sector within journalism to scale up. Among the topics: establishment of a donor collaborative; university-based resources that could be shared across states; and a clearinghouse to vet foundation investments in nonprofit media

Definitely worth a read.

Saving Journalism: Worth Another Read

As we think about the nonprofit model and its applications to journalism, it's worth taking a few minutes to go back and read Phil Meyer's 2004 CJR essay, Saving Journalism - if for no other reason, to measure progress and revisit areas where progress has stalled.

Meyer - professor emeritus at Chapel Hill and a man who has been 20 years ahead of his time for half a century - takes the first deep dive into examining the nonprofit model as a kind of Biosphere 2 for socially responsible journalism as the newspaper model collapses around it. The essay anticipates many of the questions we're now wrestling with. Among them: Would philanthropies exert undue influence over newsroom? (Answer: It couldn't be any more dangerous than what advertisers do now.)

Meyer also paints a dark picture of what has become the newspaper industry's reality. He writes:

I know of no newspaper companies that are doing this consciously, but the behavior of most points in this direction: smaller newshole, lighter staffing, and reduced community service, leading, of course, to fading readership, declining circulation, and lost advertising. Plot it on a graph, and it looks like a death spiral.

Meyer also reminds us that brighter days still are possible.

We should look for ways to keep the spirit and tradition of socially responsible journalism alive until it finds a home in some new media form whose nature we can only guess at today.

This essay is what got me interested in pursuing the nonprofit model several years ago as I anticipated the eventual evaporation of my former bureau, and reading it again reminds me that this is a trajectory worth following to its conclusion.

Google's Partial Answer

A little while ago, this blog wondered why, with so many other philanthropies entering the realm of journalism, Google hadn't made a foray through its Google.org subsidiary. Now, we have an answer from CEO Eric Schmidt - or at least part of one.

Turns out, Google is "trying to avoid crossing the line" between technology and content. At least this is what Schmidt told the Financial Times when he was asked why Google hadn't bought a newspaper company. Schmidt reportedly said:

There’s a debate in the industry of exactly how to get it but, ultimately, the problem is not us taking money from some other pocket and subsidizing it, ultimately the solution is to build products that really are so good that we make enough money from advertising and subscriptions, to a degree, that they make sense and that there’s enough money to pay for the construction of this high-quality content.

Let me see if I've got this right. Google doesn't want to invest in creation of high-quality content because it hasn't yet figured out how to make enough money pasting ads onto the content it's already squeezing out of a dying industry. The real answer probably has more to do with appearances and Google's desire not to look like it is creating a vertical monopoly in news and information.

But his quote notwithstanding, Schmidt is no disinterested bystander in the debate over the future of news and the growing role of nonprofits in producing it. In his spare time, Schmidt is chairman of the New America Foundation, which has sponsored two forums this month on what will become of enterprise and investigative journalism as fewer newspapers can afford to underwrite it.

Maybe Google doesn't want to cross the line, but Schmidt clearly has no hesitation.

Hey, Steve … Answer The Question!

Many thanks to Steve Coll and the New America Foundation, which has taken to heart the problem of faltering support for enterprise/investigative journalism. In the past two weeks, New America has hosted two thoughtful, well-attended forums on the topic.

The question posed in Washington last week was, Who pays for the news? And on Wednesday in San Francisco, it was, What comes after newspapers? The answers, in brief, were that 1) nobody wants to pay and 2) that nobody knows what’s next.

I don’t mean to sound ungrateful – I thoroughly enjoyed the 3+ hour discussion in Washington – but I’m getting a little frustrated that we aren’t discussing some possible answers to the questions. I think we’re missing some opportunities.

Only toward the end of the Washington forum did somebody throw out the notion of the L3C – the low-profit limited liability corporation – and how it might or might not be a workable model for journalism. But only one of the panelists seemed at all familiar with it, and the conversation quickly turned other topics. I didn’t attend San Francisco, but from what I’ve read and watched, there was a similar lament about the demise of the newspaper model followed by little discussion of solutions. As Conor Gallagher reported:

"So, what's next?" (moderator and NPR media reporter David) Folkenflik asked at the opening of the lecture. After over an hour of stressing the importance of journalism surviving in some form, that question remains unanswered.

