Tag: The Wired City

How the IRS is killing nonprofit media

This article appeared earlier at The Huffington Post.

Outrage over the Internal Revenue Service’s targeting of Tea Party and other right-wing groups continues to boil — yet a potentially more consequential IRS practice has scarcely gained any attention.

Over the past few years the IRS has virtually stopped approving 501(c)(3) status for nonprofit news organizations. Given the well-documented decline of traditional for-profit newspapers, nonprofit journalism can be a vital alternative, especially at the local and regional levels. But even when applications for 501(c)(3) status aren’t rejected outright, they are stacking up, unacted upon, for months and even years.

A recent Council on Foundations report titled “The IRS and Nonprofit Media: Toward Creating a More Informed Public” put it this way:

There is significant anecdotal evidence that the IRS has delayed the approval of nonprofit media, potentially slowed the development of those already created, and harmed communities by leaving them without essential coverage, due to the application of archaic standards.

Starting in the middle part of the last decade, a number of nonprofit entrepreneurs launched community websites that were built roughly on the public radio model, funded by grants, sponsorships and contributions from readers. Gaining 501(c)(3) status allowed donors to make make those contributions tax-exempt.

In researching “The Wired City,” my book on the New Haven Independent and other community news sites, I was struck that nearly all of the best-known nonprofits — the Independent, Voice of San Diego, MinnPost, the Texas Tribune, the Connecticut Mirror and others — had been started during the same time period, from 2004 to 2009.

“There was an initial bubble of nonprofit start-ups, but you haven’t seen that great wave spreading across the country,” Andrew Donohue, the then-editor of Voice of San Diego, told me in 2011. He saw that as potentially a good thing — a sign that journalists were trying a variety of models, for-profit as well as nonprofit. Since then, however, it has become increasingly apparent that the IRS is a principal agent in stifling that great wave.

Consider some of the consequences of the IRS’s actions and inaction:

• In February 2012, the Chicago News Cooperative went under, in part because of its inability to obtain 501(c)(3) status from the IRS, as Ryan Chittum reported in the Columbia Journalism Review.

• Because the IRS does not consider journalism to be among the educational activities covered by the 501(c)(3) rules, the agency told the Investigative News Network to remove the word “journalism” from its articles of incorporation. The INN complied and won approval, according to an article about the Council on Foundations report by Justin Ellis of the Nieman Journalism Lab.

• In a similar vein, according to the report, the Johnston Insider of Rhode Island received a message from the IRS telling it: “While most of your articles may be of interest to individuals residing in your community, they are not educational.” Because of that and other reasons, editor Elizabeth Wayland-Seal announced that she was suspending publication.

What adds to the absurdity of the IRS’s stance, as the report notes, is that we are already accustomed to relying on nonprofit, tax-exempt media for much of our news and information — not just from community news sites but from long-established outlets such as NPR and local public radio stations, “The PBS NewsHour” and magazines such as Mother Jones, Consumer Reports and National Geographic.

Here is how the media-reform organization Free Press, which has assembled a useful repository of information about the IRS and nonprofit news, describes the problem:

Nonprofit journalism is not a silver bullet for the future of journalism. But fostering a more diverse media system is. If the IRS decides against allowing nonprofit status for newsrooms, it will essentially be arguing that all journalism should be done for profit. The problem is, the market has shown it will not support the full extent and diversity of news and perspectives we need.

Four years ago, U.S. Sen. Ben Cardin, a Maryland Democrat, proposed a bill that would have allowed newspapers to become nonprofit organizations. At the time it struck me as superfluous. Now it appears that it warrants another look — not just for newspapers, but for other forms of media as well.

Absent legislation, President Obama should appoint a new IRS commissioner who understands that providing quality local journalism is indeed the sort of educational activity that should be covered by the provisions of 501(c)(3).

At a historical moment when it has become increasingly difficult for the traditional media to provide the information we need to govern ourselves in a democracy, the IRS shouldn’t stand in the way of promising alternatives.

Haverhill Matters moves closer to reality

The Bradford Bridge, looking north toward downtown Haverhill
The Bradford Bridge, looking north toward downtown Haverhill

This article appeared earlier at the Nieman Journalism Lab.

It was as incongruous a situation as I could imagine. Friday, April 19, was one of the most gripping news days we have ever experienced in Massachusetts. Dzhokhar Tsarnaev, the younger of the suspected marathon bombers, was in hiding. Boston and several other cities were under voluntary lockdown. And that morning I was driving north, toward Haverhill, on my way to a meeting where earnest community activists were making plans to revive local journalism.

