Tuesday, September 29, 2009

Size matters in non-profit news

Second of two parts. The first part is here.

The five-member staff of the Chi-Town Daily News was laid off after Labor Day when its founder could not raise the $300,000 necessary to fund the balance of its annual budget.

But Pro Publica, the biggest of the new-breed journalism non-profits, is thriving on a budget that will hit $9 million this year.

This disparity dramatically illustrates the difference between the resources available to an earnest but under-funded grassroots news start-up and a non-profit journalism project that has entered the ranks of the major-league philanthropic organizations.

The size and scope of Pro Publica, a formidable and enviable national investigative reporting project, hints at the way other big-league journalism non-profits may evolve.

By far the largest of the new journalism ventures, the New York-based project started life two years ago with a pledge of $30 million in ongoing support from Marion and Herbert Sandler of San Francisco.

Since then, Pro Publica has undertaken comprehensive and granular coverage of federal stimulus spending and worked with such partners as the New York Times to investigate the case of the medical professionals accused of killing seriously ill patients at a hospital struck by Hurricane Katrina in New Orleans. It has investigated the environmental danger of a gas-drilling practice called hydraulic fracturing and tackled the thorny issue of what to do wtih the terrorism suspects now detained at Guantanamo.

The ambition and funding of Pro Publica is surpassed in the realm of non-profit journalism only by National Public Radio and the Public Broadcasting System, which are long-established organizations that depend on a combination of government support, philanthropic largesse and contributions from listeners and viewers like you.

Pro Publica operates at a level far beyond any of the non-profit news start-ups that have emerged to date to address the crisis in local coverage caused by the contraction of newspapers and local broadcast media.

Unlike the Chi-Town Daily News, whose tiny staff of five was laid off this month because founder Geoff Dougherty could not raise the entire $300,000 necessary to make this year’s modest payroll, Pro Publica has an annual budget of about $9 million, according to Richard Tofel, its general manager.

The Pro Publica staff consists of 32 full-time journalists and 5 administrators, plus a few paid short-term interns and fellows, said Tofel. Its expenses in 2008 included a salary of $570,000 for editor Paul E. Steiger, the former managing editor the Wall Street Journal, and $296,370 for Tofel, according to the organization’s tax return.

“The Daily News needs $1 million to $2 million per year to do a great job of covering a city as sprawling and complex as Chicago,” wrote Dougherty in his blog. His estimate is consistent with the annual budget targets developed by the operators of such other journalism non-profits as MinnPost, Voice of San Diego and the still-to-be launched Texas Tribune.

As a consequence of its bare-bones budget, the scope and caliber of reporting at the Daily News was understandably limited, trending in the month prior to the layoff to such things as a new soup-kitchen website or the coverage of dull-but-important bureaucratic news.

Dougherty never got close to raising the money he said he needed to realize his goal of recruiting and training volunteer journalists to cover each of the 70 neighborhoods in the city. Despite “hundreds of phone calls and letters to foundations, corporations and individual donors over the past four years,” he said, he raised a total of only $600,000 since 2005.

By contrast, the New York-based Pro Publica has collected some $14 million in donations since inception, including $8.5 million in 2008. In addition to an $8 million donation from the Sandlers in 2008, Pro Publica collected $554,734 from half a dozen other organizations like the MacArthur Foundation, the Monarch Fund, the Peter G. Peterson Foundation and the Atlantic Philanthropies, according to its tax return.

Counting the Sandler gift, the average donation at Pro Publica last year was $1.2 million per donor. If you take out the $8 million provided by the Sandlers, the average donation among the other benefactors was $90,789.

Pro Publica recently received $1 million from the Knight Foundation to hire two noted consulting firms to help raise more money. “We will be involved in fund-raising for the rest of our institutional life,” said Tofel in a telephone interview. “We will never be done. Even the New York Philharmonic is not done.”

Fund raising is a way of life, too, at MinnPost and Voice of San Diego, two other notable online journalism non-profits. But it occurs at a far smaller scale than at Pro Publica.

MinnPost founder Joel Kramer said he and his wife, who both work without pay, have raised $2 million from some 1,700 donors since the non-profit news site was founded in November, 2007. That works out to an average of $1,176.47 per donor.

At Voice of San Diego, chief executive Scott Lewis said his organization has raised a bit more than $3.5 million from 962 donors since launching in 2005. That works out to an average of $3,669.44 per donor, thanks in large part to a series of gifts totaling $1.3 million over the years from its original angel, local businessman Buzz Woolley.

Woolley, who provided 30% of the site’s operating budget in 2008, told James Rainey of the Los Angeles Times that he would like to reduce his contribution “to avoid a perception that one individual holds too great a sway.”

Although Lewis said donations to his organization are on track with expectations, he and his colleagues expect to be engaged in continuous fund raising to ensure it thrives “into perpetuity.”

It's a choce he wouldn’t trade for anything. “I am living a dream,” he said. “I would do it 1,000 times again.”


Anonymous Joel Kramer said...

