Journalism’s New Patrons: Guardian shows how newspapers could attract philanthropy

The Guardian offices in London. Image: Wikimedia commons.

An intensified search for philanthropy by the UK-based Guardian Media Group has touched off an experiment that could provide a new revenue source for American newspapers.

A newly created U.S. nonprofit, theguardian.org, has already raised $2.4 million in foundation gifts and pledges, and has sent some of that money to the Guardian news operations to finance five journalism initiatives.

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The Guardian differs from most American newspapers in that it is owned by a trust that returns all profits to the news organization. Yet there is no legal reason why newspapers and other for-profit news organizations couldn’t replicate the Guardian’s approach to seeking philanthropic support, says Jeff Hermes, deputy director of the Media Law Resource Center.

“Is it a pain to do this? Definitely,” says Hermes. “There are a lot of limitations. But is it prohibited? No.”

The idea that philanthropy could subsidize for-profit newspapers gained attention a decade ago, when the bottom fell out of newspapers’ advertising market. In early 2009, in the middle of a two-year collapse that saw newspapers lose 40 percent of their advertising revenue, I wrote about that possibility for the Online Journalism Review.

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Charlotte Hall, then president of the American Society of Newspaper Editors, told me that a “model could emerge for foundations to fund some local reporting at newspapers… A new kind of firewall would be needed to assure independent reporting and unencumbered editing.”

Now The Guardian has done exactly this. Its owner, the Scott Trust, established theguardian.org to solicit tax-favored donations, some of which will be devoted to special projects at The Guardian. A board led by John Paton, former CEO of Digital First Media, governs the nonprofit and is required to vote on specific grants to the Guardian or other recipients.

“Is it a pain to do this? Definitely…. But is it prohibited? No.”

The nonprofit is yet another example of how philanthropy is making its way into for-profit newspapers. Newspapers large and small are increasingly publishing the work of journalists employed by news nonprofits. And a growing number of reporters working in for-profit newsrooms are being financed directly through philanthropy. But arguably the most robust infusion of journalism resources could come from newspapers having nonprofit partners.

A different version of this has already happened at the Philadelphia Inquirer, Philadelphia Daily News, and philly.com, which cable television mogul Gerry Lenfest purchased and then donated to a nonprofit, the Lenfest Institute. The Lenfest Institute supports local news innovation projects across the country, but the largest beneficiaries are the Philadelphia newspapers. Last fall the Institute’s board granted them more than $1 million for a variety of projects, including investigative reporting and a fellowship program for “emerging journalists from diverse backgrounds.”

David Boardman, the Institute’s board chair, says the Philadelphia news operations provide a “unique test kitchen approach.”

Between the two of them, theguardian.org and Lenfest Institute offer two models on how philanthropy could enter newspapers’ bloodstreams.

“We think we’ve identified something that’s very important,” says Rachel White, president of theguardian.org as well as executive vice president of Guardian News and Media, publisher of The Guardian. “We think the universe of funders for media is only going to grow.”

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Other newspapers have been watching The Guardian’s experiment; executives at several of the nation’s largest have called White to inquire.

The New York Times announced its own philanthropy initiative last fall, but it remains in an early stage after the death in December of Janet Elder, who had been leading The Times’ effort. Eileen Murphy, the newspaper’s senior vice president for communications, said in an email: “We intend to continue to pursue various sources of philanthropic funding for our journalism when appropriate but we have not yet chosen someone to take over leading the effort.”

Although the Times earlier laid out a variety of potential approaches, it appears to have the same ultimate goal as The Guardian. In a staff memo, Executive Editor Dean Baquet and Managing Editor Joseph Kahn wrote, “Mainly, we think there are journalism projects we are eager to pursue that could be more ambitious and have greater impact with outside support.”

