Insomniactive

Alan Mutter is one of the keenest observers of today’s topsy turvy media landscape. I am therefore pleased that he payed me a compliment on his highly trafficked Newsosaur blog today:

An amazing number of smart and sophisticated people continue to harbor the fantasy that philanthropic contributions can take over funding journalism from the media companies that traditionally have supported the press.

At least I think it was a compliment. You see, as a co-founder of The Texas Tribune, I am one of those fantasy-harboring loonies who believes that non-profit journalism is important. But, now that Alan—who I consider a friend—also considers us smart and sophisticated, I suppose we should all be able to call the whole thing off and get back to our day jobs.

Or not. Alan gets so many things right that I can’t resist arguing the other side. I think he is gloriously, deliciously, spectacularly wrong here. Alan’s logic runs aground on the shoals of three m’s: math, model, and motive.

Math

Alan asserts that replacing the $4.4 billion spent in American newsrooms will require an $88 billion endowment, which he points out is a gargantuan proportion of the $300 billion or so of annual charitable giving in the U.S. There are at least three problems with this statement. The first is that it confuses a balance sheet concept (endowment) with an income statement concept (annual giving). In the parlance of Econ 101, Alan has confused a stock variable with a flow variable. Fox news anchors are known to resort to this trick when they want to make our government seem more profligate than it is (no easy task, that). It’s a little like confusing the federal debt with the deficit. If you take a big number and multiply it by 20: shazam! It’s a bigger number! An endowment is built up over a number of years, and so comparing it to annual giving is mixing apples and pomegranates. And besides, none of the non-profits I know is considering raising an endowment any time soon.

That leads to problem number two. A tiny fraction of non-profits of any type receive meaningful support from an endowment. And other than foundations, none of them lives entirely on an endowment’s investment income. Consider any non-profit in your community: it likely operates primarily on a combination of earned income and annual giving. If it’s lucky, it has an operating reserve to shield it from rainy days and enable it to take care of special opportunities. It it’s really, really lucky, it might receive 10% of its operating budget from the income off its endowment.

Third, none of us sophisticated, non-profit dingleberries is proposing that our efforts will replace commercial news. We do assert that what I call “Capital J” journalism is in trouble, because it’s not very profitable. Turns out that it never was. But now that, as Google’s Marissa Mayer asserts, every article on a paper’s web site needs to be a standalone profit center, the jig is really up, and we’re trying to figure out how to help.

You’ll never confuse what you read on Voice of San Diego or Pro Publica or The Trib with content you can get on TMZ, TV Guide, Epicurious, or ESPN. We in Fantasy Land are trying instead to help shore up what Alex Jones calls “the iron core” of journalism in his book, Losing the News. Jones’s analysis reveals that this core of serious content constitutes about 15% of newspaper content, so let’s say it accounts for 15% of newsroom costs, as well. If we had the unhappy task of replacing all serious newspaper journalism with what non-profit skeptics refer to derisively as “handouts,” we’d be staring at a $660 million annual problem. No doubt that’s real money, but consider this: according to Alan’s numbers, it’s about what people give to environmental causes in a year. In handouts, that is.

Model

But the $660 million number still overstates the size of the issue. No two non-profit journalism organizations have exactly the same business model, but almost all of us are doing our best to practice what I call “revenue promiscuity.” At The Tribune, in addition to philanthropic support from wealthy individuals and foundations, we’re also chasing corporate sponsors for our events and for our web site. We’ll bring in about 15% of our expenses in subscriptions to Texas Weekly, a newsletter business we own and are working to expand into a string of highly valued niche titles. Our intermediate-term goal is a $3 million annual budget, split roughly equally between membership, corporate support, and specialty pubs. We’re a long way from that, but are making progress—and note that we’re not assuming any foundation support at all.

If organizations like ours can find non-handout sources for two thirds of our budget, Alan’s $88 billion problem becomes more like a couple hundred million. That’s considerably less than ballet companies raise in the U.S. every year. But the real point is this: not only will philanthropy alone not save journalism, it can’t likely support even the majority of our modest efforts. We need to run our businesses like businesses, even if our goal is public service rather than profitability.

Motive

Alan closes his post with these valedictory remarks to us fruit loops:

While there is a pressing need to save the press, a major shift in the philanthropic paradigm seems unlikely, especially in an era in which most folks – with the notable exception of a fortunate few – seem to be tightening their belts.

So, let’s stop dreaming about a visit from the Non-Profit News Bunny and get serious about discovering some realistic possibilities.

