Closing of news bureau leaves regrets, questions

CNC

CNC’s stock in trade was chasing down politicians for local legislators’ take on the day’s developments in Congress. Elizabeth Wynne Johnson, right, catches Kay Bailey Hutchison (R-Tex.) for a comment.

There was no shortage of ideas for keeping Capitol News Connection afloat.

CNC’s stock in trade was chasing down politicians for local legislators’ take on the day’s developments in Congress.

Before it was shuttered in September, public radio’s little nonprofit news bureau on Capitol Hill tried expanding into online news reporting, revising fees, selling localized coverage of Congress to newspapers and TV stations as well as pubradio, and developing widgets and apps to boost its income.

As founder and CEO Melinda Wittstock worked relentlessly against recession economics to save the cash-strapped newsroom, she turned to a dot-org hope. Her conception for NewsIt, a crowdsourced social-media news platform, was perhaps her biggest idea to date.

But losses continued to mount as stations dropped subscriptions, two foundations nixed additional grants, Wittstock assumed personal debt, and expenses continued for the scaled-back bureau while she sought a solution. Meanwhile, CPB, the bureau’s most generous funder, was facing reduction of its congressional appropriation, and reexamined its commitment.

The story of CNC’s demise reveals pitfalls for entrepreneurial nonprofit news operations, especially on the frontier where for-profit investment and technical innovation might bring a big upside but carry no guarantees. For Capitol News Connection, like numerous small nonprofits these days, the end was marked by debt, disputes over broken financial commitments, and a gaping hole in news coverage for stations that supported CNC until the end.

Despite Wittstock’s marketing push beginning this spring, only about 13 pubradio outlets signed up for CNC reporting for the present fiscal year — less than a quarter of the bureau’s peak in 2006–07.

Annual fees for CNC’s service, in the neighborhood of $10,000 per station, had never covered more than 30 percent of costs, Wittstock said, and some stations were reluctant to resubscribe after the news bureau almost shut down in late 2010. To keep CNC going, Wittstock arranged a $75,000 line of credit with her home as collateral, she told Current.

As a final decision point neared this summer, Wittstock attempted unsuccessfully to recruit a white-knight partner or buyer. In September, the board of Pundit Productions Inc., the nonprofit Wittstock had founded to run CNC, decided to shut the bureau. After producing almost 40,000 audio spots and news features during its eight-year lifespan, CNC closed Sept. 30, laying off its small staff and vacating the tattered office across the street from the U.S. Senate.

Thirteen stations and one newspaper — the Gazette, in Cedar Rapids, Iowa — had laid out fees for the year and found themselves without a Washington bureau.

Pundit’s board said in a statement that it “deeply regrets any unmet obligations to stations, consultants and to the CEO who has incurred significant personal financial liability. It is our hope to meet as many of these obligations as possible.”

Potentially “game-changing”

NewsIt entered the CNC story at the beginning of the end. The web application was in development and its beta-stage site not yet launched but Wittstock said it could become CNC’s revenue engine. When the news bureau went under, it became Wittstock’s next dream.

Last year at this time, Wittstock was working on plans for CNC and NewsIt with Jim Russell, longtime top producer at Marketplace and now an active program developer based in North Carolina.

NewsIt, Wittstock’s new project had “tremendous potential for public radio,” but requests for further grant funding failed to materialize, and she set to find venture capital. Pictured: In October, she participates in a Springboard forum for women-led businesses seeking capital. At left, Dan Kunitz, former managing editor of Politico, helps fly the NewsIt flag. (Photo: Jean Luc Mege Photography, www.jeanlucmege.com.)

Wittstock described NewsIt as “a game-changing, transformative concept,” a web-based platform that combines social networking, gaming psychology and tools to recruit people to report news “in a really focused way.” With its built-in rewards for participants, she said, “it’s like Foursquare applied to news.” The system is designed to track the reliability of citizen journalists and give priority to reports from the best, she told Current.

“We thought it had tremendous potential for public radio, because everyone is struggling with local news coverage and how to create it in a cost-effective way,” Wittstock said.