Not that anybody is expected to have the silver-bullet answer to the questions that have been so ably posed by New America. But we know what the problem is. And by “we,” I mean people who care and know enough to do something more than bemoan the loss of fading institutions. Steve Coll got it right: This is a time of great experimentation, as well as destruction. There are lots of ideas out there that need to be picked apart and examined as only journalists can. No time like the present.

Kaiser Health News Launches June 1

The Kaiser Family Foundation plans a formal launch on June 1 for Kaiser Health News (KHN), an independent service that will provide original reporting on the politics and policy surrounding health care. The stated goal of the news service, edited by veterans of the Washington press corps, is “to provide in-depth coverage and news at a time when cash-strapped news organizations are being forced to scale back.”

The news service had a "soft launch" last fall, and earlier this year began distributing its work via the Los Angeles Times-Washington Post News Service. It already has had stories published in newspapers such as The Philadelphia Inquirer. It does not charge for its work.

The foundation sees KHN as fulfilling a public need – independently produced journalism on a topic of public interest – that no longer is being fully met by the private sector. The foundation funds KHN directly and acts like the publisher, according to foundation senior vice president Matt James. An independent advisory board oversees KHN's work, but as in all of the foundation's programs, it is overseen by the foundation's board, he said.

Kaiser has put parameters around KHN's work – no “gotcha” journalism – but foundation officials do not review stories prior to publication. James said he expects there will be complaints from within and outside of the foundation. But to do otherwise would undermine the credibility of the news service. “The key is editorial integrity,” he said.

Reason for the Nonprofit Model

When I was a reporter writing about public policy, I used to love to call the in-house experts at the Cato Institute. Their libertarian logic was always clean and sharp, and it could slice almost any subject to the bone.

Well, the libertarians are it again, this time taking on the demise of the newspaper industry. In a new article entitled "Hired News" in Reason, the leading libertarian magazine, author Tim Cavanaugh argues that public relations professionals are taking over where investigative journalists are leaving off. He writes:

Flackery requires putting together credible narratives from pools of verifiable data. This activity is not categorically different from journalism. ... Communications is a highly competitive environment, and it is becoming more competitive. Frequently the most valuable information comes out just because somebody wants to make somebody else look bad.

This is a bit like arguing that it's okay for the patients to run the asylum because they know it as well as the professional staff. Now, I'm not arguing that P.R. professionals should be committed. Far from it. But they serve an entirely different role in our society, and that role shouldn't be confused with what journalists do.

Cavanaugh's argument is straight out of the Stone Age. In essence, he says that if we're both able to throw rocks at each other, it's a fair fight, and that's all society owes its members. But the fact that he is free to make his argument in a magazine owned by a 501(c)3 nonprofit organization underscores exactly why society benefits from thriving alternatives to for-profit journalism.

The Wall Street Journal, Upside-Down

Have you seen those great offers from The Wall Street Journal, where you can get both the print edition and online access for something like $100 a year? Mark Potts made an amazing - and in some respects, alarming - discovery. For new subscribers, it actually can cost less to get both print and online than to buy online access only. After seeing his online renewal go up to $151, Mark searched around and found a subscription offer for $89 - but only if he took the print edition as well.

Mark reports that he's getting fed up with the Journal's pricing schemes, and is considering cancelling his subscription altogether. He doesn't want the print product. And now that he can get a lot of the Journal's content on his iPhone for free, he doesn't feel he needs the online access. "A publisher who disregards customers that blatantly — trying to force them to buy something they don't want to get something they do want — is just nuts," he writes.

Agreed. But there's still a nagging question: Why would the Journal turn its pricing model upside-down and risk alienating loyal customers?

