Twitter  There's a new daily newspaper in L.A. Here's what you should know about the Los Angeles Register strategy nie.mn/1jLLDsw  
Nieman Journalism Lab
Pushing to the future of journalism — A project of the Nieman Foundation at Harvard

Tom Stites: Might the new web journalism model be neither for-profit nor nonprofit?

There’s a third option, the veteran editor argues: a co-op model that lets communities advance their own interests. Part 3 of 3.
Email

Editor’s note: Tom Stites had a long career in newspapers, editing Pulitzer-winning projects and working at top newspapers like The New York Times, the Chicago Tribune, and the Philadelphia Inquirer. In recent years, he’s shifted his emphasis to trying to figure out a new business model for journalism through the Banyan Project. Here, Tom outlines where he believes web journalism stands today and one model he thinks might work; here’s part one, here’s part two, and this is part three.

Maybe we’ve been looking for models in all the wrong places. To find the elusive secret to making web journalism sustainable in community after community, maybe we need to take a peek behind the curtain into the secret sector of the economy.

For years now, people have been trying to devise business models for online community journalism that are both sustainable and replicable, but the usual sectors aren’t delivering: Only a few isolated for-profit sites are generating enough advertising revenue to support themselves while producing the original reporting that’s so crucial to civic health and democracy; on the nonprofit side, there are nowhere near enough philanthropic dollars to support enough sites, at least not for long (see part one of this series). And the idea of public-sector news publishing gets tangled up in the First Amendment.

It’s common to think these three sectors are all there are, but there’s a fourth — the cooperative sector — which future-of-journalism efforts are just starting to explore. U.S. co-ops take myriad forms and represent $3 trillion in assets, $500 billion in revenue, and $25 billion in wages; they include 7,794 credit unions and 864 utility co-ops that distribute electricity over 75 percent of the nation’s land mass. Few people know that co-ops are such a significant and healthy slice of our otherwise ailing economy — the U.S. government doesn’t keep statistics on them and, because co-ops are structured to build community wealth rather than investor wealth, business journalism largely ignores them.

What’s magic about co-ops is that for a long list of industries they offer stable and replicable business models that work in economic settings too arid to support for-profit models — the kind of situation many communities are experiencing with journalism after five grim years of plummeting newspaper advertising revenue that’s led to drastic cutbacks in original reporting (see part two of this series). Now that the news ecology has turned from verdant to desert-like, particularly in less-than-affluent communities where the majority of the U.S. public lives, might co-ops grow the hardy cactuses that journalism needs to thrive again?

Judging by experience in other countries, the answer is yes. Long-established reader-owned co-ops publish newspapers in Italy, Germany, England and Mexico. A worker-owned cooperative is creating an ambitious city-by-city set of news sites across Canada that combine to publish a national weekly newspaper. Also in Canada, listener-owned co-ops operate radio stations.

But to date there are no such co-op journalism efforts in the United States.((Despite their names, the Chicago News Cooperative and KOOP radio in Austin, Texas, are standard nonprofits. The Associated Press is a cooperative, but a producer co-op owned by the news organizations that it provides with state, national, and foreign news.))

Disclosure: The Banyan Project, which I lead, is building a reader-owned co-op model that’s designed to scale massively, the way depositor-owned credit unions and shopper-owned food co-ops have scaled community by community, coast to coast. Banyan has chosen Haverhill, Massachusetts — a middle-income city of 60,879 whose daily newspaper has devolved into an under-resourced weekly and whose radio station has shut down — as its pilot community. As a news desert, Haverhill has very little focused coverage of issues facing the community or of life-issue reporting that its people can use to make their best life and citizenship decisions. Presuming that the pilot thrives, Banyan envisions scaling with each added community site run by its own democratically run co-op with hundreds of local member/owners; a federation would provide the co-ops with turnkey licenses for sophisticated software and other centralized services.

If other co-op approaches are being planned in the U.S., I’ve not discovered them — but there are many other possible approaches, such as the worker-owned co-op being developed in Canada. I’m cheering for lots of social entrepreneurs to jump in and cultivate their own ideas. The Citizen Media Law Project, part of the Berkman Center for Internet & Society at Harvard, wants to help all comers — it is researching the legal issues that journalism cooperatives will face and will post its findings on its online legal guide.

Recent events are making co-ops less of a secret: In 2009 the University of Wisconsin Center for Cooperatives published a comprehensive study of co-ops’ role in the U.S. economy; more than 700,000 people moved their accounts from major banks to credit unions in response to the Move Your Money campaign inspired by the banks’ just-rescinded fees for use of debit cards, and the United Nations has proclaimed 2012 the International Year of the Cooperative. Co-ops are more common in Europe, where the form originated more than a century and a half ago, and in less developed countries where economic deserts are more common; worldwide, more than 1 billion people are co-op members.

