What If: The Non-Profit Media Model

In Micro 101, we learn that such "public goods" as clean air and national defense will not be produced in sufficient supply exclusively by market forces. Allow for the sake of argument that journalism is such a good.
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TechCrunch honcho Michael Arrington deserves much applause for his July 30 post, "What If: The New New York Times." In it, he ponders what might happen if the top 10% of the venerable New York Times' reporters went on walkabout and set up their own purely digital shop.

From a journalistic standpoint, one presumes that harps would play and angels sing. Arrington proves that he "gets it" in a way that many others cogitating on the future of news do not when he writes, "Journalists still matter. A lot. Especially the good ones." And although I know of no such objective measure, it's hard to argue with his assertion that 5-10% of a newspaper's best journalistic talent account for half or more of the value of the enterprise.

Arrington also seems to believe that the NNYT could be viable commercially, with a $25 million annual expense structure, and -- if it could match the traffic of the current digital version of the Gray Lady -- 124 million monthly page views. Certainly, nobody should question him when he asserts that plenty of money would be available to back such a venture. If he says so, it likely is so. Nobody in Silicon Valley is more connected than Michael.

Still, Arrington's analysis leaves me wondering whether -- in re-imagining the New York Times as a purely commercial, digitally native team of journalistic all-stars -- the game is worth the candle. To cover a little over $2 million per month in expenses, a site with traffic equivalent to the current NYT would need revenue per 1,000 page views of about $16.50. That might be doable, depending on how one feels about impressions per page, sell-through, and -- most imponderably of all -- the secular trajectory of display advertising rates. But still: we're talking about a business with the traffic of the NYT that only breaks even. Why would the hedgies and private equity titans bother? Even if the site grew to twice that size, it's hard to envision an enterprise that is much bigger than $50 million or so in revenue, with maybe 25% operating margins. What's a site like that worth? Not a lot more than the $100 million Arrington posits it might cost to launch the thing.

But what if our cash-flush friends were to go a different route, taking cues from both Microeconomics 101 and the New Testament (stay with me here)? What if instead of trying to earn a buck on the NNYT, they were to turn it into a purely civic, not-for profit endeavor?

In Micro 101, we learn that such "public goods" as clean air and national defense will not be produced in sufficient supply exclusively by market forces. Allow for the sake of argument that what I'll call "capital J" Journalism -- journalism that takes on serious, complex issues and puts them in the context of how citizens interact with their government -- is such a good.

As for the New Testament, the apostles Peter and Luke both admonish against that most common of human frailties -- the allure of attempting to serve God and Mammon simultaneously. From roughly 1960 to about the middle of this decade, newspaper publishers seemed to think they had managed somehow to roll this dictate back. A secular economic boom, shifting demographics, and sharp consolidation of newspapers led to a period when solid investigative and explanatory journalism was plentiful, even though newspaper operating margins often neared 30%. As it turns out, though, God seems to have a long memory. No such repeal was ever granted. And with newspaper margins now plunging into the single digits on a very large base of (largely leveraged) capital, nobody is talking about public service nearly as much as paying the bills. When it comes to the news business, God and Mammon are no longer BFFs.

And now back to Micro 101, where we also learn that all economic decisions are made at the margin, or at the incremental unit of revenue or cost. For newspaper publishers, that means deciding between reinvesting the incremental available dollar and sending it back to shareholders. It also means deciding between keeping the Baghdad bureau open and keeping up with TMZ.

But what if a bunch of financial titans decided to stick strictly to lucre in their in their day jobs, and did the NNYT out of their philanthropic coffers? A non-profit version of Arrington's conception could be a fabulously worthwhile philanthropic venture. It could produce the best journalism in the world, without confusing profit motives with the provision of a public good. And there would be no doubt that the incremental available buck could go back into the product.

In Texas, a group of us is about to try a very similar play with a statewide, online, nonprofit organization we're calling Texas Tribune. We will launch with a small staff focusing on politics, government, and public policy issues of statewide interest. As a 501c3, we will try very hard to remember that we serve nobody but the people of Texas, although we'll attempt to be as profitable as we can so we can grow to match our outsized ambitions.

Along with pioneering colleagues in places like San Diego and Minneapolis, our team has learned a lot about non-profit journalism down here in the Lone Star State during the last year. We'd love it if somebody with the ambition for a non-profit version of the NNYT would give us a jingle.

Help us launch the Tribune, then let's tackle Gotham together.

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