One of the most prominent critiques of late was written by Alan Mutter, a well-respected expert on the economics of media. Relying on figures by Poynter media analyst Rick Edmonds, Mutter shunned the idea that the nonprofit sector could finance the $4.4 billion spent annually by news organizations to gather news. That statement set off a flurry of counterarguments, which together paint a detailed picture of the possibilities for nonprofit news.

Mutter’s assertion was that philanthropists would have to drop $88 billion into the nonprofit news sector to create an endowment large enough to support $4.4 billion in annual expenses by news organizations. Given the $307.7 billion given to charity in 2008, Mutter writes, that’s a tall order.

But John Thornton, an Austin venture capitalist and founder of the Texas Tribune, disagrees. He says it’s much more complicated than setting up an endowment to cover all news-gathering expenses for all news organizations.

Thornton argues that not all $4.4 billion needs to be financed through nonprofits, because much of that amount is profitable on its own. Rather, innovators should be concerned with financing the 15 percent of journalism (his estimate from Alex Jones’ book, Losing the News) that is high-quality, accountability journalism, which amounts to $660 million in annual newsroom expenses.

That’s because to Thornton, high-quality accountability journalism is more of a public good (such as clean air and water) than a product that can be financed through market solutions. “It seems to me that the big picture at hand is that when atoms become bits, content consumers win and content producers get hammered into cost-cutting smithereens,” Thornton writes. “If some of that content happens to be vital to the functioning of our society, I simply think it’s prudent to look around for other means of funding it.”

That $660 million, however, would still require a $13.2 billion endowment (my math assuming the standard 5 percent annual yield), however. But what Thornton, along with author David Clay Johnston and Reuters finance blogger Felix Salmon, points out is that only foundations rely on an endowment covering all expenses, and few endowments are built in one year, just as any future shift to a nonprofit model wouldn’t happen in one year.

That makes the picture seem somewhat more optimistic, but far from ends the debate. As Mutter points out, $141 million was donated to news nonprofits in the last four years.

However, entrepreneurs in this area, such as Thornton are optimistic that nonprofit news organizations can slowly, but surely, build funding sources that will support a healthy nonprofit news sector to sustain accountability journalism, but only if nonprofits seek multiple sources of revenue. Few, if any, think the industry can be sustained purely on a foundation model.

Other questions remain, and the constant changes in the overall industry continue to influence this equation. For example, how will other forms of subsidy (government, universities, e-commerce, etc.) play into the new models for news? Will increased efficiency in the market also factor into the equation? What is the role of established nonprofits, such as communities foundations or universities in assisting news organizations in developing successful business models? Can established, legacy organizations successfully make the jump to nonprofit status?

Additional reading

• This academic article presents a survey of nonprofit efforts at revenue diversification, many of which are being pursued by nonprofit news ventures and continues several figures that help approximate funding distribution.
• The Reconstruction of American Journalism, a report from former Washington Post editor Leonard Downey Jr. and Columbia professor Michael Schudson, makes a case for alternative funding models for accountability journalism.
• Jim Barnett’s blog, Nonprofit Road, is devoted to covering the emergence of nonprofit news and is updated regularly.

But the real point is this:  not only will philanthropy alone not save journalism, it can’t likely support even the majority of our modest efforts.  We need to run our businesses like businesses, even if our goal is public service rather than profitability.

— John Thornton, founder of the Texas Tribune, discussing the future of nonprofit news

So far, some have been successful. The most prominent, ProPublica, has broken national stories and supports 32 full-time employees on its news staff; ProPublica aims to cover national “stories with moral force” and to fill a perceived void created by a decrease in investigative reporting. Texas Tribune is gearing up in Austin to do the same with state government coverage. And others are trying on the local level in San Diego and in Minneapolis-St. Paul. The San Diego Union-Tribune is also experimenting with nonprofit status, spinning off its investigative staff into a nonprofit called the Watchdog Institute.

Philanthropy-funded journalism is nothing new, though. National Public Radio has been doing that for years. Not-for-profit news isn’t all that new, either. The Associated Press has been doing it since 1846. What distinguishes these organizations is that they have emerged as a solution to the crumbling business model for mainstream news.

Most of these nonprofit operations are not emerging as competition to their for-profit counterparts. Instead, they have emerged hoping to do the heavy lifting that traditional organizations can’t pay for anymore through their advertiser- and reader-supported business models; they’re undertaking investigative stories that are expensive to produce and public affairs stories that embody the watchdog role of the Fourth Estate.

Many, such as the Texas Tribune, are still in their infancy. Others have already failed at nonprofit success. The staff of The Chi Town Daily News (the site is now updated by citizen journalists and Loyola University students) in Chicago, for example, left to start a for-profit operation this month after donations slowed so much that they couldn’t make payroll.

But many of the nonprofit operations are pushing on, distributing content direct to news consumers through their own websites and partnering with traditional news organizations. ProPublica, for example, often collaborates with news organizations on investigative projects they don’t have the resources to take on themselves. ProPublica has worked with 60 Minutes, the New York Times (including one magazine story estimated to cost $400,000), and others.

ProPublica has raised $14 million to date, according to Alan Mutter, who blogs at Reflections of a Newsosaur. Texas Tribune has already raised more than $2.5 million this year, and Warren Hellman just dropped $5 million to kick-start the Bay Area News Project in San Francisco. All the big donors to those organizations (the Sandlers at ProPublica, John Thornton at the Tribune, and Hellman) attribute their philanthropy to a desire to increase the amount of public affairs and investigative reporting.