Nice piece, Alan. You focus here only on donations. MinnPost, in its second full year, will generate more than $200,000 in advertising/sponsorship revenue in 2009. While many nonprofit startups have not emphasized advertising and sponsorship, we believe it has a lot of promise.

Joel Kramer
CEO and Editor

8:20 AM  
Anonymous Mike Donatello said...

$570,000 for an editor? I don't care if it's Ben Franklin himself, that's absurd. I guess we can see, early on, whom the "philanthropy" is benefiting.

10:42 AM  
Anonymous Christopher Zurcher said...

Wow .. I guess I need a fund raiser or something. I have a hard time finding $5,000 for my blog. It's just a blog. It's largely for non-profit environmental organizations and those who want to know what's going on in the environmental community and, basically, what's being reported on in the state. I look forward to having the time to do a column and some original reporting, but, from the point of view of a career journalist, it's been a bit tough getting off the ground.

4:37 PM  
Blogger DigiDave said...

One thing I've learned is that money follows money - for better or for worse.

I think paying the top two editors at ProPublica over 1 million combined is a bit absurd. Just ONE of their annual salaries is equivalent to (almost) running ChiTownDaily for one year - or for Spot.Us to double (nearly tripple) its technological infrastructure.

8:58 PM  
Anonymous Anonymous said...

I'm happy to see wealthy folks making commitments to news-gathering, but there's already a troubling trend: These are all in major markets, or towns with highly-educated and wealthy populations: SF, NYC, Austin, Minneapolis, Chicago, etc.

What happens to the less-affluent cities when their only newspapers close? Who keeps an eye on the corruption and crime that often are roo causes their problems, and where the watch-dog function of journalism is even more important?

The rich in this country will continue to get richer, even in the benefits of a vigorous press.

rend the new non-profits should be obvious to all who care about what journ alism means to a healthy e

6:34 AM  
Blogger The Hypervigilant Observer said...

You've just blown my mind!

Almost $900,000 for the top two honchos at Pro Publica.

That leaves a newly acquired bitter taste in my mouth about Pro Publica with its Wall Street type salaries...when thousands of journalists are collecting unemployment.

What nerve!

8:55 AM  
Blogger Unknown said...

Something (or someone) is worth exactly what someone (or something) will pay for them/it. I have no doubt that ProP's top suits will secure what the organization needs to succeed: ground-breaking investigative reports. If they don't, they---and the company---won't be around very long.

Even non-profits aren't immune to the laws of supply and demand.

5:10 PM  
Anonymous Geoff Dougherty said...

The last article we reported at Chi-Town was about the indictment of a Chicago manufacturing exec accused of stealing equipment from his Chicago plant to start a non-union factory in Iowa. It appears that the investigation and indictment are based largely on our reporting earlier this year.

Dull? Hardly.

Also, just to clarify: We weren't facing a $300k deficit. We would have needed $60k to make it through the end of the year. At that point, grant renewals would have kicked in and enabled us to continue operating.

And we'd secured some loans that would have allowed us to make it until then. But we concluded that it would take us about five years to get to a stable level of funding that allowed us to fully execute our mission.

8:40 AM  
Blogger Jennifer H. McFadden said...

Great post. As someone who has moved from fundraising at an Ivy League university to working in the newspaper industry, I'm always shocked at how quickly people in the industry turn to a non-profit model as a panacea because of the perceived ease of getting a non-profit venture up and running. What is often ignored is that even the most efficient, scalable, and well-known non-profit organizations sometimes have a difficult time raising funds--particularly in cyclical downturns like we are experiencing now.

Fundraising for a non-profit with a multi-million annual budget requires major infrastructure and an experienced staff. There are researchers, development officers, and communications staff who are responsible for responding to RFPs and supplying reports to donors once grants have been funded. It is, by no means, a small undertaking. Additionally, it is not an immediate process. It can take months, and sometimes years, for a foundation and its board to decide to support an organization--particularly if you are looking in the $1M+ range. These grants rarely go to operating funds--which means that the newspaper is beholden to its donors when making resource allocation decisions. Membership programs only add on another layer of complexity.

Joel Klein and his wife have done an amazing job of raising funds for their publication. However, I would urge people to look at this as an anomaly and not the norm. There is a reason why MinnPost is constantly innovating to find new sources of revenues--relying on one source of funds, whether it is advertising or donations, in the current environment is risky. The fickleness of grantmaking organizations, who sometimes tend to focus on the issue of the day when making funding decisions, only adds to this risk.

There will likely be a role for non-profit news organizations in the new ecosystem for news. I would just urge journalists who are contemplating starting a venture on their own to make sure that they are teaming up with a board who has serious fundraising experience or, better yet, find a partner who has actually run a non-profit organization. Things are never as easy as they originally appear.

8:20 PM  
Blogger Gadfly said...

Awfully pricey for the top two staff. What happens if lower-end donors don't like that price model? Do we get "Cadillac journalism"? And, how viable will the donor model be? Will ProPublica et al, with a fresh start, be any smarter about paywalls? Doesn't look like it so far. I cannot understand how papers can give content away when ads aren't paying the freight on the online side.

10:48 PM  

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