At the recent Harvard session on new business models for news, I offered an off-the-beaten-path idea to the question of who will pay for the news. One answer, I said, was non-news organizations: NGOs, trade associations, businesses, governments and labor unions.

Yes, labor unions. There are indications of a back-to-the-future trend in labor funding for the news. Just in the last several months, two labor unions in southern California have provided six-figure funding for very different kinds of operations – Voice of Orange County, an independent news site working toward a January launch, and Accountable California, a direct arm of Local 721, Service Employees International Union.

The idea that legitimate journalism might flow from “special-interest” labor money would have seemed a non-starter to many of us not long ago. How could journalists provide fair and unfettered accounts when their paychecks were the product of an organization with a clear political agenda? In fact, though, Voice of Orange County and Accountable California are simply a revival of a kind of journalism that permeated American life in the late 19th and early 20th centuries – labor-backed newspapers.

A few months ago I stumbled on a website kept by the Kansas State Historical Society that listed labor newspapers published in Kansas during that period. There were 95 of them, going by names like Anti-Monopolist, Labor Champion, People’s Vindicator and Vox Populi. Theirs was an era when local markets often had many newspapers, not just one, and each reflected a constituency like labor or business, or one political party or the other, that provided audience and sustenance.

There were plenty of arguments then about what constituted journalism, what was accurate, what was fair. We’re certainly headed for more of them now now, with a likely proliferation of news hybrids that may make the previous era look monolithic by comparison. But don’t discount the potential of newsgathering backed by labor (or myriad other interests) to be the essence of journalism. There’s already powerful evidence that the two can happily coincide, and it’s hard to see why the trend won’t continue.

When I posted notes from my Harvard remarks last week, NYU’s Jay Rosen pointed me to David Beers, editor of The Tyee of Vancouver, British Columbia. I hadn’t realized how long Beers has been toiling in the world of investigative reporting backed in part by labor. He started The Tyee in 2003, with $190,000 in initial funding provided by labor. Quite quickly, he diversified his revenue stream, which now also includes philanthropy, advertising, audience contributions and small grants from the government.

The result is an award-winning nonprofit that’s investigative and progressive at heart, and focuses on the civic life of Western Canada. Beers’ budget this year is about $550,000, and his site last month reached more than 160,000 unique visitors.

“It’s a fantastically hopeful story,” said Beers. “And no, we haven’t solved the business-model problem. But we do terrific journalism that has impact and that journalists can take heart from.”

Beers, in fact, thinks labor won’t be the only special interest that will be funding news gathering in the future. “There are thousands of debates going on that people, institutions can’t afford to lose. They need venues for these debates. They have money. And they need journalism and journalists.”

(Note: I’ll write more about The Tyee in a subsequent post.)

THE VOICE OF ORANGE COUNTY
The business model for the nonprofit Voice of Orange County is fundamentally the same as The Tyee’s: Start with seed money from a labor union, add other revenue streams, and produce independent reporting. In the case of the Voice, though, supporters want to ramp up immediately. Norberto Santana, the Voice’s editor, said the $140,000 contributed by the Orange County Employees Association will be supplemented by private donations that could put the first-year budget north of $600,000. (Eventually, Santana said, the site hopes to diversify through advertising, foundation grants, NPR-style memberships and perhaps premium content).

Santana said the Voice of Orange County will differ from The Tyee in one other respect: Unlike The Tyee’s progressive orientation, Voice will be neutral ideologically. However, he acknowledged that the mission of doing strong accountability reporting in an overwhelmingly Republican area like Orange County may make it look like Voice leans solidly left.

In any case, Santana isn’t concerned that the labor money baked into the Voice’s business plan will skew its coverage. “My only orientation is aggressive watchdog coverage of the local scene,” he said. “What does labor get out of it? Only the guarantee that city hall’s feet will be held to the fire, the same way we’ll hold their fee to the fire. But they know they’re not getting a labor shill out of me.”

The Voice will begin with a staff of 6-8, Santana said, and plans to partner extensively – with public broadcasting, with local and topic-based bloggers and with NGOs like the League of Women Voters. Current plans are to translate significant pieces of the site into Spanish and Vietnamese.

ACCOUNTABLE CALIFORNIA
What do you call investigative work that is written by a union staffer and is part of the union’s strategic agenda? Can that be journalism? Is the writer a journalist?

I put those questions to Ted Rohrlich, former award-winning investigative reporter for the Los Angeles Times who now is research coordinator for the SEIU local’s research arm. Six months ago it launched a website called Accountable California, whose aim is to produce investigative reporting about the government and its contractors.

Here’s Rohrlich’s answer: “I still think of myself as a journalist,” he said. “But I also think of myself as a staff member of a labor union with strategic goals. So I think skepticism of my work is not inappropriate. But this exercise is pointless if it doesn’t have credibility.”

Here’s one way in which his role is different. Rohrlich’s initial investigation was about the nonprofit Tarzana Treatment Center, which gets 85 percent of its money from the government. According to his reporting, the treatment center spent $22 million in government funds over the last 11 years on inappropriate benefits for company insiders. Interestingly, the Los Angeles Times ended up beating Rohrlich on some of the story. But here’s the difference. Rohrlich’s story wasn’t just for public discussion; it was a dossier that the union took to the attorney general’s office, where it’s demanding action.

