The New News Economy 

As newspapers struggle, nonprofit news is being touted as the key to the future. Is it?

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And that's where things get tricky: The nonprofit investigative model exemplified by ProPublica and CIR certainly depends on traditional journalism — but it also may be hastening its demise by providing cheaper content, facilitating more cutbacks, and, eventually, eroding brand recognition.

The new journalism model, meanwhile, is also being threatened by an outside source: the Internal Revenue Service. The explosion of nonprofit news organizations hasn't just spelled big changes in the newsroom, it appears to be wreaking havoc on the federal government's aging precedents for educational nonprofits, forcing the IRS to all but halt 501c3 approvals as it tries to contend with journalism's next wave.

Maybe the future of the future of news isn't so bright after all.


The success of nonprofit journalism relies on a rather unsettling paradox: It needs for-profit journalism to survive. One of the main goals of nonprofit news organizations is to effect change by reaching the widest audience possible. And since most nonprofits don't have tremendous reach by themselves — imagine the traffic for CaliforniaWatch.org versus SFGate.com — the best way for them to operate is by leveraging other people's audiences. That means forming partnerships with newspapers, TV, and radio stations or distributing content to them.

Take, for example, the award-winning series "On Shaky Ground," a California Watch investigation that exposed the state's systemic failure to heed earthquake construction codes for schools. The project took nineteen months to complete, involved nearly forty reporters and producers, and ultimately went out to more than a dozen media partners, including the Chronicle, the San Jose Mercury News, the Sacramento Bee, KQED public radio, several Patch.com sites, ABC-affiliated TV stations, and the PBS News Hour. California Watch also made an iPhone app and published a coloring book in several languages to make the story accessible for young readers. Within a few weeks of publication, the story spawned major reforms — including two internal investigations at the state architect's office, new legislation to change seismic standards at schools, and the release of $200 million in bond money repairs. It was nominated for a Pulitzer.

That's the journalism equivalent of going triple-Platinum, and a major feather in the cap for California Watch. But it couldn't have happened without an aggressive distribution model. Videos on the organization's website show staff sitting at a roundtable, creating their game plan and discussing ways to maximize the story's audience. In many ways, it resembled a product launch.

It was also a fundamental part of California Watch's business model. Nonprofits can't mimic the practices of a commercial enterprise — to avoid raising suspicion from the IRS, they have to show that every new revenue stream has an educational purpose — but they have to persuade donors of their efficacy, which means reaching a wide audience. The reason that foundations donate to journalistic enterprises, after all, is to produce blockbuster stories like "On Shaky Ground," which expose a severe social injustice, encourage readers to call or write their local policy-makers, and ultimately put pressure on legislators to enact reform. CIR is a stalwart proponent of new media models — social media networks are a critical part of its armature, and it even curates an investigative channel on YouTube. Proponents argue that the best way to effect change, as a news organization, is to reach many readers.

And the funders agree. Daniel Silverman, communications director for the James Irvine Foundation — which is one of CIR's main benefactors — said that audience definitely matters. "Not to put too fine a point on it, but our goal is to educate Californians on governance and political issues," he explained. "So the more Californians we reach, the better." Jeff Okey, communications manager for the California Endowment, concurred. "There are so many ways that people consume news; we want to make sure it's distributed across all platforms," he said. Eric Newton, the senior advisor to the president of the John S. and James L. Knight Foundation, was a little more tentative, admonishing that sometimes it's more important that a story reach "the right eyes," rather than simply reach many eyes. But he agreed that, more often than not, volume factors into a news organization's ability to impact readers.

As such, it's in a nonprofit's best interest to provide content to as many news outlets as possible. (In fact, when the Bay Citizen ended its relationship with The New York Times after the merger, Rosenthal, in an interview with Neiman Journalism Lab at Harvard, cited as a partial cause "concerns" about the exclusivity of the two organizations' relationships.) And in order to do that, nonprofits have to convince potential buyers to purchase their content. In most cases, that's actually not too difficult: By virtue of being nonprofit, a news organization like CIR is obligated to sell stories at or below cost, to show the IRS that its purpose is wholly philanthropic, rather than mercantile. Many mainstream news partners see that as mutually advantageous. Chronicle Managing Editor Stephen Proctor said that forming partnerships with CIR and other outlets, such as the USC Annenberg School of Journalism, has allowed his newspaper to bulk up resources, and cover certain local issues in much greater depth.

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