In November 2010,Wittstock and Russell pitched a proposal to CPB to develop NewsIt as a for-profit revenue generator for the CNC bureau and wean it from CPB aid that had been vital for its operations. But the proposal to subsidize CNC with revenues from the unproven NewsIt, and involvement with for-profit financing were problems, according to Bruce Theriault, CPB radio chief. In December CPB said it was unlikely to fund NewsIt. Though CPB later gave Pundit a temporary grant to plan a new future for CNC, the cash infusion also failed to save the bureau.

This fall, the reporters’ chairs and microphones and the CNC website were among the few remaining assets to be sold as the office closed. Wittstock said she herself acquired Power Breakfast, CNC’s morning news module, and Ask Your Lawmaker, an online widget that collects listener questions for members of Congress.

The sale of CNC’s assets, and Wittstock’s plans for NewsIt, have become a focus of interest for Russell, who is trying to collect $7,300 for his work. He’s willing to write off a similar sum spent on behalf of the nonprofit news bureau but is pressing for payment for his work on NewsIt. Russell and Wittstock disagree over whether he agreed to be paid with a piece of NewsIt ownership. He recalled insisting on cash.

“It’s one thing to go out of business — things fail and people make mistakes,” Russell said. “But it’s how you go out of business and what kind of blood you leave on the sidewalk. I gather that there are a lot of victims here.”

Russell is the most outspoken among those “victims.” He’s calling for scrutiny of Pundit Productions, which listed NewsIt Public Media on its 2010 tax statement. NewsIt (then called AssignIt) began as a foundation-funded project of Pundit Productions, CNC’s parent nonprofit, but Wittstock and Russell said Pundit established NewsIt as a limited liability corporation in 2010 and separated from CNC. As CNC prepared to close, Wittstock told Current she was lining up friends to invest in NewsIt.

While Wittstock was eager to tell her story of perseverance in Current as CNC was closing, this month she and Pundit’s nonprofit board largely declined to answer questions about NewsIt decision-making and the disposition of Pundit assets. She said NewsIt had “angel” investors but declined to name them. “This is a private company, and our accounts have been independently audited,” she said last week.

The decision to pursue for-profit status for NewsIt was made after CPB and other funders of nonprofit media turned down grant proposals to develop NewsIt apps for public radio journalism, Wittstock said. Without grants, the startup has been “boot-strapped” with sweat equity by people working on it, Wittstock said.

The restricted grants that Pundit received to develop NewsIt in 2010 were carefully managed under nonprofit accounting standards, according to statements given to Current by Wittstock and Pundit’s board. “The Board has taken special care to ensure that Pundit funds have been devoted solely to the Corporation’s [Pundit’s] activities,” the board said in a statement Dec. 7. “The Board is confident that all grant, subscription and other funds were properly applied and accounted for.”

Pundit’s board president, Washington attorney George Foote, and treasurer Marianne Bottigleiri, a nonprofit accounting specialist in Vermont, declined requests for interviews. Bret Marcus, a board member and content chief of KCET-TV in Los Angeles, said he’d talk with a reporter but didn’t call back.

Bottigleiri offered Dec. 6 to respond to questions about NewsIt and CNC by email but said the next day that she couldn’t: “The motherboard on my computer blew last night,” she explained in an email.

Some outraged, others not

Russell isn’t the only CNC creditor who’s speaking up. The most vocal pubradio clients are managers of Miami’s WLRN-FM, who were outraged at the news bureau’s closing in September, less than three months after they paid it $20,000 for a year’s service.

News Director Dan Grech told Current that CNC reporters discussed long-term coverage plans with him on Aug. 31 even though they knew a decision to close the bureau was likely within days, and it ended up closing a month later.

“When they were on the call they had already been told they were losing their jobs,” Grech said. “All the reporters who were involved have called me and apologized.”

“We reupped at the highest rates,” Grech said, “and I spent a huge amount of time coming up with an editorial plan with [Wittstock’s] staff — that’s why we feel burned by the way this has gone down.”

At least six stations paid five-figure advances on subscriptions that ultimately would not be fulfilled, but many of the broadcasters recognized CNC’s situation or shrugged their shoulders, accepting the likelihood that they’d never get a refund.