It’s a common refrain. I hear it from my friend Jeff Jarvis all the time (I have this mental image of Jeff in the classroom of his “new models for news” course, crying “THINK HARDER, DAMMIT!” to a group of j-school students with their eyes tightly clinched). But like lots of common refrains, I’m tired of it. Here’s why.

First of all, it’s not an either/or proposition. Fantasy Land could easily quadruple in population without meaningfully diluting the talent pool trying to figure out ways to make money in the news business. And although I admire his since of urgency, I should remind Alan to look at one of his own slides—the one that shows newspapers losing media spend share every single solitary year since 1959. Although the combination of the Great Recession and the digital revolution has caused the line on Alan’s chart to auger in recently, this is not exactly a new problem.

Second, the “think harder, dammit” refrain assumes that market solutions are inherently superior to non-market solutions in every situation, even though the existence of public goods (think clean air, national defense) is discussed in the early going of a basic economics course. My mentor in business was fond of saying, “get the big picture right.” It seems to me that the big picture at hand is that when atoms become bits, content consumers win and content producers get hammered into cost-cutting smithereens. If some of that content happens to be vital to the functioning of our society, I simply think it’s prudent to look around for other means of funding it.

Finally, Alan’s admonition for all of us wingnuts to get back to work reflects a view of capitalism which is totally opposite my experience as an investor. I can say with great confidence that markets are more efficient than not, that there is more than enough investment capital looking for profitable places to go, and that nobody had to yell “think harder” at Larry Page and Sergei Brin. I can say with even greater confidence that the world is a better place because investment capital tends to flow where it garners the highest risk-adjusted returns. This just in: the business of serious journalism news ain’t in the top 100, probably never was, and certainly won’t be again. Commercial efforts will persist because they just will. But expecting investors to continue to fund for-profit, Capital J journalism just ‘cuz: doesn’t that sound a lot like charity? And for the love of Zeus, please don’t talk to me about “patient capital” and “lower return expectations for noble causes.” It’s all just another form of philanthropy, but with the added confusion about whether service to God or Mammon is the order of any given day.

I’m about two years into my foray into non-profit journalism, and I’m more firm than ever in this conviction: public media, privately funded, will be a bigger part of the media landscape in ten years than it is today. This will require the inhabitants of Fantasy Land to do a good deal of consciousness raising in the general public for membership support, and among foundations and major donors to give us the runway we need to establish sustainable business models.

We can use all the help we can get. Alan, we’ll leave the light on for you. And let me know if you see that Bunny!

The best piece I’ve seen on the dismal state of hyper-local, via my friend and Community Impact Newspapers honcho John Garrett. A sample:

Such are the unholy collisions between “local news” and computerized news gathering. The problem for the new localists is that local news doesn’t obviously “scale,” a term of art that folks who put together business plans throw around to refer to businesses that get a lot cheaper to run as they grow. To cover more ground you generally need more bodies, a real buzzkill in a news industry that is desperately trying to stay afloat by doing … well, less with less. So what we see in the local news efforts is something like the creepy apocalypse of a 1950s science fiction story, in which, with the people gone, computers take over the few tasks that remain to be done in the barren landscape, hoping by algorithms to take the bits of local information that are out there and put them together into sites that can be built on the cheap.

Also, my new instant favorite compound adjective: “sub-trivial.”

Well, that didn’t last long. Destination web sites taking it right in the kisser. These pictures say several thousand words.

Whodda thunk that one of President Obama’s great contributions during his first year would be to tamp down the spikes of Presidential rhetoric. Certainly not I.

Sayeth Hendrick Hertzberg in The New Yorker, about the President’s speech at West Point last week:

His grimly businesslike speech was a gritty, almost masochistic exercise in the taking of responsibility. What he had to say did not please everyone; indeed, it pleased no one. Given the situation bequeathed to him and to the nation, pleasure was not an option. His speech was a sombre appeal to reason, not a rousing call to arms. If his argument was less than fully persuasive, that was in the nature of the choices before him. There is no such thing as an airtight argument for a bad choice—not if the argument is made with a modicum of honesty.

Someone else commented this week that this plank of the Obama Doctrine constitutes something akin to widening of means and the narrowing of ends. My apologies to the author, but it’s a good thought.

Dear Mayor White-

I have observed with real admiration your Senate campaign team’s facility with all things web. It’s really quite impressive, as is the breadth of your early fundraising numbers. Particularly, 1980 new contributors in Q3 bespeaks a real breadth of early support. I commend you.

