Why you might not want to start a nonprofit newsroom

Phillip Smith
Sep 19 · 10 min read

One of the journalism entrepreneurs that I’ve been most inspired to watch recently is Kara Mayberg Guzman at Santa Cruz Local. Like a page out of the playbook that I documented on how many news startups come to life, Kara saw a lack of coverage in her own community and left her job in a daily print newsroom and took a leap of faith to build something new.

And like many journalists who’ve taken this path, Kara and her co-founder Stephen decided to — at least, as the first step — start a business. This may seem like a small thing to note, but I believe it’s actually important to point out specifically because it runs counter to the national fascination with nonprofit news that is happening right now in the U.S.

I had the opportunity to speak with Kara a few times on her journey of getting Santa Cruz Local off the ground, and had a bit of an inside view into their thinking about the choice of starting a business. But instead of paraphrasing, I’ll simply point you to this episode of the Santa Cruz Local podcast where Kara and Stephen talk about their decision to start a private company:

Which also leads us into why we’re an LLC and not a 501c3 nonprofit at this moment. Which is because we do want to do endorsements on ballot measures and everything else.

For those of you who don’t know, 501c3s can’t give political endorsements.

We feel like — I feel like that’s an important thing that newspapers have done, and should continue to do, because they’re out there reporting on all of these people all the time. So they’re in a position to know, maybe more, better than anyone else, about where public policy should go.

[We] want to be able to say to our listeners, we’ve been neck-deep in this over the last year. We’ve studied the issues and this is what we think.

Endorsements may seem like a small and unsexy thing, but endorsements were just one of a dozen of reasons that were cited by journalists for starting an incorporated company or LLC instead of a nonprofit newsroom in my year of interviewing news startup founders.

Too much focus on nonprofit news?

The simple truth is: setting up a nonprofit journalism organization requires more work and more patience than setting up a standard C corporation, S corporation, or LLC (which, in some cases, can be done online and completed in two-to-three business days). And though it’s possible to start a nonprofit newsroom more quickly as a project of a fiscal sponsor, fiscal sponsorship fees can reach as much as 10% or more of received grants, which can eat into already razor-thin margins.

While many in the journalism industry, and many of the industry’s main benefactors, are currently preoccupied with the nonprofit newsroom model, a lot of the people that I’ve talked to who are outside the echo chamber don’t even understand — or, dare I say, don’t care — about the difference.

Another important consideration: the number of newsrooms in the US and Canada set up as corporations or LLCs is exponentially larger than the number of nonprofit newsrooms. Looking at the Institute for Nonprofit News membership directory, as well as those in Michelle’s List and LION’s membership, there are probably less than 500 nonprofit newsrooms in the U.S.

And, while it’s true that your current sources of news might not be good predictors of your future sources of news, I invite you to just think for a moment where you got your news from this week or last week. Where did you get your local news? National news? Let me know what percentage was from a nonprofit newsroom. Do your own assessment and then drop me a note on Twitter or leave a comment below with your findings.

If you’re lucky enough to live in Vermont, Texas, or California, or perhaps in Chicago — or another city where there’s a concentration of excellent nonprofit news undertakings — perhaps you might be able to say “I get 10–20% of my news from nonprofit newsrooms.” But outside of a handful of states and cities, I believe that most Americans get their news from news businesses vs. nonprofits — and I believe that’s a good thing.

Different approaches, different models

I believe that meeting the information needs of communities across the U.S. and Canada, as the traditional “industrial news production system” continues to shrink, is going to require lots and lots of different approaches, and different business models.

To go a step further, Chris Krewson, Executive Director for Local Independent Online News Publishers and former VP at Spirited Media, pointed out recently on Twitter, “Nonprofit is not a business model, it’s a tax status:”

https://twitter.com/ckrewson/status/1174395344987275264

Even Sue Cross, CEO of the Institute for Nonprofit News, agrees: During a talk at Stanford University last year, Cross was quoted as saying “Nonprofit news startups have to run as a business, just like any other business.”

“Nonprofit news startups have to run as a business, just like any other business.” — Sue Cross, CEO, Institute for Nonprofit News

And some forward-thinking funders have acknowledged this by awarding grants to outside of the nonprofit space, for example Lenfest Institute for Journalism has made grants to companies like Automattic (the company behind WordPress) and Pico. In fact, the Knight Commission on Trust, Media and Democracy — a joint initiative between Aspen Institute and Knight — released a report earlier this year, based on more than a year of work by experts across sectors, that recommends “developing viable nonprofit, hybrid and for-profit local news models.”

Let’s not forget either that the for-profit approach has brought us a lot of innovative new ideas over the last several years: everything from the Canadian local news darling Village Media (providing the technology for McClatchy and Google’s Compass Project) to fast-growing media brands like Blavity (which recently took on a $6.5M investment from Google Ventures and has more than 80 people on staff).

Blavity, for example, is building a multifaceted media company dedicated to telling black stories from black perspectives. I caught up with Blavity co-founder, Aaron Samuels, last week and he shared his belief that “To do something good for society, you don’t necessarily have to be a nonprofit.”

To Samuels, the nonprofit vs. for-profit binary leaves a big gap in what’s possible for journalism organizations. He believes that it should be possible to do good for the world, and be profitable. Blavity, according to Samuels, is “Wholeheartedly a social impact organization. It’s necessary. And it’s a model for the future of business.”

We both mused on the role of alternatives to nonprofit and for-profit status such as “benefit corporations” and how they might provide one path forward, balancing social purpose and pursuit of profit, and making it clear to investors that return on their investment is not the only priority. There are starting to be more examples of this in the journalism world, like the Half Moon Bay Review, which was purchased by community investors and converted into a benefit corporation.