Cooperative firms are fundamentally different from other business organizations. They are neither investor-owned businesses nor nonprofit organizations, although the IRS grants tax-exemptions for some forms. Community-Wealth.org, a project of the Democracy Collaborative, based at the University of Maryland, offers this definition: “A cooperative can be any business that is governed on the principle of one member, one vote.”

So the cooperative view of capital differs quite a lot from Wall Street’s. For example, the International Cooperative Alliance has established seven principles that include concern for community; many co-ops pursue the triple bottom line of financial soundness plus positive social and environmental impact. In this era of rampant deceptive business practices, says Tom Decker of the National Cooperative Business Association in Washington, a significant source of co-ops’ strength is the trustworthiness inherent in their democratic and accountable structure.

This is also an era of rampant mistrust of journalism, so co-op news sites’ trustworthiness has the potential to add value to what they publish. Further, the co-op form allows, or rather demands, that news coverage decisions arise from the what a community’s people need rather than from today’s dominant approaches: finding ways to sustain legacy news institutions or designing Web models to conform to various ideas about what technology seems to demand. The web is inherently collaborative — just as co-ops are — and at the local level this creates the potential for civic synergy that could add still more value to co-op community journalism.

Cooperatives arise as a bottom-up response to market failure: It’s a lot of work to start a co-op, so if for-profit businesses were providing needed goods and services at fair prices, why would people go to all the bother? Without economic deserts, there would be no co-ops, but over time there has been no shortage of deserts and there is no shortage now.

The Wisconsin study reports that the great boom in credit unions came, no surprise, in the Depression, after widespread bank failures created a credit desert. That’s also when electric utility co-ops came on the scene, with a boost from the Rural Electrification Administration, a New Deal effort. In the 1930s, cities were 90 percent wired but 90 percent of rural homes were not — investor-owned utilities shunned the high cost of wiring rural areas. Co-ops filled the void.

In today’s struggling economy, Decker says, co-ops are on the rise. The scarcity of reliable child care and home health care are arid zones that are inspiring co-ops to form. “Worker-owned home care cooperatives,” the Wisconsin report says, “are emerging as a way to both address high staff turnover and to improve the quality of home care services provided to the elderly and disabled.” Decker reports a rise in worker co-ops in other fields as people come together to invent livelihoods for themselves in a time when jobs are so scarce. He also estimates that as many as 300 food coops will form in 2011, many to meet demand for a coherent supply of local food that supermarkets don’t supply. “Local,” he says, “is the key.”

Now, news deserts are proliferating and the need is great. It may be that co-ops will be the only new journalism business model that can take root in current market conditions. May many species of news cactuses bloom.

Tom Stites, president and founder of the Banyan Project, which is building a model for web journalism as a reader-owned cooperative, was a 2010-2011 fellow at the Berkman Center for Internet and Society at Harvard.

Photo by Andrea Marutti used under a Creative Commons license.

                                   
What to read next
los-angeles-register
Ken Doctor    April 16, 2014
The first edition of the Orange County Register’s expansion into the Times’ turf is hot off the presses. Is this about selling papers or positioning for a further shakeout of the newspaper market?
  • Drue Hontz

    The cooperative model definitely adds a new dimension to the mix, and may be a key ingredient to helping the existing models.  I would add that a hybrid model of for-profits/and/or non-profits working together with a loose co-op model connecting business as a normal co-op connects people, as another option.  Let’s call it the 4 1/2 sector option.

    The Banyan Project sounds very interesting and promising.  I look forward to following its progress and learning more.

  • Kathleen Hurley

    “ah-ha!”  having a moment here.

  • http://twitter.com/CaryCitizen CaryCitizen

    Great information, Tom! Thanks for sharing.

    The non-profit model is definitely losing some steam in hyperlocal journalism. But quite a few for-profits are at the break even point or beyond. 

    Here’s a Delicious stack of hyperlocals we like from across the U.S.  - 
    http://www.delicious.com/stacks/view/STuLWx

    —————————————————————
    CaryCitizen is a 2011 Knight Foundation New Media Fellow

  • http://www.intomobile.com/ Stefan Constantinescu

    I’m slightly confused here, how is the co-op model different than saying you have a subscription model that’s heavily integrated with your community?

  • http://twitter.com/tomstites Tom Stites

    Excellent question.  Co-ops are by their nature heavily integrated with their communities, and, as I’m sure you know, subscription models don’t work.