But now, feedback you didn’t ask for. It seems like that to have a chance against Gov. Perry, you are going to have to play up the fact that you are serious, competent guy. But all the faux, email-y, text-y, hype-y suspense around “will he or won’t he” makes you seem less of each. First it was silly but quaint; now it’s just insulting. Hopefully such nonsense will all stop tomorrow. And I’m sorry I didn’t respond to what I assume was your wife’s message encouraging to send a text somewhere so I’d be among the first (and of course, very last) to know. The thought of paying AT&T the vig on those digits was too just much.

It’s waaaay too early to be overhandled, Mayor. Plenty of chance for that later. As Garrison Keillor said about the McCain campaing in 08, we are voters. Not fruit flies.

The NYT continues to do as much as anyone with data-driven stories. Today on A1 was a feature about the rise and concomitant de-stigmatization of food stamp usage across the country. But the interactive map on the NYT web site tells the stories behind the story.

In Texas, the Rio Grande Valley is predictable tale of woe; Hidalgo County has the largest percentage of food stamp recipients of any county in the U.S. with over 500k residents (29% vs. a national average of 11.5%).

Closer to home, the story is more surprising. Travis County, which most of us tend to regard as a relatively insulated economic island, didn’t fare so well. Between 2007 and 2009, food stamp usage went up 50% in Travis, a rate of change that landed it in the 82nd percentile across all counties in the nation (average was 34%). Adjacent Williamson County-home of Dell-is far worse, still: up 100%, ranking it 48th out of 3,136 counties nationwide (98th percentile), and the third largest of the bottom 50 counties.

So, poverty-wise: what’s the matter with Central Texas? Kudos to the NYT for providing the starting point to investigate the question.

In Commonweal, Andrew Bacevich asks, essentially, “why not Mexico instead of Afghanistan?” A thought-provoking companion piece to David Loyn’s In Afghanistan: 200 Years of British, Russian, and American Occupation.

NYT media axe David Carr happened to be in the offices of The Texas Tribune when the terrible news broke in Ft. Hood. His piece is up on the NYT site.

In my not-so-humble and entirely un-objective opinion, The Texas Tribune opened with one helluva week. These are stories you simply will not see anywhere else. Consider, in no particular order:

Emily Ramshaw on the (over)use of passive restraints in Texas classrooms, and the head scratch-inducing conundrum of paying state psychiatrists a lot of money to work insanity-inducing hours to help make their patients more sane

Abby Rapaport on the reality tv show which doubles as the Texas State Board of Education, as well as the curious puzzle of the Texas dropout problem (together with Brian Thevenot, whom I’ll get to momentarily)

Morgan Smith on a brief history of fratricide in Texas politics (not that plenty of matri-types haven’t been in the mix)

Reeve Hamilton on the existential question of the difference between a pundit and several other words that begin with a p. Reeve is also our guide to what’s happening around the state before breakfast and just after lunch.

Ross Ramsey, Jim Henson, and Daron Shaw on Rick’s lead over Kay, what Texans are concerned about, and why all polls will leave the majority of interested parties with something to bitch about (largely because the majority of interested parties won’t be in the lead). Ross also broke the story about the party switch by Jim Hopson that had Democrats crying in their beer-before noon.

Elise Hu on the daily tug and pull of Texas politics, as well as a video about our fledgling enterprise which we will play over…and over…and over…in service of funding said fledgling enterprise, if nothing else.

Matt Stiles on the Houston mayor’s race and, more importantly, why he is the Overlord of All Texas Data

And yesterday, there was my personal favorite so far, Brian Thevenot’s article about the specter of electronic reading devices in Texas classrooms.

Brian comes to Texas from the Times-Picayune in New Orleans, where he was the member of two Pulitzer-winning teams and a finalist for the third. He will be The Trib’s axe on public education, and taught me a lot in this piece To wit:

That scenario represents the ideal — to some, at least — and may yet be years away. The changes thus far have come slowly, navigating a thicket of big-money politics and curriculum wars surrounding the nation’s second biggest textbook market. At the core of the new order, resulting from new legislation, lie three fundamental transfers of power and money:

• from the State Board of Education to the Commissioner of the Texas Education Agency;
• from three major textbook conglomerates to a broad array of computer hardware and digital content providers;
• and from the state to school districts….

The new rules mark a stark departure from the state’s unique and comparatively one-size-fits-all textbook adoption process, one stretching back to 1918 when voters approved a constitutional amendment mandating the state provide free textbooks to all…

Most states allow local school districts to buy their own instructional materials, in print or otherwise. Twenty-two states have similar statewide adoption processes, Givens explained in an interview, but none has held the reigns of curriculum and money so tightly as Texas. Here, school districts never see the bill for textbooks, which some argue has limited downward free-market pressure on prices. The state traditionally provides only a limited menu of books to districts, then writes checks based on local choices…

“Texas is the only state that pays directly,” Givens said. “So this is the first time, after they go through the process, that we’ll actually be sending money to districts out of the textbook fund. That’s the fundamental shift.”

