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February 26 2010


The news Good Housekeeping seal: What makes a nonprofit outlet legit?

With many new news organizations launching as nonprofits and many nonprofits moving into the news business, one has to wonder: Exactly where does journalism end and something else — call it spin, opinion, or advocacy — begin? Or to phrase the question as Chuck Lewis recently did for me: If a nonprofit says it’s doing journalism, what makes it legit?

The line — if you believe there ever was one — is becoming increasingly blurred. As the traditional advertising-and-subscription model of newspapers continues to erode, other institutions — including advocacy, membership and charitable nonprofits — are leaping to fill the void. But it’s not clear that some new entrants are playing by the rules of journalism and nonprofit accountability. Or more accurately, it’s not clear that they want to.

In this uncertain environment, the question of legitimacy looms large, particularly for nonprofits. As beneficiaries of taxpayer support, nonprofits have a special duty to be absolutely transparent. If they want to call their work journalism, the material they publish must be good enough meet any test of professional standards that might reasonably be applied, from both the realms of journalism and of nonprofit management.

Trouble is, no widely accepted set of best practices or due diligence exists for journalism nonprofits. To separate journalism from what Dan Gillmor has dubbed “almost journalism,” many in the business have borrowed from Justice Potter Stewart’s standard: “I know it when I see it.” Or at least they think they do.

When you can’t know it when you see it

This standard has worked most of the time. But it failed notoriously in December, when The Washington Post published a story by The Fiscal Times, a new, online news organization owned by The Fiscal Times Media Group LLC and backed by investment banker and former Commerce secretary Pete Peterson. Peterson is a long-time deficit hawk, and has helped fund the Concord Coalition, a nonprofit that is “dedicated to educating the public about the causes and consequences of federal budget deficitseradicating the federal deficit.”

As recounted by Post ombudsman Andy Alexander, the article drew criticism from progressive critics of Peterson because it quoted the president of the Concord Coalition, but failed to mention that the group receives funding from Peterson’s foundation. The article — reporting that momentum was building for a plan to name a special bipartisan commission to address the nation’s debt — also fell short of the Post’s standards because it cited data from a study supported by the foundation but again failed to note the foundation’s backing, according to Alexander.

Compounding transparency issues, The Fiscal Times gives mixed signals about its corporate status.

In fact, The Fiscal Times is not a nonprofit. It has a “.org” landing page and invites readers to “join now” to create a “Member ID.” It also says on its about page that it “is part of a new era of independently supported non-partisan journalism.” But it is incorporated in Delaware as a limited liability company, or LLC, a for-profit structure most often used by sole proprietorships, partnerships or small businesses.

Jackie Leo, editor in chief of The Fiscal Times, told me in an email that the organization changed strategies shortly after launching. “When we started this project, we thought we would model it after ProPublica or some of the other non-profit news sites,” she wrote. “But our lawyers pointed out that if we post opinion pieces (from our bloggers and columnists) about candidates running for office or bills pending in Congress, and if that opinion can be deemed as influencing the outcome of a vote, the IRS would consider it ‘lobbying’ and we would lose our 501c3 status. With that in mind, we decided to create the LLC.”

Did the Post know all this before it agreed to publish The Fiscal Times’ work? Judging from Alexander’s column, the Post had no formal means of screening its reporting partners. Rather, it appears to have relied almost exclusively on institutional familiarity with the Fiscal Times’ staff, which includes former Post reporter and editor Eric Pianin.

Setting up guidelines

The controversy has subsided. But it has left a lasting impression in journalism circles, particularly in Washington, and nobody wants to repeat the Post’s mistake. As Vivian Schiller, CEO of National Public Radio, told me in an interview, “my alarm bells go off” when she looks at the Fiscal Times’ corporate structure, financial backing and reporting focus.

At NPR, Schiller added, editors employ a set of criteria to evaluate potential partners. Among them: nonprofit status, a well-regarded board of directors and top-notch journalists. But the process remains an informal one.

So what to do?

As I’ve talked over this problem with Lewis, Schiller, David Westphal and others who think about it a lot, I keep coming back to the idea that some standards are in order — a Good Housekeeping seal of approval, if you will, for nonprofit journalism.