People of colour deserve to capture the value they create

Latest read by the Lenfest Book Club

Having just finished reading Trailblazer, Dorothy Butler Gilliam’s memoir as the first black woman reporter at the Washington Post, I had another question on my mind: is there a risk that the nonprofit model for news inherits some of what Gilliam describes as “the institutionalized racism and white privilege that the U.S. has suffered from for centuries?” Does it possibly ignore the systemic barriers that often disadvantage women, people of color, and the under-represented in society?

I put this question to Samuels — as a founder of a black-owned digital-first media company — and his answer was an emphatic “Yes.” He spoke to the barriers for many black entrepreneurs in accessing the same networks of wealthy people and foundation support — both key components of most successful nonprofit newsrooms — and he also spoke to the systems in the U.S. that have historically extracted value from people of color without compensation.

Samuels went on to describe the ambitions that he and his co-founders had in their early days, “We wanted to be able to compensate people, including the founders, for their time. People of color deserve to capture the value they create.” Samuels continued “The entire history of the U.S. is centered upon black people creating value and not being able to capture it. We wanted to create a company that compensates our employees and we wanted to have investors that believe in our mission. We wanted to prove that we could do value creation and value capture, while creating a platform for our community.”

We believe that journalism serves democracy but not that people will pay for it

The other question on my mind was the market’s perception of nonprofit news: the latest trend in memorable soundbites from conferences attempt to position nonprofit journalism as similar to patronage of the arts, like ballet, theatre, or the symphony. I worry that the average person on the street may draw less glamorous comparisons.

To dig into this question, I reached out to the quintessential journalism entrepreneur, Jesse Brown of Canadaland (Canadaland is one of Canada’s most financially successful independent journalism organizations). I asked Mr. Brown straight up: Why is Canadaland — an organization that generates half of its revenue directly from readers — a for-profit business? His response: “Why wouldn’t it be?”

Brown went on to explain:

“Journalists are weird, in simultaneously believing that: a) We provide an invaluable service that democracy cannot function without (which is true), b) The public doesn’t value this service enough to simply pay us to perform it (which is false)”

“I think this attitude is not only incorrect, but that it also poisons our relationships with the people we do journalism for. If you operate under the principle that you are serving a public that does not value you or your work, and that the reason they don’t value you is because they do not understand their own best-interests, you are operating under a pretty shitty and patronizing framework. This will invariably influence your work and distance you from your audience, and can become a self-fulfilling prophecy.”

That’s not to say that individuals don’t contribute to nonprofit newsrooms — they do — or that the donation model doesn’t work — it can — but it does surface an important question about the framing of that relationship, and of the perceived value of the work. What message does it send to readers when the crux of the relationship is appealing to a person’s altruism vs. an exchange of value for services rendered? I believe that it’s worth digging into this further before throwing the for-profit model out the window.

The scale of the news business is changing

Given the opportunity, I asked Brown to explain why he believes the Canadaland model works and he had this to share:

“We ask people to pay us for journalism that we give away for free, and we deliver it in a format that people want (mostly podcasts). Our model works, in part because we built our editorial operations around the revenue it generates.”

Brown continued “The Canadaland model can’t sustain a newspaper, nor should it. But we’ve grown from one person to ten in six years, which is not explosive growth, just sustainable, steady growth for a lifestyle business (not a tech startup) that plans to be here practicing our trade for a long time.”

This industry-wide shift toward smaller, digital-first newsroom is one that I’ve unpacked in previous essays — here’s one, here’s another — and it is at the core of why I hope that aspiring journalism entrepreneurs will think long and hard about how they shape their undertaking in the early days and what the implications are.

Growing to the size of the Texas Tribune or ProPublica is not a requirement for doing important journalism or being recognized by the industry for powerful, public-service reporting — there are many examples of smaller newsrooms winning awards for their work. However, a certain size might be required to grow a successful nonprofit newsroom, one that can effectively fundraise from large donors and then deliver on the ever-shifting whims of those funders’ latest fascinations.

Skepticism, a feature of quality journalism we can all get behind

In an effort to tie all of these questions together, and wrap up this thought exercise, I’d like to propose a simple guideline:

Let’s apply the same healthy skepticism to the nonprofit news model that we aim to apply in our journalism — in fact, let’s apply it to all of the models.

And, at the same time, let’s experiment broadly without limitations on where the revenue comes from.

Let’s aim to be novel, if that’s what’s needed in a given market to compete with what already exists. Let’s aim to be reliable in a market that doesn’t have a lot to offer news consumers.

Let’s focus first on building journalism products that surprise and delight customers. Products that deliver real value. Products that meet real market needs.

Let’s recognize that if the industry just keeps investing in the same models that we’re already familiar with, and the same people we’re already familiar with, we’ll likely end up with the same news ecosystem that we have today — troubled and sorely lacking in diversity of perspectives.

Let’s demonstrate to the the industry that a more holistic and diverse approach to making better news will be better for everyone.

As always, I’m keen to hear your thoughts. Please drop me a note on on Twitter, or leave a note below.

Learned something? Click the 👏 to say “thanks!” and help others find this article.


Update: I was pointed to this essay by Chris Wink of Technical.ly Philly that touched on some of the same ideas last week. Check it out.

Update #2: Some great commentary happened on Twitter, with several news startup founders weighing in. Check it out:


Originally published at https://phillipadsmith.com.

Phillip Smith

Written by

Digital product developer. Media startup advisor. Journalism philanthropist. Mozilla Sr. Fellow ’17. JSK Stanford Fellow ‘17–18. Certified Lean Stack coach.

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