We are not advocating or discouraging specific ways for news organizations to seek payment for digital content. We believe the marketplace will determine whether any of the many experiments will ultimately be successful. And we believe that managers of news organizations are best positioned to shape and test responses to them. For example, newspapers should develop detailed information about their digital audience to sell more targeted, and higher-priced, advertising to accompany specific digital content, while protecting individual readers’ privacy. They also should experiment with digital commerce that does not conflict with their news reporting, such as facilitating the purchase of books they review. To borrow a phrase from another digital news context, we see a long tail of possible revenue sources—payment for some kinds of unique digital content, online commerce, higher print subscription prices, even new print products—being added to diminished but still significant advertising revenues.
There is unlikely to be any single new economic model for supporting news reporting. Many newspapers can and will find ways to survive in print and online, with new combinations of reduced resources. But they will no longer produce the kinds of revenues or profits that had subsidized large reporting staffs, regardless of what new business models they evolve. The days of a kind of news media paternalism or patronage that produced journalism in the public interest, whether or not it contributed to the bottom line, are largely gone. American society must take some collective responsibility for supporting independent news reporting in this new environment—as society has, at much greater expense, for public needs like education, health care, scientific advancement, and cultural preservation—through varying combinations of philanthropy, subsidy, and government policy.
The failure of much of the public broadcasting system to provide significant local news reporting reflects longstanding neglect of this responsibility.
Our recommendations are intended to support independent, original, and credible news reporting, especially local and accountability reporting, across all media in communities throughout the United States. Rather than depending primarily on newspapers and their waning reporting resources, each sizeable American community should have a range of diverse sources of news reporting. They should include a variety and mix of commercial and nonprofit news organizations that can both compete and collaborate with one another. They should be adapting traditional journalistic forms to the multimedia, interactive, real-time capabilities of digital communication, sharing the reporting and distribution of news with citizens, bloggers, and aggregators.
To support diverse sources of independent news reporting, we specifically recommend:
The Internal Revenue Service or Congress should explicitly authorize any independent news organization substantially devoted to reporting on public affairs to be created as or converted into a nonprofit entity or a low-profit Limited Liability Corporation serving the public interest, regardless of its mix of financial support, including commercial sponsorship and advertising. The IRS or Congress also should explicitly authorize program-related investments by philanthropic foundations in these hybrid news organizations—and in designated public service news reporting by for-profit news organizations.
Many of the startup news reporting entities are already tax-exempt nonprofits recognized by the IRS under section 501(c)(3) of the tax code. Some magazines with news content, including Harper’s, Mother Jones, and The Washington Monthly, as well as public radio and television stations, also have been nonprofits for years. All are able to receive tax-deductible donations, along with foundation grants, advertising revenue, and other income, including revenue from for-profit subsidiaries. Their nonprofit status helps assure contributors and advertisers that they are primarily supporting news reporting rather than the maximization of profits. Tax deductibility is an added incentive for donors, and the nonprofit’s tax exemption allows any excess income to be re-invested in resources for reporting.
However, neither the IRS nor Congress has made clear what kinds of news organizations qualify as nonprofits under section 501(c)(3), which specifies such charitable activities as the advancement of education, religion, science, civil rights, and amateur sports. News reporting is not one of the “exempt purposes” listed by the IRS, which has granted 501(c)(3) nonprofit recognition to startup news organizations individually by letter rather than categorically. News organizations cannot be certain whether they would qualify—or whether they would be able to keep their 501(c)(3) status, depending, for example, on how much advertising or other commercial income they earn or the extent to which they express political opinions.