Nonprofit news organizations continue to emerge through university partnerships, local communities foundations and wealthy local philanthropists. While few question the motives of these organizations, many of which tackle topics no longer addressed by legacy media, the sustainability of these organizations is repeatedly called into question.
One of the most prominent critiques of late was written by Alan Mutter, a well-respected expert on the economics of media. Relying on figures by Poynter media analyst Rick Edmonds, Mutter shunned the idea that the nonprofit sector could finance the $4.4 billion spent annually by news organizations to gather news. That statement set off a flurry of counterarguments, which together paint a detailed picture of the possibilities for nonprofit news.
Mutter’s assertion was that philanthropists would have to drop $88 billion into the nonprofit news sector to create an endowment large enough to support $4.4 billion in annual expenses by news organizations. Given the $307.7 billion given to charity in 2008, Mutter writes, that’s a tall order.
But John Thornton, an Austin venture capitalist and founder of the Texas Tribune, disagrees. He says it’s much more complicated than setting up an endowment to cover all news-gathering expenses for all news organizations.
Thornton argues that not all $4.4 billion needs to be financed through nonprofits, because much of that amount is profitable on its own. Rather, innovators should be concerned with financing the 15 percent of journalism (his estimate from Alex Jones’ book, Losing the News) that is high-quality, accountability journalism, which amounts to $660 million in annual newsroom expenses.
That’s because to Thornton, high-quality accountability journalism is more of a public good (such as clean air and water) than a product that can be financed through market solutions. “It seems to me that the big picture at hand is that when atoms become bits, content consumers win and content producers get hammered into cost-cutting smithereens,” Thornton writes. “If some of that content happens to be vital to the functioning of our society, I simply think it’s prudent to look around for other means of funding it.”
That $660 million, however, would still require a $13.2 billion endowment (my math assuming the standard 5 percent annual yield), however. But what Thornton, along with author David Clay Johnston and Reuters finance blogger Felix Salmon, points out is that only foundations rely on an endowment covering all expenses, and few endowments are built in one year, just as any future shift to a nonprofit model wouldn’t happen in one year.
That makes the picture seem somewhat more optimistic, but far from ends the debate. As Mutter points out, $141 million was donated to news nonprofits in the last four years.
However, entrepreneurs in this area, such as Thornton are optimistic that nonprofit news organizations can slowly, but surely, build funding sources that will support a healthy nonprofit news sector to sustain accountability journalism, but only if nonprofits seek multiple sources of revenue. Few, if any, think the industry can be sustained purely on a foundation model.
Other questions remain, and the constant changes in the overall industry continue to influence this equation. For example, how will other forms of subsidy (government, universities, e-commerce, etc.) play into the new models for news? Will increased efficiency in the market also factor into the equation? What is the role of established nonprofits, such as communities foundations or universities in assisting news organizations in developing successful business models? Can established, legacy organizations successfully make the jump to nonprofit status?
- This academic article presents a survey of nonprofit efforts at revenue diversification, many of which are being pursued by nonprofit news ventures and continues several figures that help approximate funding distribution.
- The Reconstruction of American Journalism, a report from former Washington Post editor Leonard Downey Jr. and Columbia professor Michael Schudson, makes a case for alternative funding models for accountability journalism.
- Jim Barnett’s blog, Nonprofit Road, is devoted to covering the emergence of nonprofit news and is updated regularly.