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Sept. 12, 2023, 11:27 a.m.
Business Models

The Colorado Sun, a pioneering for-profit/nonprofit hybrid, moves toward a fully nonprofit model

“Whether I agree with it or not, whether I even like it or not, the reality is that many individuals, many institutions and philanthropic groups, have concluded that journalism should be nonprofit.”

The Colorado Sun is going nonprofit. The five-year-old digital news organization, launched by journalists who’d left The Denver Post following round after round of cuts by the paper’s hedge-fund owner, Alden Global Capital, had operated as a rare for-profit exception in the universe of local news startups. Now the Sun is joining its tax-exempt peers.

“Whether I agree with it or not, whether I even like it or not, the reality is that many individuals, many institutions and philanthropic groups, have concluded that journalism should be nonprofit,” editor Larry Ryckman said in a phone interview on Monday. “I have my own thoughts on that, but that is reality.”

The move was not entirely unexpected. The Sun is one of the projects highlighted in a forthcoming book by Ellen Clegg and me, What Works in Community News: Media Startups, News Deserts, and the Future of the Fourth Estate, which will be published by Beacon Press in early 2024. When I interviewed Ryckman in the fall of 2021, he told me that a shift to nonprofit might be in the Sun’s future. The Sun has been operating as a public benefit corporation, or PBC, a legal designation covering for-profit organizations that serve society in some way. Among other things, a PBC is under no fiduciary obligation to enrich its owners and may instead plow revenues back into the enterprise.

A PBC, though, is a complicated structure, and Ryckman said Monday that moving to a nonprofit would make for a simpler framework that’s easier to explain to funders. Like a number of other for-profit news organizations, the Sun works with a nonprofit — the Colorado Freedom of Information Coalition in the Sun’s case — so that donors may make tax-exempt contributions to support certain types of public-interest reporting. The coalition takes a cut. Once governmental authorities have approved the Sun’s nonprofit status, though, donors will be able to skip the middleman.

“It’s an easier, cleaner story,” Ryckman said, explaining that the hybrid model “was just one step maybe too complicated for some people.”

Nonprofit status will also solve a problem Ryckman was wrestling with two years ago: what to do about a news organization that had nine co-owners — the 10 former Denver Post reporters and editors who started the project minus one who’d left — and a burgeoning number of staff members with no ownership stake. The Sun now has 27 employees, Ryckman said, and the co-founders will no longer have to figure out how to manage what had morphed into a two-tiered system.

Ryckman is excited about a twist on the nonprofit model that the Sun hopes to embrace — a governance structure under which the employees themselves will have a say and a vote in how the organization is run. Over the years several local news startups have attempted cooperative ownership, most notably the Banyan Project in Haverhill, Mass., and The Devil Strip in Akron, Ohio, only to fall short for a variety of reasons. The Colorado Sun will not be a co-op, but it will have some similarities. Ryckman offered the example of employees being able to vote for a five-member board comprising three employees and two members of the community. “That has me fired up and excited,” he said. “I think this is going to be an innovative model. You and I would agree that our industry desperately needs new thinking and new models.”

This isn’t the first time that the Sun has taken some innovative steps on the business side. The Sun was one of a number of media outlets that partnered with the Civil Foundation, which received most of its funding from ConsenSys, a for-profit blockchain company. But though the Sun received some crucial startup money, it had to pivot after Civil’s attempt to raise funds through the sale of tokens in the fall of 2018 fell short.

More recently, in the spring of 2021, the Sun was brought in as co-owner of Colorado Community Media, a chain of 24 weekly and monthly papers in the Denver suburbs whose owners were retiring. The other co-owner is the nonprofit National Trust for Local News, which led the purchase. The chain was reorganized as a public benefit corporation, but Ryckman said nonprofit status might make sense for those newspapers as well. “My guess is that that’s the path that we’ll ultimately take,” said Ryckman, who’s a board member of the Colorado News Conservancy, the group that was set up to manage the papers.

The Sun’s shift to nonprofit status means that there will be one fewer news organization that operates under the hybrid for-profit/nonprofit model. The largest is The Philadelphia Inquirer, a public benefit corporation owned by the nonprofit Lenfest Institute, named after the late billionaire H.F. “Gerry” Lenfest, who briefly owned the paper and gave it away. Donations to Lenfest support reporting projects at the Inquirer as well as other news organizations.

Another example of the hybrid model is The Provincetown Independent, a print-and-digital operation that is organized as a PBC. The Independent has its own nonprofit partner, the Local Journalism Project, which accepts tax-deductible donations to educate young journalists and to support reporting on issues such as housing, the environment and LGBTQ concerns.

Ed Miller, the editor and co-founder of the Independent, told me that moving from the for-profit PBC model to nonprofit status might make sense for The Colorado Sun because the Sun is digital-only, does not place its journalism behind a paywall and offers statewide coverage. The Independent, by contrast, charges for subscriptions both in print and online, earns much of its revenue from print advertising, and is tightly focused on four towns at the tip of Cape Cod.

“I’m all for philanthropy as a way to strengthen local journalism,” Miller said in an email. “But I would just say this: philanthropy comes largely from people with outsize wealth and power, and a newspaper that does its job properly should be making people with that kind of wealth and power uncomfortable. That’s a wrinkle in the nonprofit news model that I don’t think anyone has really grappled with yet.” (Disclosure: Miller recently asked me to serve on the board of the Local Journalism Project, an invitation I accepted.)

Up to this point, Ryckman said, The Colorado Sun has not been especially reliant on philanthropy. About 80% of the Sun’s revenue comes from voluntary memberships or from earned income — mainly advertising and events. By contrast, many nonprofits get much of their money in the form of large grants and gifts. Even The Texas Tribune, a widely admired nonprofit that earns a considerable amount from its events business, has struggled recently, announcing the first layoffs in its history.

The Sun, though, plans to stick with what Ryckman calls its “fundamental business model,” adding that a nonprofit needs to be run with an eye on the bottom line.

“If we don’t make money and thrive as a business, the journalism doesn’t happen. It’s not enough just to do good journalism, sadly,” Ryckman said. “Even as a nonprofit, we have to make a profit.”

Dan Kennedy  is a professor of journalism at Northeastern University and the author of the blog Media Nation. Read his and Ellen Clegg’s updates on developments in community journalism and listen to their podcast at “What Works: The Future of Local News.”

Photo by Hans Leatherman used under a Creative Commons license.

POSTED     Sept. 12, 2023, 11:27 a.m.
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