The bottom line for most media companies is that print subscribers still are many times more valuable than online readers in terms of generating advertising revenue. Clearly, the Journal saw that cross-subsidizing the print edition makes economic sense as long as the subsidy is less than the marginal revenue it gains by "paying" an online subscriber to take print.

The strategy seems to be working, Mark's pending cancellation notwithstanding. Last month, Dow Jones proudly announced that it was the only major newspaper to grow its audited circulation last year.

So how does this relate to the nonprofit model? Seems to me the Journal is operating on the same assumption that works well for many nonprofit publishers: The print product, whether a glossy magazine, a newspaper or a monthly newsletter, is only one part of its value proposition.

Take the Smithsonian Institution and its magazine, for example. If you go to the subscription page, you see that the magazine comes with other benefits including discounts on shopping at the SmithsonianStore.com and the Smithsonian Catalogue, access to "exclusive, members-only tours and vacations to outstanding destinations," and a membership card "identifying you as a proud supporter of this unique cultural institution." Act now, and for your $12 subscription, they'll even throw in a Smithsonian umbrella.

The National Geographic and AARP operate on similar models. More than a product, they offer a relationship to their subscribers, members or whatever they choose to call their customers. At AARP, for instance, most members join for the benefits, but the magazine - paid for with the annual membership - is one of the benefits that keeps them coming back. Will this model work for everybody? Probably not. But it is a model that nonprofits seem to do better than most, and there could be lessons here for other publishers.

A postscript: Lest anybody think the Journal is going all squishy and nonprofitty on us, please note that they did issue a press release scolding The New York Times for publishing a story suggesting that the Journal's circulation gains were the result of discounting. From the release:

However, in 2008 the Journal moved away from deep discounting and raised the introductory offer and newsstand pricing by nearly 40%. Even with higher prices across the board, Individually Paid Circulation continues to grow in an industry that is largely shrinking.

Content Wants to be Ubiquitous

A lot of newspaper people (and former newspaper people) I know get excited about the nonprofit model for journalism because they think it's a way to instantly and magically free themselves of problems - financial and otherwise - that plague newsrooms. I know. When I first read about the idea in a 2004 AJR article (link to come) written by my grad school adviser, Phil Meyer, that's exactly what I thought - freedom!

But anybody who aspires to launch a journalism nonprofit (or even to work at one) needs to understand that the laws of economics still apply - only in reverse. In an online news model, where marginal production and distribution costs approach zero, there is almost no economic incentive to produce costly enterprise/investigative journalism. As a result, that kind of work becomes a pure public good - but one that government can't be fully trusted to provide. One answer: The nonprofit model.

This is the logic thread that runs through a recent post by venture capitalist John Thornton of Austin, who has studied both for-profit and nonprofit journalism models closely. As John neatly states the problem facing journalism in the online age: Content Wants to be Ubiquitous.

When the the unit production cost of any good approaches zero, what that good really wants to be is ubiquitous. And information–particularly news– on the web is sui generis in at least two reespects: regardless of the total production cost of a piece of content, the average unit cost has the potential to be trivial because replication is free. And unlike any other good I can think of, the marginal unit production cost is exactly equal to the marginal unit distrubution cost, and both approach zero. It’s hard to imagine that even the most arduous, long-form, Pulitzer-winning series of articles will have an per-unit cost of much above the asymptote–and here’s the perverse thing–if enough people want to read it.

As mentioned here previously, Thornton is raising money to launch a nonprofit called Texas Tribune.

Slogging It Out In Seattle

This blog began the same April day that former staffers of the Seattle Post-Intelligencer announced that they would begin their own online nonprofit news site, Seattle PostGlobe. But it appears that high hopes have given way to the grim reality of long hours and limited resources.

In a reader blog on the seattlepi.com site, local freelancer Linda Thomas posted an interview with Kery Murakami, the former PI reporter who launched the PostGlobe. Thomas writes:

In addition to being a reporter for the site, Murakami has to be an editor, site designer, IT specialist, grant writer, business partnerships director, and receptionist. That's not what he imagined when he decided - as a third grader - to become a journalist. That early realization came after he watched All the President's Men with his mom.

