Nonprofit journalism venture to support newspapers

  • By James McCusker
  • Saturday, October 27, 2007 9:09pm
  • Business

If you look closely at the MGM (Metro-Goldwyn-Mayer) symbol, right above Leo the Lion are the words, “Ars Gratia Artis.” What that means, if my schoolboy Latin is correct, is “art for the sake of art.”

Art for its own sake was never the goal of MGM; not in its days under Sam Goldwyn or Louis B. Mayer and not in its present day form. MGM is a business. But in the entertainment industry, the business side is deliberately kept out of the spotlight.

The news business is also an industry where the business dimensions are usually in the background. But however high the goals, and however intensely dedicated the newsgathering organization is, it still needs profits to survive and continue its work.

The enterprises that make up the news business enjoy a special relationship with the American public, a relationship that involves a lot more than the usual exchange transaction between buyer and seller of a product.

One of the characteristics of these enterprises is that they have active constituencies that extend far beyond the customer base that actually uses and pays for its product or service. A newspaper, for example, has a responsibility to the community it serves. It is a responsibility, which is felt rather than codified in law, but it is none the less real for it. It has permeated newspaper organizations and affects individual behavior as well as strategic decision making.

Like any other business, newspapers are affected by economic, technological and social change. In recent times, the extent of these changes has left many newspaper enterprises without a truly satisfactory business model. Instead, under pressure, many newspapers, especially those serving national and big-city audiences, have been forced to cut costs, despite knowing that ultimately this is not a winning strategy.

Along with budget reductions that are too broadly based, newspapers across the U.S. have cut back significantly on their investigative reporting. This makes a lot of sense from a business standpoint: cut back in the high cost areas that seem to have the least direct impact on circulation. There is no doubt, though, that cutting back on investigative reporting clashes with the felt responsibility and with the behavioral ideal that motivates many newspaper people.

Now some people are stepping up to do something about it. A nonprofit organization called ProPublica — here we go with the Latin again — has been put together with private funds mostly provided by billionaires Herbert and Marion Sandler.

The new organization plans to offer specific investigative journalism stories, free of charge, to newspapers, magazines and other media who can deliver them to a wide audience.

ProPublica has recruited some impressive people for its management and its board of directors and that bodes well. We could wish that it had more realistic economic underpinnings, for that is a healthy thing for an organization. And we can wonder about the real purpose of the new organization, because its main source of funds is so politicized. Both Sandlers are big-time Democratic Party donors and active critics of President Bush, so we can pretty much guess who is going to be investigated first.

But in its own clumsy way, ProPublica may accidentally provide newspapers with a new kind of business model. Essentially, it involves restructuring what economists call “externalities” — benefits or costs to people outside the process — and reducing costs through resource leveraging and outsourcing.

If, for example, an investigative reporting project is too costly for one newspaper, it may be possible to share the costs with, say, a television station, or even other newspapers. Also, because of the potential cost savings, businesses may emerge that provide this kind of investigative reporting for a fee, much like news services (still often called “wire services”) which today provide stories which would be impractical for each news organization to develop on its own.

Newspapers provide a remarkable number of stories that are later reported by television stations — a kind of externality that, in effect, provides a subsidy to other news outlets. Newspapers must find a way to restructure this process because it is increasingly expensive.

Despite the severe limitations imposed by today’s budgets, newspapers can maintain coverage of important subjects, but it will require some different skill sets and will probably involve the increasing use of trained reporters and editors to guide and vet the work of others outside the organization. ProPublica is providing one experimental model for this. And there will be others, built on better economic foundations.

It is important for newspapers to survive, and that is true even if the “paper” is eventually transformed into Web pages and cell phone videos. Ultimately it comes down to responsibility to the community. That’s just the kind of business it is.

James McCusker is a Bothell economist, educator and consultant. He also writes “Business 101” monthly for the Snohomish County Business Journal.

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