    The model I’m on the way to piloting, the Banyan Project, will not sell subscriptions but instead monetize the benefits of ownership in a community institution — which is to say the heavy community integration you ask about.

    Banyan’s benefits are both tangible and intangible, ranging from civic potency and a sense of control to free classified ads and discounts with local merchants. Those likeliest to join are people with civic interest and people who  find themselves heavy users of the Banyan site, which will not only deliver the news but also offer civic networking space and easy-to-use digital tools so readers can work together in pursuit of constructive community change.  Being a member will require continuing dues-like payments, probably at the rate of a dime a day, which is $36 a year.  It is this stream of revenue, added to streams from advertising, crowdfunding, and donations above the annual $36, that promise to make Banyan sustainable.

    Co-ops are businesses owned by their users, or a subset of users, on a one-member/one-vote basis.  Instead of investors, co-ops are owned by a large number of people who band together to meet their own needs and the needs of their community, each with a small ownership stake.  They vote on the directors, who hire the editor, and they get modest checks when there are profits to distribute.  Co-ops most akin to Banyan are food co-ops and credit unions, which also are community institutions owned by end-users. 
    To learn more, see http://banyanproject.com/index.php?title=Co-op_Ownership.  Note: This is a working document for organizing my thoughts and those of the Banyan advisory board, not a public presentation.  For an executive summart, see http://banyanproject.com/.

  • EJohnson

    Interesting idea, Tom. As a former hyperlocal blogger who is preparing to re-enter the fray after a stint with Patch, I would suggest there are more news deserts than meets the eye. My town has a GateHouse weekly, TribLocal and Patch, but I’d submit it, too, is a desert because so little of substance is covered. To really do the job right, I believe we need to reconsider the definition of “community news”–a mission I’ll be returning to in 2012.

  • http://twitter.com/tomstites Tom Stites

    Good for you.  Best of luck.

  • http://twitter.com/RodneyEqEx Rodney North

    As a long-time member of a worker co-operative (Equal Exchange*) and a news junkie who worries about the news deserts around us I’m very excited about your project and will be pulling for you.
    *We’re just about 60 miles south of you by the way.

  • Karissa_gall

    Hi Tom,

    Will the Banyan Project depend on member contributions for content?  If not, how will Banyan structure and fund staff?

  • http://twitter.com/tomstites Tom Stites

    My description of Haverhill, Massachusetts, omitted mention of a source of news about the city: The Eagle-Tribune, a daily newspaper that circulates in Haverhill and 57 other communities in Northern Massachusetts and Southern New Hampshire.
    The paper’s central office and printing plant are in North Andover, Massachusetts. Haverhill is one of the largest communities in the region The Eagle-Tribune serves.  Its website shows that on a typical day it publishes three to five Haverhill news stories, sometime more, sometimes less.My essay describes Haverhill as a news desert. I base this on the the yearning that an array of people in the community have expressed to me for a much greater flow of information that they can use to make their best life and citizenship decisions.  All sources available to them combined, they tell me, falls well short of their needs.

    I thank Al Getler, The Eagle-Tribune’s publisher for pointing out this omission. 

  • http://twitter.com/tomstites Tom Stites

    Perhaps co-ops are becoming a less secret sector, thanks to this compelling New York Times op-op piece this morning, which I heartily commend to you:  http://www.nytimes.com/2011/12/15/opinion/worker-owners-of-america-unite.html?_r=1&hpw.

    The author, the political economist Gar Alperovitz, is co-founder of the Democracy Collaborative, a national organization of academics that “focuses on the role community economic stability plays as an essential foundation of civic practice and democratic life,” and of its partner organization, Community-Wealth.org.

    Alperovitz, a member of the Banyan Project advisory board since Day One, first suggested that I explore co-op ownership as the basis for a new business model for journalism. My gratitude to him is boundless.

  • Anonymous

    Coming from the cooperative side with an ignorance of local news(paper) revenue realities, I nonetheless have considered cooperatives to be a perfect model for the satisfaction of communities’ news needs.

    However I’m curious about how doomed the subscription/ad sales hybrid model really is. Or rather, how doomed it would be if all of the subscription holders and ad placers were also member-owners with a greater degree of control and influence than patrons have ever had.

    Granted there is the issue of greater capital needed to issue a printed paper v. something online; however my intuition is, given the trustworthiness, control, loyalty, and member-owner engagement that cooperatives foster, that a faltering for-profit community printed newspaper could be saved with higher subscription levels than expected by converting to a cooperative printed newspaper.

    Please let me know what your research, experience, and intuition tells you relative to these ideas.

