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To make matters more difficult, the SF Public Press' foundation funds often come with the admonishment that the organization needs to become a 501c3 as soon as possible. The implied message: Without that designation, more money isn't forthcoming. "So we've had to plead with our funders," Stoll said. He acknowledges that while this "intermediate" tier of philanthropy might work as a temporary Band-Aid, it's ultimately not a viable business model. Davis agrees.
If the IRS continues to drag its heels, then many agencies with the same intentions as CIR could quickly die. That would, in effect, strengthen the existing nonprofits. They would have access to a greater share of a finite amount of foundation money, which, in turn, would allow them to boost their staffs and widen their reach. CIR's current staff of seventy dwarfs that of most daily and weekly newspapers.
More problematic, though, is the fact that if mainstream newspapers have to rely heavily on one nonprofit for a large portion of their content, then all of them would start looking the same. But that wouldn't necessarily be true if the outside content were culled from a variety of sources. A newspaper that purchases some of its content from an outside supplier can still distinguish itself as an aggregator. But that's not possible without multiple suppliers to choose from.
Paradoxically, having a healthy variety of nonprofit news outlets might actually be good for for-profit newspapers, especially since nonprofits aren't allowed to act as commercial operations — SF Public Press only earns 20 percent of its revenue from content-sharing, versus 50 percent from foundations. Yet, a sudden onslaught of 501c3-certified news start-ups might also pose threat to the for-profit press. If the IRS were to have a change of heart tomorrow, and suddenly loosen its standards for journalistic tax exemptions, then newspapers would suddenly face an onslaught of competition from outlets whose very purpose is to be as widespread and voluminous as possible. At a time when many for-profits are putting up paywalls and cutting their circulation, it could be extremely damaging to suddenly have a new peer that offers similar content for free.
Davis suggested that the two paradigms are actually at cross-purposes: "As newspapers continue to turn to paywalls, and close off their news, and make it available only to those who can afford it, they actually become less attractive," he said. "If you look at the mission of the majority of nonprofit news organizations, it's to get that content out and have an impact."
Commercial newspapers don't compete with nonprofits for advertising dollars, but they do compete for readers, which are indirectly related to advertising dollars — given that the product a newspaper sells to advertisers is its audience. If the Chronicle, for example, publishes a lot of California Watch stories, and California Watch offers the same content for free on its website, then readers would have less incentive to pay for a Chron subscription. More audience-share competition would impact the Chron's website, SFGate.com, as well. If more people click on CaliforniaWatch.org to get their news, rather than clicking on SFGate, then the overall page views for SFGate would decrease. That's dangerous for a publication that relies on pageview metrics to make advertising revenue.
Still, nonprofits have a point when they say that they're simply trying to stanch a wound that already exists. Davis argues that the model isn't an indictment of any one newspaper — it's acknowledgment that the system, at large, is broken. People aren't even relying on old-school rubber-banded, paper-and-ink newspapers to get their news anymore. They're using social media — the folks who, ten years ago, might have looked for a paper on their doorstep every morning are now checking Twitter as soon as they wake up, and using friends' status updates on Facebook as their news feed. It's a brave new world for journalism, Davis says, and you just can't expect the old paradigm to work anymore.
Yet, if the new model of free, mass-distributed, donor-funded, high-impact news eventually supplants the old one, is that any better for readers? There's a finite pool of professional journalists in the Bay Area, and if you look at the masthead of CIR, you'll see it consists, largely, of refugees from for-profit outlets. That alone suggests that the relationship between nonprofits and for-profits is somewhat problematic. As the new system grows, it enables the old system to cut back, which could, ultimately, be deleterious to both sides.
After all, fewer newspapers mean fewer vessels for nonprofits to distribute their content — and if the goal is maximum impact, then even a robust nonprofit might fall short.
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