“I don’t think I was duped — I wasn’t fully aware of the situation,” said Brian Larson, news director of KUNC in Greeley, Colo. Thinking back to talks with CNC about his station’s $10,000 renewal, “it seemed on the surface that the discussion about money was handled pretty fairly.”

Like most of the eight station news directors interviewed by Current in October, Larson was more concerned about filling the reporting gap created by CNC’s demise. “I don’t have the budget to pay for a person to cover Congress,” he said.

Phil Shuman, an underwriting specialist who found a corporate backer for broadcasts on Washington’s WAMU-FM, similarly chose not to push for unpaid fees that CNC owes him. “I was not looking to make it more difficult for Melinda,” Shuman said.

“This is what you get?”

The suspicions of colleagues such as Russell and Grech aggrieve Wittstock, who had put much of her prodigious energy into CNC since starting it in 2003.

“I just went to the wall for this organization, and this is what you get? This is what it all comes down to?” Wittstock asked in an interview, responding to Current’s questions about how she divided her time between CNC and NewsIt over the past year.

“We have followed the best practices in accounting standards” and put “scrupulous detail” into reports filed with CPB, she said. “We handled our grants with absolute care, and that’s been verified by outside, independent auditors year after year.”

Wittstock devoted herself to raising money for CNC or “meeting with people to try to get them to buy it,” she said. “I worked 60 hours a week for CNC for the past nine years, and no organization has gotten more value out of one person, who put their house and family’s future on the line.”

No one disputes that Wittstock had worked hard — initially pitching in as a reporter on the CNC team and later as idea generator and fundraiser. CNC developed a unique line of Congressional news coverage that many stations found valuable, especially those lacking resources to closely cover the local members of Congress.

“Overall, I thought it was a great service,” said Andrea Chalfin, news director and sole reporter at KRCC in southern Colorado, who is hard-pressed to cover five members of Congress. “It sort of filled a niche that we can’t really get here.”

“We have a big news hole to fill and were always grateful for the content,” said Trimmel Gomes of WFSU in Tallahassee, Fla.

WPSU in State College, Pa., received great value from its relationship with CNC, said Greg Petersen, station manager. When his budget couldn’t cover the $10,000 minimum subscription, Wittstock negotiated a smaller package valued at $5,000, he said, and delivered “real firsthand reporting that sounded good and was well written.” The reports set WPSU apart from other radio outlets in town. “All the other stations are rip and read.”

But the quality of CNC reporting became inconsistent over the years, said several news directors who knew the bureau had been struggling financially. “Melinda was quite professional, but she not always able to hire the best people,” said John Hingsbergen, news director at West Virginia Public Radio, who also had used CNC reports when he worked at WMUB in Miami, Ohio. “Frequently, we’d get the less experienced reporters.”

For several years, CNC nurtured a syndicated morning module called Power Breakfast that brought the brisk and insightful Marketplace outsider attitude to insider Capitol Hill reporting, with Todd Zwillich and later Elizabeth Wynne Johnson as producer/host. Wittstock said she hoped to produce customized versions of the segment for cities with special legislative interests.

The morning module won only two subscribing stations — WSHU in Connecticut and a more obvious fit, Washington’s WAMU-FM. But Power Breakfast went off public radio after WAMU dropped it in April. Johnson continued to do a TV module for NBC’s Washington station, WRC-TV, until CNC closed in September. (Disclosure: WAMU’s licensee, American University, operates Current through its School of Communication.)

In better times, CNC groomed a series of talented journalists who brought in big awards and went on to bigger reporting jobs — Chad Pergram, now with Fox News, and the former Power Breakfast host Zwillich, who now reports for Public Radio International’s The Takeaway, among others.

Zwillich recalled his CNC period as a formative experience in his career. But, like “a lot of public radio places,” CNC didn’t have a lot of financial stability, he said. “There was always an issue of wondering about the next CNC grant, and the next round of station sign-ups.”

“Always under-capitalized”

Those pressures weighed most heavily on Wittstock, whose commentary in Current Sept. 19 urged funders to pay for revenue-generating personnel if they expect grantees to adopt sustainable business models. “CNC was always under-capitalized and was in a continual struggle to find financing towards self-sustainability,” she said in a statement.