The opening of the textbook fund for technology purchases takes on more significance in the context of the state’s historically paltry financing of technology infrastructure. Districts have been lobbying for years to increase a state technology allotment of $30 per child, a pittance compared to state financing of books.

I have a feeling I’m going to learn a lot from this team. Congrats on a great launch.

In case you’ve had the good fortune to spend the Great Recession on a desert island, here’s a snippet from the Columbia Journalism Review that summarizes the media landscape to which you have returned:

American journalism is at a transformational moment, in which the era of dominant newspapers and influential network news divisions is rapidly giving way to one in which the gathering and distribution of news is more widely dispersed. As almost everyone knows, the economic foundation of the nation’s newspapers, long supported by advertising, is collapsing, and newspapers themselves, which have been the country’s chief source of independent reporting, are shrinking—literally. Fewer journalists are reporting less news in fewer pages, and the hegemony that near-monopoly metropolitan newspapers enjoyed during the last third of the twentieth century, even as their primary audience eroded, is ending.

I find this interesting primarily because of the source. The passage comes from a long report with an immodest title: “The Reconstruction of American Journalism.” The authors—Leonard Downie, Jr. and Michael Schudson—are not exactly tattooed and pierced denizens of Netroots Nation but, rather, the former editor of the Washington Post and a Columbia J-School professor, respectively.

I do not agree with all of Downie’s and Schudson’s prescriptions for lifting America from our media malaise. But I heartily endorse what strikes me as their central premise:

The days of a kind of news media paternalism or patronage that produced journalism in the public interest, whether or not it contributed to the bottom line, are largely gone. American society must take some collective responsibility for supporting independent news reporting in this new environment—as society has, at much greater expense, for public needs like education, health care, scientific advancement, and cultural preservation…

Which brings me to our own fledgling enterprise: The Texas Tribune.

In my day job, I’m a venture capitalist, so like much else in my life, this endeavor was born out of a quest for financial gain. In 2007, it struck my partners and me that the steady decline of the once-nearly-$60-billion American newspaper industry should present some financial opportunities for firms like ours. That turned out to be true—sort of—and our analysis of the newspaper business continues to inform our media investing strategy. But I couldn’t shake a personal conclusion that didn’t have anything to do with enriching myself: that the abundance of public service journalism that prevailed in the period between the Kennedy and Bush 43 inaugurations was a historical accident, unlikely to ever repeat. Like the guy who realizes late in life that he’s been speaking prose all along, I was in my forties before I realized that I had grown up in a now-ended Golden Age.

I also concluded that capital-j Journalism—roughly the equivalent of Alex Jones’s “iron core” in his book, Losing the News—is a public good. The corollary to this conclusion is that the commercial press is too fragile for our democracy to rely on for all the news and information that we require to function as responsible citizens. It’s the ultimate case of bad things happening to good people. Most of the thousands of journalists who entered the business in the past few decades think of (or thought of) themselves as public servants. But the three revenue sources on which they relied to support their good work—subscriptions, classifieds, and display advertising—have all gone spectacularly awry due not just to a terrible economy, but also to the arrival of cheaper alternatives.

Students of introductory microeconomics are taught that public goods have a number of characteristics, two of which are most relevant to Journalism. First, public goods are non-rivalrous: I can consume all I want without leaving any less for you. Second, market forces alone will not produce public goods in sufficient quantity (imagine a world in which indigent health care, national defense, and clean air were left entirely to the discipline of the market).

The provider of most public goods is government. But even though the U.S. ranks somewhere between Burkina Faso and Uranus in our per-capita federal spending on public media, Congress will not come rushing to the aid of Journalism anytime soon. There are simply too many competing priorities, and the deficit hawk in me recoils at proposing another one. Besides, obvious fox-in-the-henhouse issues arise—to mix animal metaphors—from government watchdogs funded out of government coffers.

So with both commercial and governmental fixes in serious question, maybe that leaves you and me. Well, me, anyway—I’m in for the proverbial penny and pound. You, I trust, will be won over in time by the good work of privately funded public media efforts like ours.

Thanks for your interest in The Texas Tribune. Seeing this day arrive is one of the true highlights of my life. I think we will succeed. And if I’m wrong, it won’t be for lack of effort.