“The Los Angeles Times would have the chips fall where they may,” said Steve Askin, who hired Rohrlich and heads the union’s overall research effort. “What we did was a detailed report that says to the government: This money should be paid back.”

Askin said part of the rationale for Accountable California is to respond to the vacuum that’s developed in coverage of labor issues. Labor beats used to be standard fare at metropolitan newspapers; today they’re almost non-existent. But he said the SEIU local has two other more specific goals: putting a face on public employees more favorable than the one people normally see, and acting as a counter-weight against the government.

Mixing journalism and an agenda like that would be in the realm of high treason at the Los Angeles Times, but Rohrlich said he’s perfectly at home with his role, and comfortable in asking the public to buy it.

That’s not journalism as I practiced it, but that doesn’t mean it won’t have its own validity. We’re almost certain to see more of it.

Update: Josh Kalven has flagged me about the Progress Illinois site he edits. The site launched in 2008 under sponsorship of the SEIU Illinois State Council.

It is painful to watch the steady decline of newspapers. For some, I expect we’re about to see the dead cat bounce as the economy turns around. This will only delay the inevitable. The challenge they face at this late date is immense but surmountable.

Their near death experience is similar to what Digital Equipment Corp (DEC) and IBM faced. Only IBM remains a blue chip market leader. However, IBM completely reinvented itself from a “big iron” mainframe and minicomputer driven company to the market leader in I.T. related services. There were some valuable assets that they were able to leverage but it took an outsider like Lou Gerstner to make that wholesale change happen.

Meanwhile, the vanguard company of the minicomputer era (DEC) wasn’t able to make that shift and sold at a deep discount to Compaq (who in turn was bought by HP). It’s important to recognize that IBM and DEC were in highly competitive markets. DEC along with countless other mainframe and minicomputer companies were unable to transform themselves and are mere footnotes of history. In contrast, the newspapers have largely operated in non-competitive markets by comparison. It will take a true newspaper leader and visionary to make this happen as opposed to someone just milking the cash cow until it withers and dies.

The “good news” for newspapers is their stocks are so far in the tank that there’s relatively little risk (easy for me to say!) in them taking some calculated risks. I didn’t work for IBM but my impression is they allowed the services group to have true independence from the legacy businesses IBM had. I was closer to a couple similar situations — how Microsoft handled Xbox and Expedia — so I will expand on those examples. I would argue that Microsoft’s only had two real new, stand-alone successes in the last 10 years – Xbox and Expedia.

While Microsoft has yet to fully recoup its investment, few would argue that Xbox hasn’t been a commercial success. In the meantime, it is generating a year by year profit and more importantly from Microsoft’s vantage point is having a coveted spot in millions of consumers’ living rooms.

In roughly a parallel timeframe, Expedia was incubated inside Microsoft but was running into some issues being inside of Microsoft. Rich Barton was trying to run Expedia as a company 100% focused on achieving success within the travel sector, however periodically would run into stumbling blocks. For example, organizations like United Airlines, Hilton Hotels, and countless other travel companies didn’t like what Expedia was doing to the travel market. The problem for Microsoft was that these companies were big customers of Microsoft’s software and it created internal conflict. Eventually, Rich made a compelling case why Expedia should spin out of the company and they did so. Microsoft made a nice return by selling its stock in Expedia in the public market. Unfortunately, there have been virtually no Rich Bartons in the newspaper industry.

How did they do it and what can newspaper companies learn from this?

Bill Gates and Steve Ballmer were smart enough to accede to the request of the leaders of Xbox and Expedia to have separation from the main company. That had three main dimensions:

• Physical separation. Both the Xbox and Expedia teams were located several miles from Microsoft’s main campus.
• Brand separation. Other than very light branding (e.g., in the footer of their website in a subtle gray font), you see little or no mention of Microsoft in Xbox. Expedia became a fully independent brand.
• Technology separation. A pivotal early decision was to not tie Xbox to the Windows platform which is a general purpose operating system rather than something that is focused purely on gaming. I wasn’t privy to Expedia’s development details but I don’t think the technology platform was a big factor one way or another.

Smartly, both organizations did leverage at least three things from the parent.

• They hired in great talent in to their teams. Just as important, they weren’t forced to bring people on to their teams.
• They utilized the company’s capital to build big new businesses.
• They leveraged the distribution capability of the parent. In Xbox’s case, they didn’t have to establish all new channels of distribution. In Expedia’s case, they had a carriage agreement with MSN that gave them a huge infusion of traffic to build their business.

Is it too late for newspapers? No more than it was for IBM in the early 90’s when many wrote them off. Will their leadership and investors have the guts to do it? I’m hearing rumblings from a few. Most are half-hearted attempts. Fortunately, there are some capital efficient ways of doing this. For example, with as many as 20,000 hyperlocal sites having formed in the last few years, a smart partnering strategy, limited capital and a distribution partnership would be a way to start.