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The FTC should give nonprofit news a closer look

You know the old saying about how we’re from the government and we’re here to help you? That’s what came to mind as I read the Federal Trade Commission’s notice for its workshop on journalism in the digital age.

The notice makes the case that “news organizations,” which it notably does not attempt to define, are suffering at the hands of aggregators and other online actors that have drained the fun and profit from news gathering. Among the solutions the FTC wants to examine are some that would seem to support nonprofits — tax treatment and greater public funding, for example.

Memo to the FTC: No thanks.

It’s not that the FTC’s proposed solution are so bad, though I don’t much like the idea of government funding non-broadcast news operations. It’s that they provide fresh fodder for misinformed critics who have come to the conclusion that nonprofits pose a threat to for-profit news sites and journalism generally.

Mention “nonprofit” to some of these folks, and you’re likely get an allergic reaction. No sooner had San Francisco investor Warren Hellman ponied up $5 million for the Bay Area News Project than somebody complained errantly that the new venture would rely on unpaid college students, forcing other media to cut staff to remain competitive. News flash: Old media aren’t competitive in the online age, and that isn’t the fault of Warren Hellman or any nonprofit. Others fretted that donated money like Hellman’s comes with agendas and strings attached. And advertising dollars don’t?

But I digress. Nonprofits offer a viable solution to the decline of socially responsible journalism. By design, they put mission ahead of profit. And as a result, they will live or die based on their commitment to transparency. When the government gets involved, it introduces the appearance of special favors and the potential for political interference. That’s the death of transparency.

To be clear, I don’t object to the notion of government oversight. A little can go a long way — witness the FTC’s late-1990s antitrust investigation of Intel Corp. At the time, Intel dominated the computer chip market and, along with Microsoft Corp., seemed capable of devouring anything in its path, much as Google appears today. But just before trial began in 1999, Intel signed a settlement with the FTC in which it admitted no guilt and essentially agreed to be nicer to the smaller kids in the technology sandbox.

Based on this experience, we can assume that what the FTC workshop really hopes to accomplish is to once again nudge the bullies into being nicer. I would submit that there are better ways to accomplish this goal. One might be to bring in witnesses who can explain how the nonprofit model works and how it complements the work of for-profits in journalism and other sectors.

My nomination would go to Duke’s Jay Hamilton, author of All the News That’s Fit to Sell, which is cited in the FTC notice. In the book, Hamilton makes the case that journalism is becoming a public good. He writes:

The point here is that since individuals do not calculate the full benefit to society of their learning about politics, they will express less than optimal levels of interest in public affairs coverage and generate less than desirable demands for news about government.

I do agree with the FTC that the stakes are high because unlike the great oil and steel trusts of old, the big powerhouses of the Internet are in the business of ideas. As Bill Kovacic, then a law professor at George Washington University and now an FTC commissioner, told me during the Intel case: “I think the impact is so important because its impact on information services affects everything we do.”

The FTC workshop will be held in Washington Dec. 1-2.

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  • Walter Abbott

    Not to worry – the FTC need not get involved at all. Soon, all those frustrated letter-to-the-editor writers you newsies told to get lost will be blogging on their own. Attending city council and county commission meetings and uncovering the graft and corruption you all missed because the Mayor bought you lunch every once in a while.

  • Howard Weaver

    I guess Jim Barnett must trust rich people a lot more than I do.

    Don’t get me wrong: some of my best friends, yada-yada, and I certainly wouldn’t mind if my sister married one. (If I had a sister). But why on earth does he think putting media decisions in the hands of the richest few Americans is the best way to go?

    I hope Jim and everybody else understands my own preference: journalism needs to be rooted in the community, and in a capitalist society, there’s no better way than to make things work in the marketplace. I’ve spent more than 40 years advancing that idea, and I’m trying to help do so once again.

    I’m not against non-profit news orgs, either. Hell, let a thousand flowers bloom. What I object to is the specious reasoning here that says “Whoa, the government has no role in this. Leave it to the philanthropists and other independently rich people to decide.”

    Come on. Government has played a huge role in shaping the press industry at least since Ben Franklin’s introduction of a postal subsidy for newspapers. Similarly, the government is the chief determinant of how non-profits operate, chiefly by deciding what qualifies for tax breaks. (You know anybody giving away millions that’s not tax deductible?) I’ve written about that a couple of times in the last few month, and said this: “… government inevitably puts its thumb on the scale in all kinds of situations. It’s naive or disingenuous to pretend otherwise.”

    The naive part of Barnett’s post comes here: “By design, [non-profits] put mission ahead of profit. And as a result, they will live or die based on their commitment to transparency.” You don’t have to look very far into stories about the United Way or American Red Cross to start laughing about that observation. Some do, some don’t, Jim — just like come for-profit corporations seek admirable goals and some don’t, just like some government subsidies serve the public good and some don’t.

    The disingenuous part comes in the same paragraph: “When the government gets involved, it introduces the appearance of special favors and the potential for political interference. That’s the death of transparency.” The straw man here (or is that red herring? I can never remember) comes from arguing that the government better not get involved.

    The government is involved, neck deep. Tax policy and regulatory barriers and philanthropic rules already dictate the economic landscape. We can change them or tweak them or reorient them (and we should) but they will always be there.

    While we’re at it, let me say this: for all its flaws, government is hugely more open and transparent than philanthropic decision-making. Nobody lets you hear all the debates at the Ford Foundation or the Bill and Melinda Gates Foundation.

    People can exert “political interference” on government policy? Oh, my. I thought that’s what we were supposed to do, to interfere in favor of changes that meet public needs. No need to interfere in philanthropies; their bias comes built in. Nothing wrong with that, either; it’s why they exist. But stop with the purity arguments, please.

    Let me say this once more in closing: I like non-profits, I think they play a constructive role in society, and if they can help the news business navigate the turbulence of this phase transition, wahoo.

  • Jim Barnett


    Thanks for your comment. I especially appreciate the wahoo sentiment. But I’d like to offer a couple of perspectives I think you’ve overlooked.

    Have you ever known anybody who made a contribution to a local public radio station? Did they do it because they were rich? Probably not. More likely it was because it made them feel more connected to their community. I take greater pride in making my double-digit annual gift to the local station than I do in paying my newspaper subscription – and I work for the paper part-time.

    So while there are some Warren Hellmans out there, nonprofit managers know they need small contributors not only for revenue, but for credibility in the long run. That’s why ProPublica is spending a big chunk of its $1 million Knight grant figuring out how to build a grassroots base.

    And while we’re on the topic of rich people, here’s something else to consider: Have you ever in your life spent money on a newspaper? And if you have, did you believe any of what you read in it? If you answer “yes” to those questions, then you’ve trusted a rich person to gather and deliver your news. For better or worse, most newspapers still are controlled by rich people. So the (implied) premise of your argument, that rich people shouldn’t be trusted, doesn’t stand to logic. Is it also disingenuous? I’m giving you the benefit of the doubt on that count.

    Your point about government being involved neck-deep is dead on. But I’m afraid you missed mine – that government should not make special considerations for “news organizations” that do not apply to other businesses, whether for-profit or nonprofit. I see now that I should have made that point more directly, and will be sure to next time.

    Thanks for reading.


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