Wednesday, November 4, 2009
The vision for a nonprofit covering Texas politics, public policy and government started with John Thornton, a general partner of Austin Ventures who wanted to to put money and energy into journalism for the public good. He and his wife seeded the venture with $1 million; another $1.6 million has come in from individual donors and corporations (all identified on the site) plus $1.1 million from foundations. Not that this pace can keep up, but on the last day before launch the Tribune took in $13,000 from 190 founding “members.”
Thornton hired Evan Smith, a renowned journalist, to be editor-in-chief, and both he and the reporters make market-salaries: $315,000 per year for Smith, up to $90,000 for the reporters.
The key aspect of interest to me is that the Texas Tribune is a tax-exempt 501(c)(3) charity (or at least that's what they claim on their web site). The academic community has generated no little amount of angst regarding whether news-gathering organizations qualified as a 501(c)(3) - see the prior blog posts here, here and here. Rich Schmalbeck at Duke has been in the forefront of the tax-exemption analysis of these questions, presenting a paper on the topic at the May 2009 Law and Society Conference.
Another interesting feature of the Texas Tribune is that although most of their content will be free, they will charge a hefty fee for some "premium" content. According to the PaidContent article, the organization "already has one premium product—the Texas Weekly, a well-respected state politics newsletter acquired earlier this year; Ross Ramsey, the editor, came with it and is the new site’s managing editor. (Ramsey and Smith are acknowledged as cofounders.) Smith says the weekly newsletter has some 1,200 subscribers at $250 a year." This arrangement raises a host of unrelated business income and commercial activity questions, which Smith apparently is aware of. Quoting Smith, the PaidContent article notes,
The goal is to grow the circulation base for more “earned income.” It’s a delicate dance. “We actually had deep conversations with exempt counsel and said, what are the things that we can do that qualify as related businesses that we can generate earned income from—because our model assumes we’ll be funded almost exclusively through philanthropy the first year and gradually transition to a model by the third year, where we’re two thirds philanthropy and a third earned income.”