This task may be easier said than done.

To begin, there are some deceivingly simple threshold questions. For one, should the nonprofit sector take it upon itself to set standards for its journalism and business practices? If yes, then who should be on the drafting committee?

If not, then are journalism nonprofits willing to live with the current mishmash of definitions of journalism put forth by entities as diverse as the Senate Press Gallery, the Pulitzer Committee, and perhaps the IRS? And how about other stakeholders such as the Post, NPR and others that have come to rely on investigative and explanatory reporting from nonprofits? Following The Fiscal Times episode, will they overreact and overlook work by ambitious, high-quality news organizations?

It seems to me that the answers should come from the nonprofit sector of journalism, if for no other reason, than to minimize damage potential damage from bad actors that might yet emerge from within its ranks.

Starting points

No list of criteria or standards can guarantee quality or take the place of professional responsibilty. But it is a place to start — much like the new IRS Form 990, which was re-designed based on input from the nonprofit sector. So here are some suggested criteria that might help.

Nonprofit Governance:
— 501(c)3 or 501(c)4 status
— All-volunteer publisher board
— 990s clearly posted online
— Major donors named
— Case for philanthropy linked to editorial indpendence
— Clear accountability measures
— Clean accounting opinion

Journalistic Professionalism:
— Functionally independent newsroom
— Journalism advisory board or ombudsman
— Adherence to SPJ Code of Ethics
— Supportive institutional culture
— Submitted entry for professional prize (SPJ, IRE, etc.)
— Holder of federal or state press credential

Comments? I plan to spend the next few months researching this question in greater depth, and I welcome thoughtful input.

Also, for those planning to attend the We Media conference next month in Miami, this is one of the issues we plan to address during our panel on nonprofits in journalism, so please come ready to discuss.

February 01 2010


NPR’s Ron Schiller: “A concrete and hopeful message” can raise funds

Ron Schiller, the new senior vice president for development at National Public Radio, doesn’t subscribe to the notion that the nation’s news media are in a state of crisis. Is the landscape changing? Absolutely. But this is no time to wallow in doom and gloom, according to Schiller. It’s an opportunity to take the case for nonprofit journalism to a broader audience of foundations and grant-making organizations with a “concrete and hopeful message” about what their philanthropy can achieve.

NPR has a long track record of success with big donors — witness Joan Kroc’s $200 million gift in 2003 — but many of its major institutional donors give because public affairs journalism already is a particular area of interest, Schiller said in an interview Thursday. But with the rapid decline of traditional, for-profit media, more nonprofits, including foundations and advocacy organizations, are having trouble getting their messages out. As a result, he said, they may be more open to the idea of NPR as a “partner in philanthropy” that can address a growing and demonstrated social need.

“There is a great opportunity to go to many, many organizations with that kind of case,” said Schiller, a former vice president at the University of Chicago who was named to his post in September. “We certainly have an opportunity to educate.”

Schiller hopes the approach will yield more gifts in the five- to nine-figure range. He concedes the approach isn’t novel; universities have been using it for decades as they take on issues such as urban education. But NPR’s new direction also would align with a broader trend in the nonprofit sector in response to the decline of traditional media.

From being the news to producing it

More and more nonprofits that once operated as expert sources for mainstream media have cut out the middleman and gone into the business of producing journalism. Last year, for instance, David Westphal documented the effort of Human Rights Watch. The New York-based nonprofit is “leveraging an already robust network of fact-gatherers around the world by adding a small unit that converts its academic-type research into consumer-friendly news reports,” Westphal wrote. Likewise on the domestic front, the Kaiser Family Foundation, a longtime provider of high-quality healthcare data, last year launched Kaiser Health News as a response to a decline in mainstream reporting on healthcare policy.

Other nonprofits with less expertise or commitment to journalism might be equally interested in filling society’s need for high-quality reporting, Schiller said. But the public radio community, including NPR, has not done a very good job of making what is known in the fundraising business as the case for philanthropy. To date, the appeal has been largely transactional, he said. It goes something like this: If you liked what you heard on “Morning Edition,” please send us a contribution.

