The “new business model”: Non-profit supported journalism

This article is adapted from one in the Chronicle of Philanthropy

By Steven Waldman and Charles Sennott

At a recent conference on local news, the veteran broadcaster Bob Schieffer praised the Texas Tribune — the acclaimed nonprofit website — but then added that it was just “a Band-Aid.” His reasoning: In the long run, real journalism can be sustained only if it’s part of a commercial enterprise. Stated another way, local news will be saved only if we create “new business models.”

It’s time we recognized that an entirely commercial approach will not, in fact, save local journalism and that nonprofits and philanthropy must take a greater role. This nonprofit-commercial mix is the “new business model” that we’ve been pining for.

There’s broad consensus that the crisis in local journalism is a crisis for democracy and the health of communities. Yet we keep hoping that a new app or a new business idea will fix it.

Yes, we’ve seen some exciting developments among national media. The Washington Post has a print circulation of about 350,000 but reaches 90 million people each month through the internet. But local news continues to collapse, as local advertisers turn to national platforms like Facebook or Google. A local news publication cannot outrun falling ad rates by reaching tens of millions of new readers. We need a radical shift in our thinking about local media models, including a different attitude toward the role nonprofits play in journalism.

Nonprofit news organizations can be powerful and enduring. We want our journalistic institutions to be strong, not only so they can survive but also so they have the muscle to hold powerful institutions accountable.

We often assume that nonprofit news organizations must be wispy mendicants holding out a tin cup. Let’s remember that many other lucrative parts of the economy are dominated by formidable nonprofit organizations. Some 59 percent of hospitals are private nonprofits. About 90 percent of college students study at nonprofit or public institutions. When it comes to the information world, we already have some nonprofit goliaths, including the Associated Press (a nonprofit cooperative), Wikipedia (a nonprofit fueled by small donations and based on open-source software), NPR (a nonprofit funded by listener donations and some government money), and ProPublica (a nonprofit supported by donations). And on the local level, the Vermont Digger and the Texas Tribune have become major players in their states. Nonprofits can be mighty.

Journalism is an essential and valuable public service. Some have said that if journalism can’t sustain an entirely commercial business model, then it doesn’t have real value.

However, economists teach us that there are two types of value. Some products or services have primarily private benefits. You pay for an apple, you eat it, and you get all the delicious benefit. But there’s a whole other category, known as “public good” services — things that benefit both individuals and the community. Having free education, for instance, helps the student but also makes society happier, safer, and wealthier.

Some types of journalism are public goods. A newspaper investigation that, say, uncovers flaws in the parole system might take a year to conduct and will lose a newspaper tremendous amounts of money. But by keeping violent criminals off the street, it has tremendous social value. There’s also the “free rider” problem — that is, many people in town benefit from that series, but only a small number pay for it (by subscribing to the newspaper).

Philanthropists routinely recognize this when they support a broad array of causes from the arts to the environment. John Thornton, a founder of the Texas Tribune, notes: “No one says, the number of violins in the orchestra should be determined by how many tickets they sell.”

The journalism business needs to accept — as other industries do — that some of what it does is a public good, providing broad social benefits and requiring broad philanthropic support.

In the 1930s the government faced a dilemma. A new communications medium called radio was growing rapidly. For-profit companies like RCA argued that all the broadcast spectrum should be given to them because only a commercial model would be sustainable. The government, however, decided that while that was mostly true, some things — like educational programming — would probably not be provided in sufficient amounts or quality. So it required that some of the broadcast spectrum be set aside for “educational programming.” Because of that decision, we have public radio and TV alongside the vibrant commercial media.

Nonprofits innovate as much, if not more, than commercial ventures. Some believe that commercial competition ensures that businesses are more likely to innovate. That’s often true, but let’s not kid ourselves. In the local news world, competition often drives media toward greater sensationalism, not greater quality. Conversely, nonprofits are under tremendous competitive pressure themselves to prove the impact of their work to attract donors. In fact, nonprofits likely operate in a more competitive environment than monopoly newspapers before the internet.

There’s more than enough philanthropic money available to save local journalism. The good news is that we’ve had a massive transfer of wealth to the rich. Well, that’s not good news, but, thanks to negative trends related to inequality, there are now many people and foundations that do have more than enough money to save journalism if they were inclined.

The count is up to 10,800,000 millionaires. And 540 billionaires, who have a combined net worth of $2.4 trillion. Local journalism could be fixed with an investment of somewhere between $300 million and $500 million annually, which could field 10,000 new reporters through something like the Report for America approach we are pioneering. (Report for America, an initiative of the GroundTruth Project, places reporters in existing newsrooms, pays half their salary, and gets the news organization and local donors to cover the other half.)

Of course, we think the public-service model is extremely promising. Report for America, a sort of Peace Corps for journalists, aims to place 1,000 reporters in communities by 2022. But there are many great nonprofit news models. The bottom line: We need a sea change in the way local philanthropy thinks about local news.

The last time we had a lot of super-wealthy people with spare change was in the Gilded Age. Andrew Carnegie funded 3,000 libraries with his excess cash. Funding 1,000 reporters — or 10,000 reporters, for that matter — would cost a whole lot less.

Steven Waldman is president and co-founder of Report for America and the author of a landmark Federal Communications Commission study of local news. Charles Sennott, a former reporter for the Boston Globe, is CEO of the GroundTruth Project and a co-founder of Report for America.