"Looking back on my years as a newspaper reporter, that seems like such an idyllic life," he says.

Now he's been spending 15 hours a day, 7 days a week trying to make the PostGlobe viable. Many of the journalists who initially said they'd volunteer and write for the site "have disappeared," he says, acknowledging that they have their own challenges to deal with following the sudden end of the P-I as a newspaper.

Murakami admits, he's thought about quitting, but he won't.

Hopefully, the PostGlobe's second month will be better.

Free Press Summit: Changing Media

Over at the Newseum today, the media reform advocacy group Free Press is holding a summit called Changing Media, where it is advocating for adoption of a "national journalism strategy."

Among the group's priorities is the promotion of private, nonprofit models to promote journalism. But its agenda also includes closer government oversight of media ownership and government support of journalism, which it says ahould be regarded as a public service rather than a commodity.

The comments of Craig Aaron, Free Press' senior program director, are worth a read. Among other things, he calls for an AmeriCorps-style Journalism Jobs program, a $50 million government-backed "journalism "R&D fund" and new public media "with an overarching commitment to newsgathering and community service." If nothing else, it is an ambitious list.

"It’s important to remember here that news has always been subsidized," Aaron says. "But just because advertising no longer subsidize (sic) journalism, does not mean that we no longer require news. So we need to find new policies to support the media. And, yes, the government will probably have to be involved."

For those with time on their hands, Fress Press' report, Saving the News: Toward a National Journalism Strategy, is worth a read, too. It's a dense 48 pages, and the title might be a major turn-off for free-market types. But it surveys the landscape of journalism business models - and entry points for government - as well as any document out there.

New America Forum: More Takeaways

One of the big, underlying questions the New America Foundation’s forum, Who Pays for the News?, was whether newspapers are in their death throes or merely are going through an existential transformation similar to radio’s metamorphosis following the advent of television.

Against that backdrop, several of the panelists offered their thoughts on what is being lost as newspapers around the country cut staff or close. A sampling:

* Institutional gravitas. Alex Jones of the Shorenstein Center at Harvard said newspapers are community institutions that are cannot be replaced by any number of bloggers or journalism startups. His case in point: the priest sexual abuse scandal covered by the Boston Globe. The same stories had been covered previously by alternative media, he noted, but were largely ignored by the community – and the Archdiocese of Boston – until the Globe dived in.

* News judgment. Mark Paul of New America said another loss is the “aggregating function of newspapers.” Paul suggested that a front page is more than a collection of random news items; it represents a professional judgment as to what is worthy of public attention.

* Professional standing. James Bennet, editor of The Atlantic, offered that the pressure to give away content could put permanent, downward pressure on salaries, returning journalism to its “scrappier” of the first half of the 20th century. The period from 1950 until recent years, when journalism paid middle-class wages, may prove to be an anomaly, he said.

The closest the panel came to a genuine debate was over the question of whether the culture and practices of journalism - source development, shoe-leather reporting, aggressive fact-checking, etc. - would survive the transition to digital.

Maxine Teller, a social media strategy consultant, offered the blogging-centric view that the online society, in a collective enterprise, would succeed in weeding out misinformation.

But Jones, whose background is in newspapers, shot down that idea, noting that urban myths continue to flourish on the Internet. "I think it's a theory that doesn't work," he said. "Bloggers are not about reporting. And reporting is the essential discipline of journalism."

New America: Who Pays For The News?

A thoughtful, well-attended forum this morning at the New America Foundation: "Who Pays For The News?" It ran nearly four hours, but most of the 100+ people there stayed throughout.

Sen. Ben Cardin, D-Md., author of the Newspaper Revitalization Act, was the keynote. But the highlight was the second panel on "nonprofit media and the role of philanthropy." Not that they had any new answers to the central question - they mostly agreed that nobody is willing to pay - but they did offer up a a good dose of clear thinking on where this is all headed.

