Working Title

I interviewed one of the founders of the Voice of San Diego last week. Buzz Woolley, a retired venture capitalist, became a venture philanthropist when he proposed starting an online news operation to recently fired veteran journalist Neil Morgan in 2004.

There are parallels between the beginnings of the Crier of Port Hope and the Voice of San Diego. Citizens concerned about the poor quality of the incumbent newspaper start a new news venture dedicated not to profit but to investigating and reporting news to the community.

“When they fired Neil Morgan, he was the last one at the newspaper (San Diego Union-Tribune) who would write anything critical about what was going on. He worked for them for 50 years or something, so it was not exactly someone who had been causing them trouble for a long time,” Woolley told me.

“So I invited Neil to lunch and the two of us talked about it and I suggested an answer to it would be to start an on-line newspaper because the cost of it is obviously significantly less.”

Woolley then went through a similar process to planning a tech startup. He hired a consultant to investigate how other on-line news operations worked and to test the need for news in the community. The answers came back that new websites didn’t make money and San Diegans wanted news, so they started Voice as a non-profit.

“We got pro bono writers in some cases that would not do it if it was for profit. They would say, ‘I want more money,’” Woolley said.

Their intention however was to pay professionals to dig deep and investigate news in a few key areas, but supplement with free lancers and volunteers. Woolley funded the first year of operations so they would have a product to show.

Now major donors giving thousands of dollars still make up the heft of the million dollar budget. Woolley says that roughly 10 per cent comes from members who donate under $1,000 and another 10 per cent is made up by advertising and sponsorship.

Woolley says he feels that Voice is at a critical mass and will attract more advertising this year.

Voice of San Diego is going strong with a new model for new publishing. Since it was founded, newer sites have begun with a similar approach in other cities, like Minneapolis and St. Louis. We can see the benefit of non-profit structure isn’t just the tax exemption but the willingness of people to contribute their donations and efforts to the news.

Magda and I have discussed the possibility of newspapers (which are generally for-profit enterprises) restructuring to not-for-profits and how that would affect their operations. News today highlighted a case of a new operation going the other direction.

Stories covering chain owner Quebecor’s planned pullout of the co-operative The Canadian Press repeated the news that the membership organization is seeking investment and ownership and thence to go for-profit.

Quebecor Inc. says it is pulling out of The Canadian Press news co-operative next year as it continues to develop its own in-house news agency that started sharing content among its media outlets earlier this year.
[...]
The decision comes as The Canadian Press undergoes its own structural changes.

Throughout its 91-year history, the organization has been a not-for-profit co-operative with a membership restricted to daily newspapers that not only pay fees but also agree to provide content for the news service.

The Canadian Press announced earlier this year that it intends to restructure itself by seeking investment from media companies and other potential investors who would become owners in a for-profit business.

Under the new structure, all of the newspapers currently in the co-operative would be considered clients, which would offer them more flexibility to choose which services they buy.
– Quebecor moves forward with in-house news service; plans exit from Canadian Press The CP 11 Mar 2009

The CP report may be a little off on the reasons. A not-for-profit can offer services to paying clients. Though different structures do affect operations, a bigger reason is likely the desire for investment and resources that the change would allow.

Two other guys from Yale, chief investment officer David Swensen and financial analyst Michael Schmidt, are putting forth the idea of newspapers becoming endowed institutions like universities. That goes along with the idea from professors Ackerman and Ayres for an national endowment from a Guardian article a few weeks ago.

In the New York Times they opine that newspapers could have endowments to make up for revenue sources they have lost.

Although the problems that the newspaper industry faces are well known, no one has offered a satisfactory solution. But there is an option that might not only save newspapers but also make them stronger: Turn them into nonprofit, endowed institutions — like colleges and universities. Endowments would enhance newspapers’ autonomy while shielding them from the economic forces that are now tearing them down.
[...]
How large an endowment would a newspaper need? The news-gathering operations at The New York Times cost a little more than $200 million a year. Assuming some additional outlay for overhead, it would require an endowment of approximately $5 billion (assuming a 5 percent annual payout rate). Newspapers with smaller newsrooms would require smaller endowments.