  • http://banyanproject.com/ Tom Stites

    Of the four reader-owned cooperative newspapers I know about — in Italy, Germany, England and Mexico — the youngest is three decades old.  This strikes me as grounding for the model you envision.  The links in the fifth paragraph of this essay tell more.

    You correctly identify large capital need as an obstacle to launching a co-op newspaper; another would be identifying and reaching the community that would value such a newspaper enough to pay membership fees.

    I’m less than confident in my understanding of the reader-owned papers that I cited, but readers of the national titles in Italy, Germany and Mexico have told me that all three have left-of-center world views that the mainstream press in those countries serves poorly.  This appears to have been the “desert” that provided the impetus for founding the papers.

    Also, the United states is larger and more complex than the  countries where reader-owned papers have taken root.  This could add to the challenge on these shores.  Further, in the 21st century I can’t imagine any more daily print papers starting up under any circumstances.  Weeklies, perhaps.

    My sense is that starting any news co-op anywhere will be much easier online, no matter whether the community serves is local and geographical or national and political.  Once my online Banyan Project is sustaining, I hope to test a weekly print version in at least one Banyan community; as I envision these, all reporting will first appear on the Web, then in print.

    I hope this helps. 

  • postgutenberg

    I have included a link to this most encouraging post with other reasons for optimism about media reform … Apparently, many of have independently reached the same conclusion, which is surely a sign of its sea-worthiness …even if a keiretsu-cooperative is not quite the straightforward co-op Banyan is, and serving a different need…It’s a sort of halfway house for powerful old media ‘brands’ finally coming to terms with the true implications of the net revolution. Please stop in here: http://post-gutenberg.com/2011/12/30/will-2012-be-the-year-of-a-great-leap-forward-into-medias-future-even-at-the-new-york-times/ … I hope that someone involved with Banyan is keeping a detailed record of the experience of setting it up.

  • JohnParman

    I study social enterprise models for media ownership in the UK and USA. Coops are a for-profit model and Mr. Stites gets his facts wrong when he says coops are not investor-owned. In fact, most founding members of a coop are investors by way of an equity obligation (start-up costs) and could expect an explicit return on investment. Coop members could expect a buy out in exchange for leaving in the case they are vested and dismissed. Cooperative members who bring in assets may seek a balance of power, limiting growth. Considering that an equity obligation is usually tied to what share of the cooperative’s total business is contributed by each member makes business planning difficult.

    I urge my American colleagues to look seriously at the Community Interest Company (CIC) model created in 2006 in the UK. It is the basis for a large number of community radio stations in the UK and for a larger number of companies comprising social enterprise in England, Wales and Scotland. The CIC model has two bases: limited by guarantee and limited by shares. There is no limit to the amount a person can invest in the business, but there is a dividend cap five points above the national interest rate, currently 5.5%. In the event of a dissolution, all assets after those owed to creditors are transferred to another CIC doing similar work in the same region or community.

    An example of how CICs are already being used is by entrepreneurs in community radio. Owners I surveyed for my thesis said overall their involvement in local radio was about replacing services lost when other broadcasters (BBC) left the market and creating avenues for regeneration. Keep the latter in mind, the prospect more and more of newspapers becoming “Plains Dealers”, advocating for community regeneration and selling education, consulting and syndicate like NYTco and WaPo.

    Mr. Stites could also investigate the role of micro-enterprises, small businesses with one or two employees. These companies are fairly often ignored because they grow through partnership, not employment growth.

    I took time from journalism in 2008 in order to get a grasp on what I felt media was missing the most: fund raising grant writing producers. I have gone on to teach, research and build charities & CICs but feel like I cannot find a place for my skill set in the media profession. What advice would you have for me?

  • http://twitter.com/tomstites Tom Stites

    I thank John Parman for his insights, and for alerting those of us in the U.S. about CICs. So far as I know there is no equivalent in the U.S., with the L3C perhaps coming closest.

    I think John and I may have different definitions of “investor-owned.” Let me explain mine: New co-ops need to be capitalized as surely as new standard corporations do. Some approaches to capitalizing co-ops can, as John says, end up being counterproductive. We should heed his warnings.

    But all co-ops are owned by their members and governed on the principle of one-member/one-vote. This differs from the one-share/one-vote governance of standard C corporations, S corporations, LLCs and related forms. This zones out angel investors and venture capitalists shooting for vast returns; co-op founders don’t get rich. Further, the mission of co-ops is quality service to members at low prices, so profits are rarely a high priority of consumer co-ops. In the U.S., co-ops are neither nonprofits nor standard investor-owned corporations; the IRS Code has a separate section for co-ops, and some are tax exempt as if they were nonprofit.