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.