Live by the Donor, Die by the Donor: Takeaways From the Demise of a Nonprofit News Outlet

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In late July, the Santa Barbara-based Social Justice Foundation was informed that it would no longer receive financial support from its primary benefactor, SAGE Publications, an academic journal publisher. In early August, the next domino fell when the foundation announced that it was cutting funding for Pacific Standard, an online magazine devoted to social, environmental, economic and educational justice.

In a statement announcing the publication’s closure, SAGE Publishing said, “SAGE is unable to continue to offer the very considerable financial support that the magazine requires to be viable while also investing in the core businesses of SAGE Publishing, and as a result, the board of the foundation had no alternative but to take this decision.. The board is committed to exploring options for maintaining the availability of Pacific Standard’s content or otherwise continuing the work of the magazine.”

The news underscores a growing tension across the journalism philanthropy space. On one hand, funders have stepped up mightily in the aftermath of the 2016 election to support nonprofit journalism outlets. Yet, as the Daily Beast’s Lloyd Grove wrote while commenting on Pacific Standard’s demise, “In today’s Darwinian media environment, newspapers, magazines and online publications seem to be biting the dust every week—a depressing new normal.”

Dubbed by Grove “the West Coast answer to The Atlantic,” Pacific Standard’s shuttering is particularly depressing because the outlet seemingly did everything right. It grew its readership, produced award-winning content, and recently rolled out a 10-year strategic plan. It also had a patron that understood the importance of high-minded independent journalism six years before Donald Trump’s unexpected election super-charged this funding space. And yet it will still shut down this month.

“I’m feeling all of the emotions about this terrible news,” said Editor-In-Chief Nicholas Jackson. “Anger and frustration, certainly—we were repeatedly and enthusiastically told we were over-performing and -delivering up until the very end, and that we had a long-term commitment—shock, sadness and disappointment.”

The Ideal Patron

The big player in the Pacific Standard saga is Sara Miller McCune, the founder and controlling owner of SAGE Publications, which currently has 700 employees and annual revenues in the $300 million to $400 million range. Miller McCune also founded the Santa Barbara-based Social Justice Foundation with the mission of promoting “meaningful public dialogue by widely disseminating, in clear and concise language, the latest and most relevant scientific research in the areas of economic, educational, environmental and social justice.”

In 2007, McCune committed roughly $2.2 million a year for five years to a new publication that would bring a wider public to the sort of social science research published by her academic and journal publishing company. The magazine, initially called Miller-McCune, launched in 2008. Four years later, Miller–McCune announced that the magazine’s name would be changed to Pacific Standard. Last year, it transitioned from a print and online publication to online only.

Miller McCune’s other philanthropic interests include development projects in India, the restoration of the Granada Theatre in Santa Barbara, and the opening of the $3.5 million Sage Center for the Study of the Mind at the University of California Santa Barbara.

Back in 2010, James Rainey, in a Los Angeles Times profile, presented Miller McCune as the Platonic ideal of a civic-minded patron of nonprofit journalism. McCune, he wrote, “looks into this bleak media sea and sees an opportunity, if not to make money, to fill a void with serious, solutions-oriented journalism.” What’s more, Miller McCune was “that rare creature—willing to pay for quality reporting and writing without demanding editorial control.”

“It’s all very well and good to be publishing the academic literature,” Miller McCune said, “but if it isn’t penetrating into the minds of policymakers, the corporate leaders, the people who count… then you are not doing the whole job.” McCune told Rainey she planned to build upon her previous five-year financial commitment to the magazine. “I’ve always had a certain confidence,” she said, “that things will work out.”

Checking Off All the Boxes

Prior to SAGE Publishing’s abrupt decision, things seemed to be working out just fine for Pacific Standard.

The magazine received prestigious National Magazine Awards and boasted a readership of 1.3 million monthly unique visitors in the coveted 25-to-34 median age demographic. Last year, it hired eight new full-time staffers. And the board of the Social Justice Foundation recently approved Jackson’s 10-year “Vision Plan” to strengthen the magazine’s investigative reporting mission. The board even went so far as to encourage him to hire more full-time journalists.

Speaking with Nieman Lab’s Christine Schmidt, Jackson said, “We’ve been told repeatedly that the amount of funding that came from SAGE was going to be the same for the long term every year and we were responsible for raising additional revenue to support growth and cost-of-living increases and health insurance raises, and we’ve done that” with individual donors, advertising revenue, and more.

Jackson, who joined Pacific Standard as digital director in 2013 and has served as editor-in-chief for the past four years, told The Daily Beast that Miller McCune was initially interested in the direction of the magazine, scrutinizing every issue before it went to press and meeting with him every month. Yet Miller McCune, who also relinquished her seat on the board of her Social Justice Foundation, began retreating from active involvement in the past couple of years.

As for the abrupt nature of the shutdown, SAGE global marketing executive and Social Justice Foundation President Clive Parry said that the foundation’s board only learned in late July that it would receive “no more contributions, as SAGE needs to focus investment on its core business of academic and professional publishing. The board then needed to move fast to ensure that sufficient funds remained to manage an orderly shutdown of the foundation and to fund a reasonable severance package.”

Commenting on the sudden announcement, Jackson said he “didn’t see it coming,” and it’s easy to see why. Sunsetting foundations typically provide recipients with “tie-off” grants to enable an orderly wind-down or to give organizations time to find a replacement funding source. Jackson went even further, characterizing the cut-off as “unethical” and possibly “illegal.”

