Everyone recognizes the financial distress of most news organizations today. But a speaker at an academic seminar I attended this summer – the founder of a nonprofit news website that covers Vermont – took it a dramatic step further: She believes it is no longer possible to make a profit from reporting news at the local and regional levels. Well, yikes.
That assessment drew disagreement from some other seminar speakers, but it’s nonetheless clear that journalism needs some new business models. One emerging model is the nonprofit news outlet, such as the one in Vermont and BirminghamWatch (which you are reading right now and to which I have donated).
Achieving 501(c)(3) nonprofit status under the Internal Revenue Code means a news organization does not need to pay federal income tax and, more significantly, donations to such an organization are tax deductible for the donor. Additionally, from a business standpoint, it means the outlet does not need to answer to profit-minded owners who potentially would start slashing expenses – meaning journalistic quality – whenever quarterly numbers go a little bit in the wrong direction.
Nonprofit news ventures have arisen across the country. The Institute for Nonprofit News, for instance, has about 200 organizations in different communities (including BirminghamWatch). These groups have helped to fill the knowledge gaps created by diminished or abandoned local and state coverage by many traditional commercial organizations. These “startups” do so with strategies ranging from local investigative reporting to covering the fundamental government meetings that no one else pays attention to anymore.
It might be that the nonprofit approach is becoming of interest to some news companies other than new, digital-only startups. In a possible breakthrough moment last week, the Internal Revenue Service approved nonprofit status for The Salt Lake (Utah) Tribune, a first among legacy newspapers. In May, when he announced his intent to seek designation as a public charity, Tribune publisher Paul Huntsman wrote: “I have always seen the Salt Lake Tribune as Utah’s institution, much like our libraries, hospitals and the arts and cultural organizations.” Continuing with a business model relying mostly on advertising is hopeless, he believes. “The current business model for local newspapers is broken and beyond repair,” he said this week.
The transformation of the Tribune is a hopeful and remarkable development for news organizations (remarkable, in part, because the Trump Administration didn’t seize on another chance to diminish journalism). Still, I don’t anticipate a huge rush by news outlets to seek nonprofit status. The many owned by chains and investors would not be interested. Huntsman held the advantage of being the Tribune’s sole owner, which more easily allows for flexibility, innovation and placement of civic duties ahead of commercial ones.
Further, the nonprofit idea has drawbacks, of course. News organizations with such a status can’t, for instance, endorse political candidates. There’s also debate about the permissibility of less civic-oriented coverage. The Vermont startup founder said her website does not report on sports or the arts because of its nonprofit status. An encouraging sign, though, came from the IRS in its Salt Lake decision: The Tribune can continue to report on sports, the arts and other subjects that might seem to fall outside tax code definitions.
It’s important to remember that nonprofits still need to bring in revenue to support and hopefully expand their operations, and they face not only many of the same challenges that are straining for-profit news companies but some distinctive obstacles, as well. Although the notion of citizen charity to support valuable journalism is catching on (yay!), in any community, especially small ones, there are practical limits on the degree of available philanthropy. Too many nonprofits and suddenly everyone is competing for the same finite pool of donor dollars, be it from individuals or foundations.
Drawbacks aside, nonprofits will continue to be an important part of the changing media landscape. A few politicians are even working to help that cause. In June, a California congressman proposed a bill, the “Saving Local News Act,” intended to make it easier for news organizations to qualify for nonprofit status. In essence, the bill declares news reporting itself to be a public benefit entitled to tax exemption, sparing news organizations from having to prove that their mission and work fall under an existing category of exemption, such as an “educational” or “charitable’ purpose. (And a bonus: Less worry about the blockades that might arise from an administration’s politicizing of the IRS.)
The bill, unfortunately, is unlikely to become law. Passage would require progressive thinking by Congress. In a political climate where attacking the media is all the rage, and where many politicians love the freedom from scrutiny created by the economically driven defanging of the local and state watchdog press, we shouldn’t get too optimistic.
Tom Arenberg is an instructor of news media at the University of Alabama. He worked for The Birmingham News and the Alabama Media Group for 30 years. He published this commentary originally as a post on his blog, The Arenblog. About News is a BirminghamWatch feature that publishes commentary by those who teach the craft and think about the values and performance of today’s journalism, a civic flashpoint. BirminghamWatch shares these articles on Facebook and Twitter and invites readers to join the conversation about their news in those forums.