While all hell was breaking loose elsewhere, the Haverhill Matters Organizing Committee met in a sunny conference room at Haverhill Community Television. The committee’s goal is to launch a cooperatively owned news site to be called Haverhill Matters sometime this year.

It’s been a long time coming. Tom Stites, a veteran journalist who’s worked at the New York Times and the Chicago Tribune, came up with the idea of local news co-ops a few years ago. He founded the Banyan Project to serve as an umbrella; Haverhill Matters will be the pilot. I wrote about his plans for the Nieman Journalism Lab last year, as well as in the epilogue to my forthcoming book about online community journalism, “The Wired City.” The launch date for Haverhill Matters has slipped a few times, but at this point it looks like 2013 will be the year.

The hour-long meeting was taken up with fairly mundane planning issues, but I could see that the site is moving toward reality. Currently the committee is at the first of a four-stage process, outlined in considerable detail on the Banyan website. The organizers envision everything from crowdsourced reporting projects to quotidian coverage of local news. A board of directors will hire two full-time employees: an executive director and an editor. The site will also make ample use of freelancers, neighborhood bloggers, and college and high school interns.

After some back-and-forth about liability issues, the committee members agreed to sign on with the Cooperative Development Institute to handle Haverhill Matters’ finances. There were charts about finances and timetables, and about how the yet-to-be-hired editor should spend the 520 hours he or she will be working each quarter.

“We’re really at a go/no-go moment, and I think we’ve decided to go,” said Tim Coco, president and general manager of WHAV, an online radio station based in Haverhill.

“Well, we want to,” replied local activist Mike LaBonte, co-chair of the organizing committee.

Coco professed some skepticism about what he was hearing but supported the idea of moving ahead. “It’s not feasible,” he said, “but that’s never stopped me before.”

The Banyan Project is aimed at serving what Stites calls “news deserts” — less-than-affluent communities that tend to be shunned by high-end advertisers and, thus, by the news organizations that rely on those advertisers. Haverhill, a city of 61,000 on the Merrimack River at the New Hampshire line, meets that definition. The Massachusetts Institute for a New Commonwealth, or MassINC, lists Haverhill as one of 11 “Gateway Cities” — former manufacturing centers that are struggling with a lack of resources and economic investment.

Yet in other respects, Haverhill is an unlikely news desert. Though the days when two daily newspapers battled it out are long gone, the Eagle-Tribune, based in nearby North Andover, continues to publish a daily Haverhill edition. The Eagle-Tribune also publishes a weekly paper, the Haverhill Gazette, that offers local staples such as school news, feel-good features and announcements. Add in Haverhill Community Television, with its robust lineup of local programming, and WHAV, and it would appear that more than a few flowers are sprouting in this particular desert.

The real target, then, is the unaccountability of local journalism controlled by out-of-state corporations. For years now, the Eagle-Tribune’s owner, Community Newspaper Holdings Inc. (CNHI) of Montgomery, Ala., has been decimating its properties. Neither the Eagle-Tribune nor the Gazette has an office in Haverhill anymore. Thus Haverhill Matters represents an attempt by local residents to tell their own story.

In reporting “The Wired City,” I learned that there are problems with both the for-profit and nonprofit models of independent online local journalism. The owners of the for-profits — including sites like The Batavian, CT News Junkie, and Baristanet — have to spend so much time selling advertising that it limits the amount of journalism they can afford to do.

Nonprofits such as the New Haven Independent, the main focus of my book, are more robust. But not every community is willing to support such a venture, and the Internet Revenue Service has made it increasingly difficult for such sites to attain nonprofit 501(c)(3) status. Moreover, nonprofits are prohibited from endorsing political candidates, traditionally an important activity for local news organizations.

A cooperatively owned news site — analogies include credit unions and food co-ops — would occupy a space somewhere between the two models, and would not be banned from publishing endorsements. Tom Stites is currently soliciting contributions for Haverhill Matters’ launch. Once the site is up and running, he hopes to attract 1,500 members at $36 a year, bringing in $54,000, as well as advertising and grant money. A chart Mike LaBonte displayed showed an initial $45,000 expenditure, with the site reaching break-even in two and a half years.

Unlike one-off projects such as the New Haven Independent or The Batavian, the intention behind Haverhill Matters is that it be replicable. Stites hopes the Banyan Project will be able to offer a “co-op in a box” to communities looking to start their own cooperatively owned news sites. But first he has to prove the model can work. Which is why Haverhill Matters matters.