The pitch is not without its successes. In 2008, NPR collected $57.7 million in grants, contributions and sponsorships, or about 34 percent of its total revenues, according to the organization’s most recent Form 990 report. But going forward, Schiller said, it might sound more like: “How do we use this incredibly powerful news and cultural organization to serve the country more powerfully?”

Are the nation’s major foundations ready to take on the task? Less than a year ago, Chuck Lewis and Bruce Sievers wrote an article in The Chronicle of Philanthropy called on foundations to pitch in. They wrote:

Philanthropy is in a unique position to take the initiative because it can move quickly and deliver significant resources to key players in the news media, while taking a hands-off stance toward content. Yet, with a few notable exceptions by some of the nation’s biggest grant makers…foundations have not become involved in this arena of public life.

Today, Schiller is optimistic that more grant-making organizations will be open to the idea of supporting journalism. What is needed is more education of potential donors and a message that makes the case compelling, Schiller said.

That might sound a lot like a traditional, university-style giving campaign, and Schiller doesn’t discourage the idea that NPR might launch that kind of effort. Much of his time, he said, is occupied in strategic planning with his counterparts at NPR’s 300 member stations to coordinate a national message while preserving their ability to meet local needs.

“We have a special time right now when the need for good information in the media is out there,” Schiller said in an interview at NPR offices in Washington. “In every community now, this is on people’s minds.”

Photo of Schiller by Dan Dry/University of Chicago.

December 14 2009


Are news nonprofits doomed to reliance on big gifts? A study in fundraising — and sustainability

I’ve been studying journalism nonprofits one way or another for about five years now, and I confess that in all that time, I’ve looked at their business models really as being slightly different iterations of the same species. But now, I’m not so sure.

As part of my graduate studies in nonprofit management at George Washington University, this fall I took a closer look at the finances of a dozen journalism nonprofits, keeping in mind the most pressing question for many: How can they diversify revenues and achieve some level of sustainability?

I acknowledge up front that my method was not perfect — I’ll explain at the end — but I think I’ve discovered what may be two critical distinctions within the group I studied.

First, the six nonprofits that served geographically defined communities — whether they be cities, states or regions — generally did a better job of diversifying their revenue sources than did those that attempted to speak to a national audience.

Second, among these “regionals,” there appeared to be some correlation between bigger budgets and greater diversity in revenues sources. This pattern suggested to me that there is a happy dynamic at work here — a virtuous cycle in which diversity of revenue helps create institutional heft that in turn attracts additional philanthropy in the form of major individual gifts and foundation grants.

What are the diverse sources that these nonprofits are tapping? For lack of a better descriptor, I lumped them together under the heading of “transactional” revenues — advertising, subscriptions, memberships, royalties, event ticket sales, contract research, and anything else that didn’t go under the “direct public support” line on Form 990. Some of these sources are taxable, some are not, and the difference was not always clear. Different nonprofits treated similar revenues in different ways. But I digress.

Regional news nonprofits: With size comes funding diversity

Here’s the graph that shows the correlation between average annual budget and a declining dependence on direct public support:

If this trend holds true, I think it would portend a relatively bright future for the nonprofit model as a major contributor in places like city halls and state capitals where newspaper bureaus have been emptied out. These are the places where the disintegration of the newspaper business model is most obvious to readers — and where for-profit alternatives have a hard time realizing returns on investment. Here, the case for philanthropy is clear — and so is a nonprofit’s potential to supplement its revenues with advertising and other market-driven revenues streams as it scales up its operations.

The trend also suggests a cruel and ironic corollary: The journalism nonprofits that can demonstrate the least dependence on foundations and large gifts may be the most likely to succeed in winning them.

National news nonprofits: Greater dependence on large gifts

At the same time, studying the finances of six “nationals” caused me to look at those organizations in a wholly different light.

Like the regionals, journalism nonprofits with national aspirations are feeling pressure to diversify their revenue base beyond foundations and founding donors. And at least some are looking to the regionals’ success for tactics they can replicate — witness ProPublica’s hiring of Watershed Co., a consultancy with expertise in online and grassroots fundraising. But from what I’ve seen, most depend on major gifts and foundation grants regardless of size. Here’s a graph showing average annual budget and dependence on direct public support:

As I reported here in September, Madeline Stanionis, Watershed’s CEO, pronounced herself “skeptical” of prospects for building a national network of small donors. As Stanionis said at the time, donors to political and other “citizen-powered” campaigns have been conditioned to believe that the candidate or institution that receives their donations will respond directly to their demands. But journalism does not — and should not — operate that way, she said. “I just think trying to force a journalistic endeavor into a hole created by these campaigns is not correct,” she said.