Perhaps the clearest of all was John Thornton, a venture capitalist from Austin, who has taken a thoroughly businesslike look at journalism and concluded two things: 1. It is a "wretched" business (hope he didn't invest a lot of money finding that out) and 2. no for-profit model will support the kind of enterprise and investigative work that is being lost with the demise of the newspaper model.

But rather than walk away from the business, Thornton has doubled down on the idea of pursuing journalism as a public good. He plans to launch Texas Tribune, which will focus on policy issues and politics from the state capital. The site, texastribune.org, is parked for now. But Thornton hopes to have a dozen reporters on staff by 2011 and to have the same kind of impact on state politics that Politico.com had on the 2008 presidential race. He told the New America audience that he has raised $2 million (including $1 million of his own money) toward his goal of $4 million.

Thornton doesn't refer to his endeavor as "nonprofit journalism," but rather as "nontaxable journalism." His model for success is Minnesota Public Radio, which has built a veritable media empire around its programming and is supported in part by a for-profit subsidiary, Greenspring Co., with annual sales of $16 million. The main difference between Texas Tribune and a for-profit outlet, he said, is that every extra dollar earned will go back into the product.

On a related topic, Thornton rained on the idea of a "low-profit limited liability company," or L3C. It's a new category of corporation that straddles the line between for-profit and nonprofit enterprise. There has been some discussion that the L3C could be a workable model for journalism. But Thornton said he thinks a hybrid would be ungovernable - just imagine the board meeting, he said. "It's horrible," he said. "It's confused."

The Senate Hearing: A Postscript

Reading over coverage of Wednesday's Senate hearing on "the future of journalism," I was overwhelmed by a quote that came not from the panelists or the senators in the room, but from a newspaper reporter watching the proceedings on C-SPAN.

In his column today, James Rainey of the L.A. Times said he received the following message from a newspaper colleague:

"This makes me so angry. It's humiliating ... Let us succeed or fail, but as a business, not a charity."

This is a reflexive, go-down-with-the-ship reaction - not strategic thinking. And I'm afraid it remains the dominant mindset even among some of the best newspapers in the country.

True, a 501(c)3 nonprofit is defined by the IRS as a "charitable organization," but that doesn't mean journalists should be on street corners carrying cups to gather spare change.

Rather, they would do well to take advantage of the laws and culture that govern the nonprofit sector - and use them only to the extent they help produce great journalism. Not every newspaper needs to re-incorporate as a 501(c)3. But why shouldn't it partner with a Kaiser Health News, a ProPublica or - better yet - spin off its own nonprofit partner? By their very definition, nonprofits put mission ahead of money. What better way to produce socially responsible journalism?

The great asset of the nonprofit sector is its creativity - something, it seems, journalists and their publishers could use even more of these days. As Rainey concludes in his column:

Bless our pals in the U.S. Senate for their kind words. But when it comes to saving the news business, we're probably going to have to figure it out for ourselves.

Google, Put Your Money Where Your Mouth Is

I didn't get a chance to watch today's Senate hearing on the future of journalism. But after reading the testimony offered by Marissa Mayer, Google's VP of search product and user experience, I can only say that it doesn't add up.

For months now, we've heard Google CEO Eric Schmidt bemoan the decline of investigative journalism. At his now-famous discussion at an Advertising Age conference in July, he blamed the lack of tough journalistic questioning for the failure of U.S. policy in Iraq. While Internet entrepreneurs have found ways to monetize other types of information found in newspapers, Schmidt said, there's no sign that online publishers will be able to do the same for investigative journalism. Schmidt called the state of affairs "a tragedy for America," and said, "I'm very worried about it."

Meanwhile, Google has rolled out its plan to pursue philanthropy through Google.org, a for-profit subsidiary it launched early last year. Among the projects it is funding are a government transparency initiative, a global health and security plan, and a microcredit program to build a middle class in Africa and South Asia.

Great. So where's the journalism?