Photo (cc) 2013 by Dan Kennedy. Some rights reserved.

Rory O’Connor reviews “The Wired City”

Veteran progressive journalist Rory O’Connor has written a favorable review of “The Wired City” for the Huffington Post. He writes:

When we as a democratic society are at what Kennedy accurately calls “a historical moment when nonprofit media — supported by foundations, donations, and, indirectly, taxpayers, since contributions are tax-deductible — are in many cases more stable than for-profit media,” his book offers a valuable window into one possible future….

Researching his book, Kennedy concludes, “left me profoundly optimistic about the future of journalism.” Reading it will do the same for you.

O’Connor, an old friend, is, among many other things, the author of “Friends, Followers, and the Future: How Social Media are Changing Politics, Threatening Big Brands, and Killing Traditional Media.” I interviewed him about  his book for (sniff) the Boston Phoenix last May.

Local journalism and the perils of retail chains

IMG_1095One of the arguments I make in “The Wired City” is that the viability of local journalism depends on the vibrancy of the local communities it serves. Among the projects I look at is The Batavian, a for-profit online-only news site that serves Genesee County in western New York, about halfway between Buffalo and Rochester.

The Batavian is a free site, though publisher Howard Owens is experimenting with a membership model to provide extra benefits to readers who choose to pay. But what really makes The Batavian work, and has allowed it to prosper despite co-existing with a local daily newspaper, is the persistence of locally owned businesses. The site is packed with ads from car dealers, florists, pizza shops, hair salons, doctors’ offices, funeral homes and much more.

So I was intrigued when Owens posted a story on Friday reporting that a Dick’s Sporting Goods may be moving in to a former Lowe’s location — and that more than $1 million in tax incentives may be used to make it happen. Dick’s, of course, is a large corporate-owned chain, and it would compete directly with locally owned sporting-goods dealers.

One of those local business people, Mike Barrett of Batavia Marine, compared such tax incentives to “using your own tax money to put yourself out of business.”

There are, of course, other considerations. WBTA Radio, which has a content-sharing arrangement with The Batavian, reports that Dick’s would bring 120 much-needed jobs to the area. The Batavian’s competition, the Daily News (which, citing an anonymous source, reports that it’s a done deal), quotes a local official named Gregory Post as saying, “Anytime we can convert empty space and bring in a retailer of that magnitude is good. This will be fantastic for our town.”

In the long run, though, the spread of corporate chains and big-box stores leads to the demise of locally owned businesses. That’s bad for communities and for the news organizations that serve them. Owens, a dedicated localist, gets it.

Photo (cc) 2009 by Dan Kennedy. Some rights reserved.

Paywalls, empowerment and “information apartheid”

John Paton

Nicole Narea and Clifton Wang of the Yale Daily News have written a preview of “The Wired City,” which is primarily about the life and times of the New Haven Independent, an innovative online-only nonprofit news site.

At a moment when online paywalls have become one of the biggest issues debated within the news business, it’s interesting that both the Independent and its newspaper competitor, the New Haven Register, have decided to keep their sites free. Here’s what Independent founder and editor Paul Bass tells the Yale Daily News:

We need to cut down on the information apartheid. If we are going to construct a paywall, we may as well not publish. We believe in community empowerment through journalism.

Of course the Register, as a for-profit entity, has a different challenge: selling enough online advertising to justify its decision to continue giving away its news. It’s a philosophy that John Paton, chief executive of the Register’s corporate parent, the Journal Register Co., describes as “Digital First.”

Journal Register is currently in bankruptcy for the second time in four years, but is expected to re-emerge later this spring. No doubt it’s going to be painful — among other things, employees have been told they will have to reapply for their jobs, and it is far from clear how many will be rehired. The Newspaper Guild-Communications Workers of America recently had some tough words for Journal Register, reports Bill Shea of Crain’s Detroit Business.

As Joshua Benton of the Nieman Journal Lab observed last September, the re-emergence from bankruptcy will also represent the best chance for Paton — one of the most closely watched executives in the newspaper business — to prove that a digital orientation can turn around a legacy newspaper chain with a lower-revenue, lower-cost approach. Interesting times ahead.

Photo found at Newspaper Death Watch.

The New Haven Register previews “The Wired City”

New Haven Register reporter Luther Turmelle has written a very kind preview of my forthcoming book, “The Wired City: Reimagining Journalism and Civic Life in the Post-Newspaper Age.” The book is largely about the New Haven Independent, a nonprofit online-only news organization founded in part to compete with the Register for city and neighborhood news.