Fixing the Nonprofit Model

While advertising and circulation revenue continue to plummet at for-profit newspapers, philanthropic funding for journalism has been on the rise. Yet the growth of charitable giving has brought some hard questions for nonprofit newsrooms as well as for the old guard media organizations now considering their own nonprofit projects.

More than 300 nonprofit news operations have been launched in 25 states since 2005, receiving a total of $249 million in foundation support, according to research by Rodney Benson, chair and professor of the department of Media, Culture, and Communication at New York University.

Moreover, funding to these news organizations is projected to increase. A month after the 2016 election, The New York Times reported that donations jumped at several nonprofit news outlets, including ProPublica, The Marshall Project, and local public radio station WNYC. The Center for Public Integrity—and its International Consortium of Investigative Journalists (which has become an independent nonprofit news organization since February 2017)—saw a 70 percent rise in individual donations over that month compared to the same period in 2015.

Commercial and nonprofit newsrooms are increasingly working together, collaborating to cover underreported issues. For example, “Rape in the Fields”—a television documentary series about the sexual assault of migrant women workers by their supervisors on farms and in meatpacking plants—was the product of a yearlong investigation by the PBS program Frontline and the Spanish-language TV network Univision, with unrestricted funding from The Center for Investigative Reporting. The series has won several journalism awards, prompted legislation in California, and been used by the U.S. Equal Employment Opportunity Commission to develop a new training film.

Philanthropic funding for journalism: Problems and solutions

However, philanthropic funding also has raised concerns about the editorial independence, sustainability, and lack of revenue diversification among news organizations that receive the money. Below are common problems that have solutions.

Problem 1: Funding specific agenda

A survey from the American Press Institute found that more than half of the sampled funders made media grants to advance specific agendas. It also reported that 60 percent of nonprofit media outlets had never turned down grant money.

Nicholas Lemann, professor and former dean of Columbia Journalism School, expressed concern that few of the foundations had journalism as a primary mission and called for protection from philanthropic foundations meddling with editorial decisions.

Solution: Protect editorial independence

Richard Tofel, president of ProPublica, said that the old rules separating the advertising and editorial departments at newspapers should apply to philanthropic foundations and news organizations who receive the funding. He cited a “classic case” from 60 years ago: When General Motors, then the largest newspaper advertiser in the United States, cut off The Wall Street Journal to retaliate against unfavorable reporting by the paper, the Journal held its ground and gained prominence as a trustworthy source of business news.

Using this example, Tofel said the benefits from compromising editorial independence were “all transitory,” while the rewards from preserving the principles of good journalism were enduring. ProPublica accepts funding for reporting beats, but not for specific stories, Tofel said.

Some foundation directors also call for unrestricted funding for journalism, untethered to particular causes. Daniel Green, director of Program Advocacy and Communications at the Gates Foundation, follows three “guiding principles”:

1. Respect the editorial and creative independence of grantees.
2. Respect the editorial and creative integrity of content (“stories are covered on the basis of editorial merit, regardless of whether they reflect positively on us”).
3. Transparency of funding.

Problem 2: Lacking transparency

But not all news organizations disclose their philanthropic funders, according to the study from the American Press Institute.

The commercial media outlets surveyed were more likely than the nonprofit news organizations to disclose their relationships to funders and collaborators. Among the nonprofits that disclosed these relationships, the extent of disclosure varied. Many of them simply listed the names of funders on their websites.

Solution: Full disclosure and transparency

News organizations must disclose all kinds of material contributions to maintain their editorial independence and credibility, Tofel said. Two good examples are The Center for Public Integrity and The Texas Tribune. The Center discloses supporters based on funding ranges, and the Tribune maintains a database where users can find all supporters and the specific amounts of funding since the nonprofit was launched in 2009. It also posts its tax returns, financial audits, and annual reports on its website.

Problem 3: Overreliance on philanthropic foundations

Many nonprofit news organizations depend on philanthropic foundations for most of their revenues. However, for the philanthropic foundations, journalism is seldom their funding priority. Nearly 40 percent of the news organizations surveyed by the American Press Institute depended on foundation grants for the majority of their budgets, while about half of the foundations surveyed gave no more than 10 percent of their grants to journalism. Only one said it directed more than 50 percent of its funding to media.

The overreliance on philanthropic foundations can threaten news organizations, Rodney Benson’s research discovered, because foundations usually want to move on to new grantees rather than to sustain existing ones.

For example, Health News Colorado, a nonprofit dedicated to health-policy coverage in Colorado, shut down after its leading supporter, the Colorado Health Foundation, decided to change direction. The foundation had awarded $500,000 to Health News Colorado — about half of its budget — since the nonprofit was launched in 2010.

Solution: Revenue diversification

Some nonprofit news organizations have diversified their revenue sources. Two of the best practitioners are the New England Center for Investigative Reporting (NECIR) and The Texas Tribune.

In fiscal year 2017, over two-thirds of NECIR’s $833,395 in revenue came from student training programs and other fee-for-service efforts, as well as from selling stories. Grants and gifts made up for about 24 percent of total revenue, said executive director Burt Glass.

In 2010, a year after its launch, The Texas Tribune depended predominantly on foundation grants and individual donations, but then April Hinkle, the current chief revenue officer, began to expand corporate and event sponsorships. By 2016, events and corporate sponsorships accounted for more than 40 percent of the Tribune’s total revenue.