“Elites Supporting Elites”

SAGE Publications, by all accounts a highly profitable company, contributed $3 million to Pacific Standard’s $3.5 million budget via the Social Justice Foundation. While that’s a substantial sum in the nonprofit journalism space, enabling the news outlet to operate on a sound footing in recent years, its sudden demise is another reminder of the growing gap between smaller outlets like Pacific Standard and the “usual suspects” like NPR and ProPublica.

Last year, researchers at the Shorenstein Center on Media, Politics, and Public Policy at Northeastern University assessed 32,422 grants distributed by foundations supporting journalism and media-related activities between 2010 and 2015. Total payout stood at $1.8 billion. Most of the funding flowed to “high-profile and well-connected nonprofits in coastal cities,” a phenomenon the authors described as “elites supporting elites.”

Similarly, a January piece by Monash University’s Bill Birnbauer in The Conversation noted that the vast majority of the $469.5 million that 60 digital nonprofit news media websites raised between 2009 and 2015 supported the 20 biggest outlets, while the 20 smallest squeaked by on just $8.6 million. McNelly Torres, a co-founder of the small Florida Center for Investigative Reporting, told Birnbauer she rated her chances of receiving a big grant from a national foundation as “one to a million. The big guys are always on top… so the little guys always struggle.”

If smaller organizations can’t secure sufficient support from foundations and wealthy philanthropists, Birnbauer writes, “nonprofit journalism will not reach its potential, no matter how valuable its coverage, nor will it abate the spread of ‘news deserts’ across the United States.”

Reyhan Harmanci, a member of Pacific Standard’s editorial advisory board channeled Birnhauer’s sentiments upon commenting on the outlet’s closure. “I honestly don’t know what it takes, beyond a billionaire, to keep a niche media company afloat. We need smaller, smarter publications to do interesting work that might fall through the cracks elsewhere.”

Another Benefactor Doubles Down

The Pacific Standard saga also speaks to the inherent risks of disproportionately relying on a single patron. In a perfect world, the outlet would have stumbled upon the ever-elusive “sustainable business model” and could survive the loss of $3 million from the Social Justice Foundation. But implementing such a model is, of course, easier said than done, which is why funders ranging from the Knight Foundation and Lenfest Institute to agile start-ups like the American Journalism Project have allocated tens of millions of dollars to help organizations withstand the shock of losing a major funding source.

SAGE Publication’s announcement stands in contrast to recent developments involving The Markup, the nascent outlet funded by one of nonprofit journalism’s most generous patrons, Craig Newmark.

In April, Julia Angwin, the site’s co-founder and editor-in-chief, was fired by her two co-founders, Sue Gardner and Jeff Larson, and the site’s remaining editorial staff resigned in protest. Newmark, as Vanity Fair’s Joe Pompeo noted during the height of the turmoil, could easily have pulled funding and called it a day. Instead, he held firm. Newmark, who had pledged $20 million to The Markup, said, “I remain absolutely committed to its mission.”

He meant it. In early August, The Markup announced its new leadership team with Angwin back in charge. “Happy to continue to support The Markup,” Newmark tweeted upon news of Angwin’s return. “With so much talent involved, I look forward to watching the good work Markup will do to advance truth in journalism.”

The Inevitable Contraction?

The other big question surrounding the shuttering of Pacific Standard is the extent to which tepid funder support for smaller outlets, coupled with the unrelenting Google and Facebook advertising duopoly, heralds a larger contraction in a left-leaning journalism funding space that exploded in the aftermath of the 2016 election.

In early July, the Center for American Progress announced that its progressive news website ThinkProgress was up for sale. “Unfortunately, like so many other news outlets that have relied on advertising to fund its work, ThinkProgress has seen a significant drop in revenue in recent years, along with other financial strains,” said Navin Nayak, executive director of the Center for American Progress Action Fund.

In late July, Sarika Bansal, editor-in-chief of Bright Magazine, an outlet that focused on health, education and social impact, announced the outlet was folding. “I want to be honest about the reason we are closing, because I think it’s informative to the sector writ large: Our grant money dwindled, and I chose to say no to the few offers of money I received,” she said.

Pacific Standard, meanwhile, was geared toward opinion leaders, policymakers and concerned citizens who were interested in developing solutions to some of the world’s toughest problems. While it leaned left of center, it certainly wasn’t a fire-breathing mouthpiece of the Resistance. Jackson alluded to this key point of differentiation in his chat with Neiman Lab’s Schmidt, saying: “A lot of places that do social and environmental justice reporting—when you hear that, you think of partisan news sources or places that lean a little more toward activism and journalism like the ThinkProgresses of the world. Those places are important, and do really good work, and I hope we find ways to support them, too. But I think especially in this moment, it’s really important to do nonpartisan, just straight reporting and storytelling in that space that’s often so charged.”

The problem? “It’s a lot harder to build an audience” for nonpartisan reporting in our current political climate, Jackson said, nor is it “easily monetizable. I thought the structure we had was going to allow us to keep doing that for a lot longer.”

Jackson told The Daily Beast that he is looking to see if any well-endowed nonprofits might be induced to replace SAGE Publishing as Pacific Standard’s financial backers. Therein lies one piece of good news out of the Pacific Standard story—its meager $3.5 million budget may prove to be a compelling selling point for would-be patrons who believe in its mission.

All of the possible suitors floated by Jackson and his associates can certainly afford it. The list includes Oprah Winfrey, who lives in nearby Montecito, billionaire Democratic presidential candidate Tom Steyer, and Laurene Powell Jobs, whose Emerson Collective also owns The Atlantic. The latter possibility, Jackson said, is “a long shot, but I think it’s worth at least a little bit of energy.”