Saturday, February 18, 2012
Media / News Why CNC is closing
Posted by Michael Miner on 02.18.12 at 12:23 PM
Two pieces of bad news drove this decision.
O'Shea was counting on a substantial grant from the MacArthur Foundation, which had helped put CNC on its feet in the fall of 2009 and had already given it a total of a million dollars. But a problem arose. The IRS has yet to rule that CNC and similar web-based news operations in other cities deserve the not-for-profit 501(c)(3) they've applied for. This hasn't been a problem for these operations, which have been able to receive through fiscal agents — which in the case of CNC has been WTTW.
But a couple of weeks ago a MacArthur staff attorney said, wait a minute. He advised the foundation that until the IRS ruled for CNC, MacArthur grants should be earmarked for specific programs rather than simply to sustain the co-op. This didn't mean that CNC had no way to use the MacArthur grant to stay afloat, but it did mean a different approval process and a longer wait for the money to arrive. O'Shea found out about the delay early this past week. He was in no financial position to wait.
Meanwhile, CNC had been in conversations for several months with the New York Times, for which it has produced four pages of Chicago news a week. The Times knew that CNC's financial position was precarious. O'Shea hoped the Times would pay more for the service; but instead the Times decided not to go forward at all with a shaky partner in a publishing experiment far more important to CNC than it was to the Times. On Thursday the Times called O'Shea and they called off the relationship.
But the closing of CNC is about more than a delayed foundation grant and a canceled contract. CNC has suffered throughout from a lack of development muscle. O'Shea is a former senior editor at the Chicago Tribune and Los Angeles Times, and at CNC he surrounded himself primarily with former Tribune colleagues — terrific journalists but not much for shaking apples out of trees. But O'Shea drove the deal in which a group of local investors — many of them CNC backers and board members — purchased Sun-Times Media last December. O'Shea had synergies in mind, and one of those investors, Bruce Sagan, discussed them with me at the time.
“There’s no deal between the Chicago News Co-op and the Sun-Times at the moment," he said. "They are indeed organizations with their own goals. But the goals are not far apart. It’s a question if they can make it work, if they can figure it out. The Sun-Times needs personality, viewpoint. That can’t come from somebody else. But is there a lot of news out there that can be shared? My god!”
And the stripped-to-the-bone Sun-Times no longer had the forces to cover all that news. The way back for that paper was to restore some of the quality that austerity had squeezed out of it; and quality, at not too high a cost, was what CNC could provide.
But that hasn't happened. Instead of pushing quality at the Sun-Times, which presumably would have meant a new role for CNC, Tim Knight, the new CEO of Sun-Times Media, has focused on the company's suburban papers. CNC remained on the sidelines.
Though CNC employees are now looking for work, I understand that O'Shea hopes a reconstituted CNC can continue. The name commands respect and the brand surely has value. Early and Often, a paid-content political feature launched on the CNC website to monitor last year's city elections, showed CNC that people will pay good money for tightly focused good reporting.
O’Shea didn’t want to talk to me about his future plans or about the Sun-Times, but he did discuss the problems with the IRS. “McArthur’s legal counsel said, ‘You have a relationship with WTTW but they don’t exert any legal control and I don’t think that will pass muster with the IRS. So we won’t support you.’ Our counsel totally disagreed with him. What this means is that they’d continue to support us with program-related investments, but the reporting requirements are onerous, the totals are usually far smaller, and the penalties are severe — foundation executives can be personally fined.” On Friday morning O’Shea told Elspeth Revere, the MacArthur vice president responsible for media grants, that he was withdrawing his pending grant request.
Comments (9)
Showing 1-9 of 9
Perhaps when reporters and photographers stop bowing to the corporations and stand up independently for real news; news that affects real people, we will again have true public interest journalism.
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How about the truth as seen from the man on the streets.
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Rob,
Should the reporters and photographers pay for the news themselves? How do you expect they be able to produce any real journalism without the corporations they work for?
" Early and Often, a paid-content political feature launched on the CNC website to monitor last year's city elections, showed CNC that people will pay good money for tightly focused good reporting."
Huh? Maybe I missed something. But it was my understanding that very few people subscribed to that (even after they had to dramatically lower the price) and that it was a total failure.
By the way, its somewhat interesting that the precipitating event (or at least the pretext) for it going out of business this week is the IRS not labeling the CNC a 501(c)(3) organization. I'm somewhat confused as to how the CNC could make the case that it was a 501 (c)(3). I'm not an expert in this type of thing and I don't know the exact definition of that type of organization. But I've always been under the impression that a 501 (c)(3) had to be set up for purposes other than to make a profit. These are not supposed to be regular businesses. O'Shea had always said that he intended for CNC to eventually support itself and become profitable and that it was only being formed as a non-profit to get it started (presumably, he couldn't get venture capital funding or anything else). I don't see how this type of organization could argue that it was a 501 (c)(3).
Rob... it's possible, but it's a lot of work. I've been putting together a weekly e-newsletter for almost three years now using a '(wo)man on the street' approach (www.chicago-pipeline.com). On the day one of our main contributors was talking to her former journalism class for the second year in a row about 'opportunities in journalism post graduation,' I couldn't attend b/c I was in a focus group- the only reason I scraped by paying my cell bill that month! I don't believe a non-profit news model (include CNC's) will work unless it's community-supported through local business participation. And the irony being that I can't imagine any Chicago businesses wanting to advertise on those four pages in the NYT devoted to CNC's news. While I enjoyed the Chicago-centric pages, they always felt stale and were usually similar to a story that I'd already read here in the Reader, the Trib, the Sun Times, New City, etc. And do New Yorkers really care that much about Chicago? I guess we found the answer.
I was surprised to see O'Shea partner with the NYT, but I didn't realize he had climbed into bed with the Sun Times, too. What was his opinion of those two organizations while he worked for Tribune? Surely, he thought he worked for a better company and produced a superior product, no?
And now?
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His God, indeed.
I renew my plea...does anyone know how much O'Shea and Warren paid themselves?
Alisa makes some good points. The problem with any advertising-supported model, though, is that advertisers have many more effective ways to spend their money online. Increasingly, this includes local advertisers, who have daily deals options and -- as the costs come down -- location-based mobile platforms that are optimally NOT paired with news of any sort.
Also, to get slightly off the subject of CNC but sticking with the harrowing theme of journalism's survival, the following is an interesting read on a newspaper that's thriving despite electing not to push its precious content online:
http://www.niemanlab.org/2012/02/the-bosto…
I like this guy's attitude of demanding a business model first before going bat-shit digital.
I'm surprised that no commenter on here has yet posted the obvious: This is a depressing development for Chicagoans who care about transparency and accountability in their government.
Whatever suspicions one might have about why CNC is shutting down, let's face the one reality we know: CNC over the past year produced some of the best, most thought-provoking news coverage a Chicagoan could find, and now, we will continue without that excellent news coverage. Many outstanding CNC journalists have no jobs, and the power brokers whom CNC (and The Reader) pester now have one less pest about which to worry. The rest of us suffer.
Farewell, CNC; I hope you find a way to return. Ditto for your impressive staff. I'll gladly support you -- with my eyes and my wallet -- as I've done during this go-round.
"An additional MacArthur grant would not have fundamentally changed CNC's fiscal situation, " says MacFound VP ow.ly/9i4QL
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