A New Approach to Financing the News?

After I finished my post about Twitter I went “out” browsing and found a very interesting information here about

 The Kaiser Family Foundation is starting a news service to produce in-depth coverage of the policy and politics of health care, both for an independent Web site and in collaborations with mainstream news organizations.

With a budget that is expected to reach $3 million to $4 million in two years, the project is one of the most ambitious in a wave of nonprofit online ventures that have emerged as mainstream newspapers and magazines cut jobs and budgets.

Kaiser, which is based in Menlo Park, California, has hired two highly regarded journalists to run the Kaiser Health News, based in Washington: Laurie McGinley, formerly the deputy bureau chief for global economics at The Wall Street Journal, and Peggy Girshman, a top editor at Congressional Quarterly who previously worked at National Public Radio.

Which is a major project, but it, perhaps, is also a different look at how to finance the media. Current prevailing model is media as a profit generating organisation. There are a couple of important exceptions. Of course there is the State ownership model – not a very good way to go, and I speak from experience.  The BBC and similar organisations live off a quasi tax, which is a model that led to such an excellent level of journalism the BBC often produces but is under some attack in the UK. In the US, the NPR is financed through voluntary donations and sponsorship, while C-Span is paid by private TV companies to do the work they are obliged to do.

The Foundation or a Trust model is not new – the Guardian, another excellent example of journalism and strategic vision, is also a Foundation (meaning mostly they have no pesky owner to demand profit but ability to think long term and invest whatever profit they create back into the company).

In my clippings I have an transcript of an interview of Steven Rattner, at the time the Managing Principal of Quadrangle Group by Chrystia Freeland, Financial Times US Managing Editor, and Joshua Chaffin, FT Senior Media Reporter, in New York on February 21 2007. The FT have the interview in their paid-for database, so I can neither point to it, nor quote more than fair use permits me, in order not to violate their rights. But here is the part relevant for this blog:

FT: You have recently been speaking publicly about the sustainability, or non-sustainability of the current model, the current business model for how newspapers operate. Why do you think newspapers can’t work as private or public companies, as they have been run so far?

Rattner: If you look very fundamentally at what is happening to the business, it is really a perfect negative storm, in the sense of loss of readership, loss of classified ads, and ultimately loss of display ads.

I was trying to throw out some ideas. If you basically start with the idea that the current newspaper model is not really working very well and that there’s a risk, I didn’t say it was a certainty, but there was a risk that it would become an unsustainable business model, then you say OK, now what do we do? And, for example, I threw out the case of New York City subways, which started as for-profit businesses, until at some point they didn’t work anymore as for-profit businesses, and they became a public service.

So I just think that we ought to begin a dialogue as to some other ways. If we believe as a society, as I do, that having quality journalism is a really critical element of our democratic process, and if the private sector won’t support it, for whatever set of reasons, then I think you have to start to think about other models. And you look at NPR as another model, if you look at the BBC, it’s another model. And since I wrote that article, people have pointed out to me that The Guardian newspaper in the UK is a trust, a number of German newspapers are trusts. You have Cspan which is a not-for- profit organisation. There are many other models, and I think we have to be open-minded about it.

The article, that he speaks about, was published in the Wall Street Journal under the title Red All Over and is available online. The is a response in the Slate considering the Steven Rattner’s Newspaper Ballet.

Rattner says:

In short, it’s not the need for profits that’s changed — that’s older than Adam Smith — it’s the ability of newspapers to generate those profits.

And concludes:

Not-for-profit status might be one possibility. Instead of having billionaire moguls as proprietors, we could try to turn them into philanthropists who found nonprofit organizations to buy and operate their local papers. At least one such example exists: the St. Petersburg Times, owned by the Poynter Foundation as a result of a bequest by Nelson Poynter.

Purchasing major newspapers would be costly and perhaps impractical, so a hybrid model may make more sense. We could create a pool of money (possibly from a license fee similar to how the BBC is funded). News organizations with an expensive but important project in mind could apply for funding, much the way producers in the public television world have for the last 40 years. Philanthropy could also play a role here, as Joan Kroc did when she left NPR a $200 million kitty.

We’ve had experience in the past — the New York City subways come to mind — with businesses that began as conventional, for-profit corporations, and, for one reason or another, were later rendered unprofitable while still being viewed as essential services. It’s time to apply some creative thinking to newspapers and, for that matter, to serious journalism in other media. Then we need to convince Americans that they should pay attention to it — and pay for it.

While Slate argues:

Rather than telling his patient to take some very strong medicine or change its rotten business habits, he concludes that the case is hopeless and that “perhaps it’s time to think about new models for the news business.”

Many others, especially the “gurus” of the New Media consider it an article of faith that the issue is simply the dinosaurs unable to part with their huge and hugely expensive printing presses versus the new, digital, “light” media. Their argument is very strong and I subscribe to many parts of it. Very often, however, I find that their strengths in “the vision thing” are matched by total unsustainability as a business project.

The essential truth is, that there is not one model of financing the news media, just as there is not one way of doing them. Whoever comes up with a way that works for a specific media and situation, allows good reporting and protects journalistic integrity, is spot on.