Although announced last fall, The Guardian’s initiative goes back more than two years, when then-Editor Alan Rusbridger and others at The Guardian weighed a proposal for a US nonprofit, which would supplement foundation money it was already receiving for its London-based operations. Theguardian.org incorporated in early 2016, and by October secured tax-exempt, 501(c)(3) status from the Internal Revenue Service.

The $2.4 million raised so far, some in multi-year pledges, has come from five foundations, and in each case the money was raised for a specific news topic: early childhood development from the Conrad N. Hilton Foundation; modern-day slavery from Humanity United; climate solutions from the Skoll Foundation; public lands use by the Society for Environmental Journalists; and animal welfare and factory farming from the Open Philanthropy Project.

It’s a three-step process by which money ends up in The Guardian’s news products, including its new tabloid-format newspaper. Guardian editors first develop ideas for reporting initiatives. White and her team then try to identify potential funders. These interactions are deemed permissible under IRS rules as long as the third step is strictly followed: The nonprofit board must make an independent judgment about whether to award the funds.

“There are projects we are eager to pursue that could be more ambitious and have greater impact with outside support.”

“It can be quite a lengthy process to make sure everyone understands how the money will be used,” says White. “We push back on our funders a great deal. They have to be comfortable with having no input at all with the news decisions.”

I asked White if The Guardian’s willingness to identify itself as politically progressive was an advantage with funders—one that US newspapers couldn’t match because of their traditional commitment to impartiality.

“We have a progressive voice, and some, like the Ford Foundation, find that very appealing,” she says. “Other funders worry it might look partisan, or ideological… Where we have real advantage is the scale of what we can deliver: 164 million readers, the third-largest English-language newspaper in the world.”

Although its initial focus was securing foundation money, theguardian.org expects to move quickly to solicit individual contributions as well.

White is aware of the several concerns about newspapers’ reliance on philanthropy as a revenue source, including worries that news coverage will be altered ito appease donors. That’s why, she says, theguardian.org will move cautiously as it builds a base of contributors.

As for worries from some news nonprofit leaders that for-profit news organizations could be grabbing an unfair share of philanthropic support, White says she’s convinced the pool of contributors to journalism will expand. “We want more people in this space with us,” she says.

It’s unclear whether US newspaper leaders, who have plenty on their plates already, will be tempted to replicate The Guardian’s nonprofit. For starters, it’s not an easy thing to set up, and might be out of reach for smaller newspapers with little staff and few legal resources. Tending the complex relationship between the nonprofit and the newspaper would also be tricky; there can be dialogue between the two, but the nonprofit must remain independent.

“In theory, the nonprofit board might decide that transferring donated money to the newspaper might not be the best use of those funds,” says Hermes.

Then there are the IRS limitations on the editorial uses of the money, which mean that donations can’t be applied to certain topics of newspaper coverage. Since journalism falls under a section that requires the philanthropy to be used for educational purposes and for benefit of the public, the areas of entertainment and sports probably don’t qualify, says Hermes. And coverage of partisan politics must be absolutely free of bias.

Finally, of course, there’s the question of whether sufficient philanthropy exists to provide significant support for news in any given community.

But for the most part, none of these are new issues. The scores of news nonprofits that have surfaced in the last decade have been dealing with all of them, mostly quite effectively.

Hermes says he wouldn’t be surprised if some newspapers jump in.

“This is certainly feasible,” he says. “I see it as one of many creative solutions.”

Editor’s Note: This article is part of a series of stories running in CJR about the growth of philanthropy in funding the news, both in the nonprofit and for-profit sectors.  It is a project of the University of Southern California’s Center on Communication Leadership and Policy, located at the Annenberg School for Communication and Journalism. Its director, Geoffrey Cowan, has been focusing on nonprofit news since 2008.

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David Westphal is a senior fellow at the Center on Communication Leadership and Policy at the University of Southern California’s Annenberg School for Communication and Journalism. He also is an adjunct instructor in the Studio 20 program at New York University. Previously, he was a longtime newspaper reporter and editor.