Turning Newspapers Into Charities: A New Model for the Future?

It’s no secret that Canadian newspapers are struggling.

Some would say they are dying, the victims of a broken business model—done in by the Internet.

People in the newspaper industry are looking for a fix, something to help them survive.

One idea that is getting some traction is the idea of enabling Canadians to make charitable donations to newspapers—turn them into charities that can accept donations and issue tax receipts.

The Canadian government is prepared to give that some thought.

In the most recent budget, it promises to explore "new models that will enable private giving and philanthropic support for trusted, professional, non-profit journalism and local news."

This "could include new ways for Canadian newspapers to innovate and be recognized to receive charitable status for not-for-profit provision of journalism, reflecting the public interest that they serve.”

Here in Winnipeg, Free Press publisher Bob Cox says this is “good news and certainly welcome.”

He notes there is a growing non-profit news industry in the United States, thanks to tax-deductible donations from supporters.

These are media like NPR and PBS, which many Canadians are familiar with, but also outlets such as the Texas Tribune, MinnPost and ProPublica.

I have to admit I’m intrigued by the idea. Even though I'm no expert on newspaper economics, I think it’s worth a try.

But before newspapers rush headlong into the charity model, there are a few questions that come to mind.

Although I'm not an expert on newspaper economics, I know a thing or two about fundraising. 

And if there's one thing fundraisers know: Raising money isn't easy.

Definition of a Charity

But before talking about raising money, we need to first take a look at Canada's Income Tax Act and charities.

The Act uses a common law to define what a charity is, something inherited from Great Britain.

In Canada, an organization is a charity if it fits under one of four things: Relief of poverty; the advancement of education; the advancement of religion; or other purposes that benefit the community in a way the courts have said are charitable.

Currently, journalism is not covered by the definition.

Maybe no change is needed; if the government wanted, it could put newspapers under education, or the catch-all “other purposes” that benefit the community.

Whatever way it goes, someone would need to make that ruling.

Advocacy and Benefits

Then there's the issue of advocacy and benefits.

Currently, charities are prohibited from spending more than 10% of their funds on political advocacy.

For newspapers, would this mean needing to be careful how they report about political issues, parties or candidates? 

Would they have to restrict the number of opinions calling for changes in government policies? 

Could they no longer support particular candidates or parties in an election?

For an enterprise worth hundreds of millions of dollars, that might be moot. But the question would still need to be addressed. 

Then there is the matter of benefits.

One of the ideas being suggested to help newspapers is to let people get a charitable tax receipt for buying a subscription to a newspaper.

It would seem like a win-win—the newspaper gets the money, and the subscriber gets a tax break.

It's a great idea, except it's not permitted. 

Canada Revenue Agency rules are very clear that donors should get no benefit from a donation.

It's one of the cardinal rules of fundraising; breaking it can get you into big trouble.

This is why if you go to a fundraising banquet, you get a donation receipt for the amount you gave— less the cost of the meal. (That is your benefit.)

If subscribers were to be able to claim their subscriptions as a donation, there would need to be a significant change to the way the CRA currently operates.

The Charitable Landscape

Those are logistical questions. They involve lawyers and accountants. With the right legislative changes, and enough money and expertise (lawyers and accountants are expensive!), the changes can be made.

It’s what happens next that ultimately determines whether the effort is successful: Fundraising.

And the fact of the matter is fundraising is hard—and it’s not getting easier.

First off, the number of Canadians claiming a charitable tax deduction is falling, from 25.1% in 2005 to 20.9% in 2016.

Added to that is the fact that the country’s best givers—older people—are literally dying. There is no guarantee their places will be taken by younger donors.

Speaking of which, younger people tend not to read newspapers, in print or online. They will be a very hard group to fundraise from.

Then there’s the competition; there are over 86,000 charities in Canada, all competing for a decreasing amount of donated money.

It's not like there's a huge well of untapped money out there just wanting for someone to ask for it.

If anything, when it comes to asking for money there are almost more hunters than rabbits.

People are already being asked, again and again. At some point, they might just be tapped out.

What about Foundations?

If appealing to thousands of small donors is difficult, what about foundations? That’s where the big money is, right?

Not as much as you think, at least not here in Canada.

We have fewer foundations than in the U.S. in general and, as far as I can tell, just one dedicated to media. (The Canada Media Fund, which supports TV and digital productions.)

The U.S. meanwhile, has over 1,000 foundations that contributed $1.86 billion to media between 2009-11.

These foundations made over 12,000 grants, but mostly to web and mobile media, vastly outpacing support for traditional media (TV, print, radio).

The foundations making these grants include well-known names like Gates, Knight, MacCarthur, Annenberg and Lilly.

But even if a foundation decides to make a grant to a media outlet, here’s the thing about foundations: They are usually not in it for the long term.

They don’t tend to make lengthy commitments. Three-to-five years is normal. Many prefer to give money to get things started, not hang around forever.

A typical goal is sustainability—being able to survive without the foundation.

Then there’s the application process itself, pages and pages of forms and documents and plans and projections.

This is why many charities today employ full-time grant writers.

But maybe that's OK; what I hear from newspapers is they just want short-term help to tide them over until they find a new model.

It all depends on whether those dollars are available. It would be interesting to find out.

Which Brings us Back to Fundraising.

Whether or not foundations come on board, newspapers will still need to raise funds from smaller donors.

The last thing any organization wants to be is too-reliant on a single source of income. Spreading donations out among thousands of smaller donors can provide longer-term stability.

But fundraising is a unique skill. People take courses, workshops and spend their entire careers trying to figure it out.

Not everyone can do it. It takes a unique personality to be a good fundraiser.

For one thing, you have to be able to ask people for money. Some people would rather gouge out their eyes with a sharp pencil than do that.

When it comes to the media, I can’t think of many journalists who consider it to be high on the list of things they really want to do in life.

If media outlets want to get into the fundraising game, they are going to have to hire fundraisers, marketers and communicators—people with those special skills.

Just putting an ad in the paper and hoping the money rolls in won’t cut it.

The media will need to do marketing, learn about creative offers, designated giving, matching appeals, and donor relations (the “donor journey”).

Figuring out what donors want to give to is art, science and a bit of alchemy these days.

Not only that, increasingly donors want to designate their donations to specific projects, types of work or countries.

This is something charities resist; the best donation is the one marked "use where needed most," since it provides the most flexibility. 

("Where needed most" can also be used for rent, heat, water, electricity bills and staff salaries, since people tend not to designate for those things.)

But donors like to choose countries, people (girls, women, children) and programs (water, food, education, health); it helps them feel more connected through their giving. 

What if they want to do that for newspapers, too? Arts and sports might be the big winners, while international of school boards loses out.

And here’s another thing about donors: They aren’t forever. They come and go. Donor retention is one of the bigger challenges facing any charity today.

Then there’s accountability and transparency—where was the money spent? How much is spent on overhead and salaries? Donors want to know.

Raising money is hard work, in other words. And there are no guarantees.

Conclusion

Boy, do I sound like a downer! I don’t mean to be. I think being able to donate to keep my local newspaper alive is good idea, and one worth exploring.

In fact, it’s already being done, albeit on a small scale, with church-related publications in Canada. Without donations, most wouldn’t be able to survive.

Will it also work for the mainstream media? I don’t know. I'm sure people who work for newspapers and other media outlets have already been thinking about the various issues and questions.

It won't be easy. But I’m game to find out.

I’d even send in a donation.