Thornton sees opportunity in philanthropy like his. He told Jeff Jarvis, a professor at City University of New York, who blogs at BuzzMachine: “Dance companies in Texas raise $20 million a year. … If journalism philanthropy, 10 years from now, were the size of dance, we’d put 150 reporters on statewide issues and could literally change the way state government operates. Think about that: an extra 20 at the capital; a couple each for all the agencies and the school board; 20 on the border. You almost can’t spend that much money responsibly. I don’t need opera. I don’t need visual arts. Don’t need symphony. Just give me dance, and I’ll change state government.”

But not all are as optimistic as Thornton. Slate’s media columnist, Jack Shafer, is among the dissenters who argue that the way to fix news is to make it profitable again and worry that foundation contributions may come with an agenda.

“In the current arrangement, we’re substituting one flawed business model for another,” Shafer wrote last month. “For-profit newspapers lose money accidentally. Nonprofit news operations lose money deliberately. No matter how good the nonprofit operation is, it always ends up sustaining itself with handouts, and handouts come with conditions.”

Many of the nonprofits show no sign of slowing down, though, and many expect the nonprofit environment to get better as the economy recovers. There are still challenges to be dealt with, though, and questions remain.

Will non-profits be able to develop alternative revenue streams to insulate them from the same shifts in the economy that have proven so damaging for their for-profit counterparts? Will for-profit news organizations become more comfortable with partnerships with nonprofits? What levels will nonprofit news succeed on? Is there enough money to fund the gap in public affairs and investigative reporting that is being left by the changing media landscape?

The institutions – 35 of them, representing some of the country’s top research universities – formed their own news site. Using content from their communications offices, the universities are running Futurity.org. The site has video content, presences on Facebook and Twitter and many other features one expects from a 21^st-century news organization. A staff editor tweaks content and pulls only stories that she thinks will appeal to large audiences, separating the site from traditional news release aggregators such as EurekAlert!.

Efforts such as Futurity are becoming more common as news-making organizations look outside of traditional news outlets, many of which are shrinking and scaling back coverage, to tell their stories. Some observers have applauded efforts like Futurity, but others are calling it “almost-journalism”, arguing that these direct-to-reader methods are often missing fairness – a staple of journalism.

“Any information is better than no information,” Charlie Petit, a former science reporter at U.S. News & World Report told the San Jose Mercury News in a story about Futurity. “The quality of research university news releases is quite high. They are rather reliable. But they are completely absent any skepticism or investigative side.”

But some non-news organizations are hiring away professional reporters to staff their operations and have employed measures to keep their journalism fair and balanced, even if the funding sources aren’t.

For example, when the Kaiser Family Foundation, a nonprofit that focuses on U.S. health care and global health policies, launched Kaiser Health News, they assembled an advisory board composed of top journalists, including former Washington Post editor Leonard Downie Jr. and  Karen Dunlap, president of the Poynter Institute. The site is also staffed by former reporters, one a Pulitzer-Prize winner.

Mark Flatten, a former newspaper investigative reporter who went to work for a nonprofit advocacy group earlier this year, said for reporters working at nonprofits the funding source doesn’t have to affect the work. “I’m an investigative reporter: a finder of fact,” Flatten told the Cronkite News Service, “fair, accurate, not skewing things, telling it like it is.”

And, as Jim Barnett, a former reporter who now covers nonprofit news on his blog, The Nonprofit Road, argues, publishers at professional news organizations can potentially have the same biases. And nonprofits created to support journalism (more on those in a later post) often have funding that could suggest biases. “There is no way to stop a journalist — or an organization that employs journalists — who is determined to try cloaking ideology or self-interest in the guise of objective reporting,” Barnett writes. “Works of journalism ultimately must stand or fall on their own merits, and so must their publishers. Both must earn credibility the old-fashioned way.”

Additionally, as Dan Gillmor, director of the Knight Center for Digital Media Entrepreneurship at Arizona State University, writes, news organizations have long relied on reports generated by advocacy groups such as the ACLU and Human Rights Watch. And media watchdogs have accused professional journalists of relying too much on university press releases for news reports in the past.

Regardless of alleged biases or transparency issues, though, the organizations have something that many journalism organizations don’t: a stable business model. While as nonprofits they are still prone to the ups and downs of the economy, they don’t have to sell ads or subscriptions to finance their content. Furthermore, many of the news operations exist as a small sector within a larger, stable nonprofit organization.

The move of many news sources to become news producers raises questions such as: How will consumers be able to judge the quality of news and information in the online era without relying on established brands as they do with current mainstream organizations? For journalists are shifting from traditional for-profit organizations to advocacy groups, will they be able to easily transition back? Will these “almost-journalism” organizations eventually be able to gain wider distribution for their work through mainstream organizations? As audiences shrink for many traditional news outlets, will there be a reduced incentive for public relations professionals to go to “outside” journalists with their pitches?

according a post by to “Newsosaur” blogger Alan Mutter. That’s enough to support 32 full-time journalists.

… journalistic bias is a function of human intention, not the business model under which the story is produced. For-profit, nonprofit, it does not matter. If a reporter or editor has an axe to grind, he or she is going to find a venue to grind it.

— Jim Barnett writing on his blog, The Nonprofit Road

according to an estimate of the cost of the publication’s latest cover story, funded partly through nonprofit ProPublica (coverage here from Harvard’s Nieman Journalism Lab)