Thoughts on the Economics of Nonprofit News

We desperately need more hard economic analysis of the current realities and future of journalism in America. We need 10 more Rick Edmonds at Poynter and a weekly update to the recent Pew State of the Media Report. Too many of our arguments about the future of news are based in economic assumptions or projections. That is why I was so glad that Alan Mutter took up the question of whether there are enough philanthropic dollars to fully fund the extent of journalism we need in America. However, I was disappointed to find that Mutter’s post is really only half an answer to what is at best a misguided question.

Mutter’s key finding is that it would take an endowment of “$88 billion – or nearly a third of all the $307.7 billion donated to charity in 2008 – to fund the reporting still being done at America’s seriously straitened newspapers.” From this, Mutter makes the claim with which he titles his piece, “Non-profits can’t possibly save the news.”

As a number of commentators have already pointed out, Mutter conflates nonprofits with endowments and then argues that endowments won’t work, and in doing so, throws the baby out with the bath water. David Cay Johnston points out this error, and suggests that we should think of nonprofit news ventures much the same way we think about endowed chairs in academia. “Very few charitable activities are 100% supported by endowment income,” he writes. “Endowments supplement, as with professors who get a premium salary and travel money because they hold an endowed chair.” A nonprofit model that uses an endowment to supplement revenue changes Mutter’s math dramatically.

A Strawman Theory

Another flaw in Mutter’s equation was his assertion that we need or should replace all the journalism currently being done in commercial media with nonprofit newrooms. However, I don’t think anyone is suggesting that there will be no for-profit newsrooms in the future. The future will no doubt be a combination of commercial and noncommercial media, providing a mix of services to a range of communities. It is foolish to present this as a dichotomy of all non-profit vs. all-profit journalism, as Johnston points out, “We do not live in and do not face a world in which the economic model produces zero dollars for news. An $88 billion endowment is a bloated straw man.”

Mutter ignores a key question: what are we trying to save? What are the important types of journalism that are not being produced, or that we are in risk of losing? As an answer to that question, let’s use the idea of “accountability reporting” as described by Len Downie and Michael Schudson, which they say “often comes out of beat coverage and targets those who have power and influence in our lives—not only governmental bodies, but also businesses and educational and cultural institutions.” The equation then, really needs to answer not how much it would cost to replace all news, but rather, how much funding would be needed to produce accountability journalism in the non-profit sector? I don’t know the math, but I’m willing to wager it’s certainly much less than $4.4 billion a year.

What Nonprofits Can Offer

Mutter is right on one account — an $88 billion endowment for news probably won’t happen. But if we decouple his critique of endowments from the idea of nonprofit newsrooms, we see that nonprofits offer a range of unique possibilities that could help support a diverse news ecosystem in the future. In Felix Salmon’s response to Mutter, he writes about the ways in which the nonprofit model relieves the profit pressure that exists in most commercial media, “If the non-profit sees a path to a sustainable model of small-and-steady profits in the future, it just needs to get the newspaper there from here: it doesn’t need a massive endowment.”

All that said, what if we “stop dreaming about a visit from the Non-Profit News Bunny,” as Mutter is suggesting? Johnston argues that we need nonprofit models to avoid what he describes as “a quality divide in news” as damaging as the current “digital divide.” He suggests that the current fragmentation of news, and the move by many to institute paywalls and raise subscriptions, is moving us “toward a world in which the affluent, and those with expense accounts, get quality news, while the typical citizen gets less.” The nonprofit sector in news is well suited to help meet the information needs of society.

A Serious Look at Public Policy

I agree that there is not enough foundation and charitable money out there to pay for in-depth accountability reporting in communities across the country. For Mutter, this finding suggests that we should “get serious” about finding better business models. However, I am as skeptical about the future of advertising and paywalls as I am about raising an $88 billion endowment. For me, this finding suggests we need to get serious about the role of policy and public funding.

We need better policies to foster the kind of journalism and media system we want to see. A key flaw in the debate over the future of news and nonprofits is that we are locked in old definitions and inflexible legal structures. Johnston references this in his response to Mutter: “Current law does not make a hybrid of commercial-endowment supported journalism possible.” Similarly, at the recent FTC workshop on the future of news, Allen R. Bromberger, a partner at Perlman & Perlman, called on the agency to address these issues:

“One principle that’s at the root of a lot of this here, is the eternal tension between mission and money. And between social purpose, and private profit. And we have in this country, essentially, a dichotomy of business and charity. And culturally, to a large extent from a regulatory point of view, they are not supposed to touch each other. […] What we have to do is combine a charity and a business. And this is a very tricky area and largely unchartered waters.”

This is a policy issue, and we need journalists, media economists and concerned citizens to become involved in the debates that will shape these laws in the future. However, we also must look at the current structures that already exist and the profound opportunities that they offer. Because Mutter ignores the role of policy and public funding, he envisions the only two ways for noncommercial journalism to thrive would be to either find “vast new sources of charitable funding” or to ask philanthropists “to abandon their traditional commitments” in favor of funding the news. An obvious third option would be an expansion of public media, as has been called for by the bipartisan Knight Commission and in the Downie/Schudson report (as well as many, many others.)

Mutter is right — we need to get serious to save the news. But we can’t seriously respond if we ignore a key part of the equation.

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