Report for America as "business model"

What we love most about Report for America model is the public service spirit. It will help restore the soul of journalism, not just the pocketbook.  But in this piece I want to go full-wonk and explain it in entirely economic terms, to show how it potentially creates a new "business model" for local news.

A few basics about how Report for America works. We recruit talented emerging journalists from around the country. News organizations compete to get these reporters, describing a) how they are under-covering communities or topics and b) how they’d use the corps member to fill the gaps. Then there’s a financial split: Report for America pays half the entry level salary. The other half is split between the newsroom and local donors. Now into the weeds:

1)   It lowers the cost of doing good journalism for local news organizations.  Report for America, in effect, reduces the labor cost for a reporter by almost 75%.  That’s not enough to turn a business from unsustainable to sustainable but it does help with the expense line that is most critical to a local organization’s success.

2)   It changes the relative value of civic reporting.  Local newsrooms often face a tradeoff between coverage that has good economics and civically-important coverage that loses money. For instance, newspapers routinely cut back on counties outside the central circulation area because it was too costly to provide the paper.  They sometimes under-cover areas with lower income readers (less interesting to advertisers and less likely to subscribe) or stories where a lot of reporting time might end up producing a low traffic story (say, rummaging through the city budget).

Report for America changes the incentive structure because in order to receive a salary subsidy, news organizations commit to using the journalist to cover crucial under-covered beats.  News organizations are “forced” to do what they mostly want to do anyway.  It focuses the subsidy on the “public good” types of journalism, which go from being money losers to money gainers.

3)   It changes the calculus for local philanthropy, and promotes long term sustainability.  Local donors pondering whether to help local journalism currently have a  few bad choices. They can invest in a sagging commercial newspaper, but that will feel odd because it’s for-profit and fruitless because the model seems limp.   Or, they can set up a new journalism organization but that would require a seven figure investment. 

With Report for America, $10,000 can make a reporter happen.  It’s hard to think of many philanthropic investments that pack such a punch.  For that reason, it’s easy to see how that source of funding could both grow and persist year to year, making Report for America a promising approach for permanently expanding the capacity of local journalism.

The Report for America journalist embedded in the Lexington Herald-Leader in his second week did an amazing story about the area not having running water for five days. A month later the person running the water district was forced out. A few weeks later, the state found $4.6 million to repair the system. As “positive externalities” go, that’s not bad for a $40,000 investment (split three ways).

4)   It harnesses the value of public service.  The nonprofit sector routinely entices people to do things for below their "market value," because volunteers or employees get psychic value out of helping improve their community or world.  You might build a house for Habitat for Humanity because it’s for needy people, and is an expression of your faith. If you build the same house as a contractor, you’d get paid.  Imagine if Wikipedia had to pay all its volunteer editors. The quality would suffer and the business model would break. Because it is mission driven, it attracts public-spirited volunteers who have made it the fourth biggest site on the internet.

Now, we're not a national service program in order to save money.   But I wanted to point out to the number-crunchers (and philanthropists) who assume that non-profit models are less economic, there are actually substantial financial benefits to this approach.   Report for America is attracting top notch young reporters and getting them to go to regions they might otherwise ignore because they believe in the mission – and understand that they are helping to save democracy.

It helps restore trust.  The business model erodes if readers do not have trust in the product. At a recent conference, Tony Marx, the CEO of the New York Public Library, was speculating as to why libraries and the military were the two institutions that still garnered tremendous trust from the public.  “There is an image of them as selfless,” he said. “If you think they’re doing it only for themselves, it’s harder to trust them.”

Of course the purpose of selflessness is not to create financial value. Quite the opposite. But I’m also describing it in economic terms to make it clear how our approach changes the business model for local journalism.

5)   It’s cost effective and scales well. Report for America is not attempting to create new news organizations on the local level.  Rather, we embed reporters into existing newsrooms that have proven themselves innovative or worthy.  This means our overhead is low, and the bigger Report for America gets the more cost effective it gets.  In fact, our projections are that the portion of the budget that would go to the reporter’s salary would rise to more than 80% by year five. 

6)   It rewards innovation. Because RFA corps members are awarded to news organization based on a competition, it shifts resources toward news organizations that innovate and focus efforts on covering civically-important under-covered beats. In addition, donors don’t have to make fundamental decisions about whether to bet on newspapers or non profits or something else. They can invest in people instead, who will then help only those with the most promise in any given community.  With enough RFA corps members available, a new market could be created focused on journalistic innovation.

In general, we believe that the non-profit sector will have to play a much bigger role in local journalism.  Inserting altruistic energy into the local news media ecosystems is not a way of avoiding the creation of new business models.  In fact, it is the new business model.

 

Report for America is an initiative of the GroundTruth Project.

 

Steven Waldman