My suspicion is that the “nationals” also suffer from being one too many levels of abstraction from readers’ lives. Their reports, however compelling in their conclusions, don’t explain to the reader why city sewer rates are so high or why the state legislature just slashed school spending. As Mike Worth, my graduate advisor and GW’s former vice president for development, remarked: “The problem with the case (for philanthropy) is that it’s intellectual. Nobody ever died from lack of public journalism.” The latter might be debatable, but I think he’s got it right.

What’s the lesson here? I think there are two, either (or both) of which may be a blinding glimpse of the obvious.

First, the nationals have a solid track record of tapping foundation support and keeping it flowing over a long period. Here, I’m thinking of the Center for Public Integrity, which has relied almost exclusively on foundations and major gifts since Chuck Lewis founded it 20 years ago. Why tamper with success? The only real benefit from the time and effort required to build a grassroots network may be the added credibility of having to answer to an audience. This is doubly true for those such as CPI and ProPublica that specialize in investigative work and also claim to be nonpartisan and/or non-ideological.

The second lesson is that any effort to build a grassroots network at the national level is going to require a lot of refinement. There are simply too many competing news sources and too many requests for support. Breaking through all that background noise is an enormous challenge. Best of luck to those that try.

Except for Mother Jones

Now here’s the big exception to the rule: Mother Jones. Among the nationals, MoJo stood out in its time-tested ability to pull revenue from all kinds of sources — advertising, memberships, events and investment income. Steve Katz, the magazine’s chief fundraiser, tells me that the model is an outgrowth of a deliberate effort to define and serve a particular constituency.

In an email, Steve told me that MoJo has “worked mightily to make the case that you won’t find our kind of point of view anywhere else, and that our journalism is also rooted in a ‘value proposition’ a.k.a. a point of view a.k.a. a politics, and hence our journalism — which must stand on its own as professional grade work — is also about changing the world.”

I’ll buy that. But I also think that if you take Steve’s view to its ultimate conclusion in our current economic and technological environment, it points to a tough road ahead for news organizations trying to replicate the newspaper model of objectivity in the online world. The new national news organizations most likely to prosper are those that already have a built-in constituency — or a primary purpose other than producing journalism.

Here, I am thinking of David Westphal’s reporting on Human Rights Watch and its transformation from journalism source to journalism producer. As David noted in his recent testimony at the Federal Trade Commission: “A key point here is that not all of the new players are news organizations.” This trend raises important questions about governance and process within nonprofits — how they try (if they try at all) to insulate their news-gathering operations from their advocacy, much as newsrooms were separated from advertising departments at newspapers.

Where does it all go from here? In my view, the nonprofit model will shake out into two, three or maybe four discrete models, depending on reach and mission. Like cousins, at first glance, they’ll look somewhat alike and may get together once a year for reunions. But each will have its own distinct direction, habits, inclinations — and contributions to the public debate.

A note on the methodology: How’d I select the 12 nonprofits for my study? Frankly, it wasn’t very scientific; it was more an exercise in putting together a fact pattern. I began by listing the nonprofits I knew that (a) existed primarily to produce journalism and (b) had revenues of $100,000 or more a year, and 3) had filed their Form 990 tax returns someplace where I could find them online.

The list worked out to an even dozen, with six that I considered to be national in reach (ProPublica, Center for Public Integrity, Center for Investigative Reporting, Mother Jones, The Nation, Grist) and six that were primarily regional (Texas Observer, High Country News, MinnPost, Voice of San Diego, Chi-Town Daily News, New Haven Independent).

From there, I assembled all available revenue data from 2002 onward a developed an annual average for each nonprofit’s revenues and the percentage of revenues derived from “direct public support.” Then I plotted them on two graphs, one for regionals and the other for nationals.

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