Note that just as endowed educational institutions charge tuition, endowed newspapers would generate incremental revenues from hard-copy sales and online subscriptions. If revenues were to exceed the costs of distribution, the endowment requirement would decline.
– News You Can Endow NY Times 27 Jan 2009

Essentially this proposal suggests converting to a non-profit tax-free structure, of which examples already exist, but to also tack on a truckload of money to it in the form of an endowment. After asking where the money is going to come from the next question should be: Do we really want to throw money at continuing to deliver dead trees to doors steps? With the idea of a national endowment, at least they were focused on the news and not the newspaper.

What needs to be endowed, supported, bought or otherwise funded is that actual generation of news. The distribution part has already been solved.

I found a story in the Times about an Alabama family-owned newspaper planning to become not for profit.

H. Brandt Ayers, the publisher of The Anniston Star, a small newspaper in northeastern Alabama, announced a plan yesterday to ensure its long-term local ownership by establishing an institute to train journalists and a foundation that is expected to eventually own all the stock in the newspaper’s parent company.
– Alabama Paper Plans to Go Nonprofit NY Times 16 Dec 2002

But that story is from six years ago. Where did their plans go.

Well, I found a more recent NPR story with more details.

The Ayers family created a not-for-profit foundation. Over time, the holdings of the Ayers family in the publishing company will be turned over to that trust. The company’s earnings will be used to run the paper, and its dividends will help pay the cost of teaching the students. The Knight Foundation has contributed $1.5 million to the project.
[...]
Very few American papers are owned by not-for-profit groups. One paper in Tupelo, Miss., uses its money to encourage regional development. The St. Petersburg Times in Florida is controlled by the Poynter Institute, a professional training center. But there’s nothing quite like this.
– Small Paper Uses Profits to Train New Reporters npr.org 2 May 2006

So, here’s the program at U of A.

Our one-year master’s program in community journalism gives students an opportunity to explore what journalism means for communities, and to hone the special skills journalists need to serve their communities effectively. The program blends rigorous academic training from faculty at UA’s College of Communication and Information Sciences with hands-on community journalism experience at the award-winning Anniston Star, one of the few independently owned daily newspapers in the country.
– Com-J: The “Teaching Newspaper” | Master’s Degree in Community Journalism The University of Alabama

The fact that the newspaper was still independently-owned made it possible to make the shift.

I learned this week that Joseph Atkinson intended the Toronto Star to be run by a charitable trust after his death, which came in 1948. It didn’t work out that way though because of the Charitable Gifts Act, passed after his death, which prevented a charity from owning more than 10 per cent of a business entity.

The Atkinson Charitable Foundation was incorporated in 1942, something the publisher undoubtedly thought reassuring. “There need be no worry on that, ” Atkinson said, responding to a reporter’s question about the fate of the paper after his death. “I am fixing things so nobody can destroy my paper.”

The idea of establishing a charitable foundation and leaving the paper to it was not entirely new to him, his chronicler wrote. He saw newspapers as “public institutions and not simply private enterprises.”

Atkinson left an estate of more than $8 million, the bulk of it to his namesake foundation which, said his will, would direct the profits “for the promotion and maintenance of social, scientific and economic reforms which are charitable in nature, for the benefit of the people of the province of Ontario.”
[...]
On the final page of his book, Harkness stated that while taxpayers gave up $5.6 million in succession duties on Atkinson’s estate in 1948, over the next 14 years they got back more than $7.2 million in grants for educational, medical and charitable purposes. Since 1959, the foundation has distributed a total of $58.9 million to Ontario charities. There remains debate on how much more or less might have been generated for charity if the foundation had retained control of the newspaper.
– Atkinson’s will kept Star’s resolve Toronto Star 6 Nov 2002

Atkinson’s son and four other from the Star’s senior management — including John Honderich’s father Beland — created Torstar Corporation and the Voting Trust to hold the controlling share.

I am still not clear on what the actual share structure is for Torstar, but it would seem to be similar to other newspapers that have some kind of purpose other than profit like the St. Petersburg Times, which is owned by the Poynter Institute journalism school; the Guardian, which is owned by the Scott Trust, or Independent Newspapers Inc., owned by INI Holdings. In the Star and those cases there are principles, like the Atkinson principles, to be upheld or also the flow of profit goes to supporting charity or reinvested in the news operations.

With Torstar profits do go to shareholders, though the company announced today it was cutting the dividend.

This story shows how there have been obstacles to furthering news as a public good.