Non-profit news

Creating non-profit news outlets is an increasingly popular idea in the journalism world (There are far too many examples to link to here). Since a well functioning "press" is essential for a functioning democracy, the thinking follows that news production is a quasi-public good. This post will address 1) legal issues for non-profit news, 2) operational issues at non-profit news, and 3) the potential size of the footprint of non-profit news.

First and foremost, non-profit news outlets face several unique legal issues. (Full disclosure: I am not a lawyer and never will be... this analysis is intended to provoke discussion, not conclude it.) A tax-exempt 501c3 organization faces restrictions on both activities and revenue generation. The organization must have a mission that is "charitable" (not necessarily aimed at the poor) and devote the majority of it's resources to fulfilling that mission. One of the more successful non-profit news organizations, the MinnPost, states its mission "is to provide high-quality journalism for news-intense people who care about Minnesota." This may not seem particularly charitable or educational, but there is precedent for "investigative journalism" to attain non-profit approval. There is also legislative movement to explicitly allow qualified news organizations 501c3 status. For more in-depth information, read Harvard lecturer Marion R. Fremont‐Smith's analysis of the legal issues facing non-profit news. In short though, it seems like journalistic missions will be sufficient.

Perhaps more importantly, non-profit organizations are prohibited from endorsing political candidates or engaging in lobbying activities. This will limit the scope of opinion pieces, and relegate non-profit news to less political news gathering activities. This contradiction between investigative journalism to inform the citizenry and the apolitical necessity of tax-exemption is VERY important in this debate. Anyone predicting that non-profit news will become dominant must explain this in far greater detail than I have seen yet.

Legally, non-profits also have restrictions on revenue sources. There are complex restrictions, but my (inexpert) interpretation is that they have to get at least 1/3 from donations, and non-mission revenue must be insignificant. This has serious implications for non-profits seeking stability through earned revenue, which includes advertising. They will have to walk a fine line, and must take extra care when designing a growth and sustainability strategy.

To illustrate a presumably legal and working strategy to creating non-profit news, let's look at the MinnPost more closely. Capital to establish the organization started with $850,000 from four foundations. For operating capital in 2009, they generated $217,000 from advertising (36% increase over 2008), and $458,000 from member donations (29% increase over 2008). They throw a successful annual fund-raising event called the MinnRoast. Members take pride in being branded news-junkies. But perhaps most importantly, they produce high-quality journalism with a cost structure that has the strong potential to be supported through operations (earned and donated).

Other organizations usually mentioned in the same breath as the MinnPost are The Texas Tribune, Pro Publica, and more recently Fair Warning. Check them out to see how quality news can be delivered by smart, motivated, and dedicated leaders.

As for the future footprint, non-profit news will probably play a significant, though non-dominant role in journalism. Unlike the Newsosaur, I don't think that it needs to entirely replace for-profit journalism to exist; it just needs to carve out a sustainable niche. My views are far more in line with John Thornton, who also sees a future of the model when the right people are at the helm. There is certainly no silver bullet the evolving issues in news, and there is no reason to think this won't be a piece of the puzzle. Just like in any other dynamic industry, there will be lots of failures and a few successes; those successes will then become indispensable to readers, and life without them will be unimaginable.