In her testimony before a Commerce subcommittee chaired by Sen. John Kerry, D-Mass., the best Mayer could do today was talk about Google's pennies-for-clicks AdSense program and its "many tools for sharing information that are being used by newspapers." Hello - these are the same tools that force newspapers to give away the content they no longer can afford to generate.

I'm not sure if it's exactly the right metaphor, but I am reminded of FEMA's response to Hurricane Katrina.

Schmidtie, you're doing a heckuva job.

ProPublica: The Results Are In

ProPublica.org, perhaps the highest-profile experiment in nonprofit investigative journalism, just posted its audited financial statements for 2008, and they're worth a look for anybody interested in what it takes to build an online newsroom from scratch.

Not surprisingly, the biggest line item is for personnel. Salaries and the related cost of benefits and payroll taxes cost ProPublica a little more than $4 million, or about 65 percent of its $6.1 million in total expenses.

Keep in mind that ProPublica spent most of the year ramping up its newsroom, so the sustained burn rate will be about $10 million per year in 2009 and 2010, according to Dick Tofel, ProPublica's general manager.

At that rate, ProPublica will spend about $180,000 per year for each of its 31 newsroom and five administrative employees in 2009. That's no shoestring operation. But saving money isn't the point, Tofel said. The goal is to have maximum impact, and there's no shame in spending money to do it.

That is one of the biggest differences with other nonprofits, Tofel said in a telephone interview. “It is why we spend more money than anyone ever has before. ... Our theory from the very beginning is that is that if you want to do world class work, you have to hire world class people, and you have to hire them at market prices."

What does $10 million buy? About 50 "deep dives" per year - high-impact stories that ProPublica gives to newspapers and other media in return for crediting it as the source.

Like a lot of nonprofit startups, ProPublica has a long-term goal of becoming self-sustaining. But don't look for answers in the annual report. ProPublica is "just starting to think very seriously" about its future, and all ideas - including selling advertising - are on the table. But nothing - including selling advertising - promises to take the place of sustained foundation support. "We've got more questions than answers at this point," Tofel said.

ProPublica's biggest funder is the Sandler Foundation, which has made a rolling, three-year commitment of up to $10 million per year, Tofel said. Other foundations so far have put up a total of about $800,000.

Hearing: The Future of Journalism

If you're in DC tomorrow afternoon and have some time on your hands, here's a best bet: A Senate Commerce subcommittee is having a hearing entitled "The Future of Journalism," to be chaired by Sen. John Kerry, D-Mass.

The hearing appears to be focused on the decline of newspapers and online efforts to replace enterprise and investigative journalism. "Whatever the model for the future, we must do all we can to ensure a diverse and independent news media endures," Kerry said in a statement reported in the Boston Globe and other outlets.

The panel will include winners and losers in the move to online news. Among the witnesses are Arianna Huffington and a Google vice president. No representatives from The New York Times Co., which owns the Globe and has threatened to close it if cannot win $10 million in wage concessions from the Boston Newspaper Guild.

Journalism and the L3C

Here's a new acronym to swallow: L3C or LLLC. It stands for Low-profit Limited Liability Company. It's a new category of corporation that straddles the line between for-profit and nonprofit enterprise. And, more importantly, it may provide a business platform for new, socially responsible news organizations.

Although the L3C has not yet been applied to a journalistic enterprise - the first U.S. state to authorize the L3C was Vermont, just a year ago - some people in the business have high hopes. As Poynter columnist Bill Mitchell writes in his column:

The new hybrid model makes it easier for companies to attract investors with different objectives and expectations. It also addresses a fundamental conflict of publicly traded news companies: the obligation to increase shareholder value while spending what it takes to provide communities with the journalism needed to inform civic life.

Mitchell offers this quote from Brian Murphy, a Vermont attorney and an expert on L3Cs.

The L3C sanctions a low-profit model - it makes it explicit that you don't have to maximize profit. You can have a tiering of interests - for-profit investors who need, say, 10 percent return; people looking to support socially-beneficial enterprises willing to settle for 3 percent; and charitable investors willing to take 1 percent

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.