Did a Non-Profit Subsidize 60 Minutes?

In early May, we asked the question, "Does Non-Profit Media Have a Competitive Edge?" This is proving to be an ever-more urgent question as conventional news companies continue to bleed money and jobs, spurring alternative business models to emerge.

To cut to the quick, however, any advantages the non-profit business model enjoys in the short term will evaporate over the long term due to the same technological trends that are sinking the for-profit newspaper industry. Everybody must get... digitized, as Bob Dylan might put it. But non-profits face additional burdens as well, as the following controversy illustrates.

One of the most difficult types of journalism to produce -- in any medium -- is investigative reporting. Therefore, it was a logical move eight months ago when a concerned philanthropist couple created ProPublica, a non-profit outfit that has been busily hiring up talented investigative reporters from the Wall Street Journal, the New York Times, etc.

Now, investigative stories take time, so I'm not going to complain about ProPublica's lack of impact -- yet. But its biggest story so far does raise an essential legal and business question that cuts to the heart of the non-profit business model.

On June 22nd, ProPublica collaborated with "60 Minutes" on a hard-hitting segment entitled, ''U.S.-funded Arab TV's credibility crisis.'' It was an expose of Al-Hurra, part of the Bush administration's $500 million Arab-language propaganda campaign disguised as a news network. (Full disclosure: "60 Minutes" is aired by CBS, which also owns BNET.)

This caught the sharp eye of media critic Edward Wasserman, who raised a serious question: "[W]hy was ProPublica using its philanthropic funding to, essentially, subsidize the cost of a segment for 60 Minutes, the most financially successful news show in the history of U.S. television?

Some personal background needs to kick in here. In the twelve years I worked at the Center for Investigative Reporting, which for over 30 years has been doing investigative stories under non-profit status, we produced many, many stories for 60 Minutes and other national outlets, But we always did so under contracts, including monthly retainers that substantially funded our work.

In that way, we could not be accused of abusing our 501-(c)-3 tax-exempt status (by which the IRS regulates qualifying non-profits) by indirectly subsidizing for-profit ventures, which (we were advised) was not permitted under our status. But today, when I asked Richard Tofel, General Manager of ProPublica, via email, how much CBS has paid for the story, he replied, "They paid us nothing (and vice versa). That's key to our model."

This truly concerns me about this new startup's future. If they had charged the network program for their story, nobody -- not Wasserman, not the IRS, nor yours truly -- would have had anything to complain about.

But since they gave it away to 60 Minutes, they may have to prepare an explanation for those nosy auditors at the IRS, as well as for the New York state regulators charged with reviewing their non-profit status.

None of this means I hope that the regulators harass Tofel and his colleagues -- au contraire. I'm a veteran fighter against those meddlers, which is why I know they keep an eye peeled for people who push against the status quo.

Those of us who have been writing, editing, and evangelizing investigative reporting for decades are rooting for ProPublica and every similar effort to succeed. In that spirit, when it comes to their business model, the good guys may wish to make a few tweaks.