“In the end, in the worst economic conditions since the great depression and with public radio funding on state and federal levels under threat, the operation could not be sustained.”

Russell said CNC’s basic business plan “turned out to be flawed” — promising to deliver custom audio reports to dozens of stations, week after week, while charging fees the stations could afford. “The more people you have buying from you, the more broke you would be,” he observed. “The only way to make money is to record once and distribute numerous times” — that is, serving a national or regional market.

He advised Wittstock to develop a pricing option with less customization, which CNC offered this year with limited success. “They were losing stations, and the economy came home to roost, and everything that could go wrong did,” Russell said.

Since the news bureau’s start, CPB played a major role in filling its budget gaps, contributing grants totaling roughly $2.3 million over the years. Its radio grantmakers passed when Wittstock pitched NewsIt Public Media as the heart of a funding plan for CNC a year ago. The proposal to develop a news service to subsidize CNC would have run into “the high six figures, if not more,” said CPB’s Bruce Theriault.

Income from the NewsIt project was to provide long-term sustainability for CNC under the plan presented to CPB, Wittstock and Russell told Current. Creating a “symbiotic relationship” between a for-profit NewsIt and a nonprofit CNC interested Russell as a novel way to support public media. But the proposal was a tough sell, he said.

CPB was skeptical. “We didn’t want this to interfere with what we’ve been supporting all these years with CNC,” Theriault explained — the Capitol Hill bureau providing coverage of local congressional delegations for public radio stations. “Our biggest concern was that there [should be no] cross-subsidy, no reduction of the service we were paying for,” Theriault said.

Wittstock and Pundit board members assured him that they had separated NewsIt and CNC financially, and their grantee reports to CPB backed up that claim, Theriault said. But CPB chose not to back NewsIt.

Early this year, Wittstock and CPB began discussing what would become CPB’s last grant to the CNC news bureau. CPB notes made available by Theriault say conversations about the funding continued into March, when CPB approved a six-month, $300,000 grant with no guarantee of long-term renewal. “The goal was to continue to support what we thought was an important service to the system and deal with issues of whether or not it was financially sustainable” from station fees, he said in an interview.

CPB’s assistance gave Wittstock a chance to revive the news bureau by hiring staff and marketing year-long subscription renewals to stations under a new pricing plan, but WLRN managers said Wittstock misrepresented CPB’s commitment when she convinced them to re-up for $20,000.

“We knew the funding was precarious the last couple of years but we had no idea of the severity of the situation,” said John LaBonia, WLRN manager. “The only reason we agreed to renew was because Melinda had assured us that CPB would continue the funding.”

Several news directors interviewed by Current said they received assurances about CNC’s financial stability during renewal talks with Wittstock.

In Wittstock’s view, she was doing the right thing. “We believed that we had CPB’s support when we had those stations renew …,” she said. “We did everything in good faith to always be honest and clear.” The terms of CPB’s grant even required her to seek renewals, she said.

This summer, Pundit failed at its final try for CPB funding. To secure further CPB aid, Theriault said, the nonprofit needed to submit a business plan that relied mostly on earned revenue.

What Wittstock came back with in July was “a shocker,” Theriault said. “The only plan was for CPB to come up with 100 percent of the cost, and it was a lot.”

Wittstock says Pundit’s plan saw sustainability farther down the road. “We made clear that we would need more CPB support, but ultimately in five year’s time we could build an organization that was not only sustainable but robust,” Wittstock said in an interview.

On July 13, CPB told CNC that “there will be no further funding.” On Aug. 24, it nixed yet another CNC appeal, according to CPB notes.

After Wittstock’s last-chance tour of potential buyers and funders, On Sept. 12, Pundit announced its decision to close CNC. Subscribing stations were notified the next day.

“This month we lost a critical and substantial long-term financial funder, the Corporation for Public Broadcasting,” Wittstock wrote in an email to stations, “and after a careful review of our finances and cash flow, we have concluded that it would be impossible to replace those funds in time to ensure continuation of that service.”

When Wittstock looked back on the CNC experience in a Current commentary published Sept. 19, she credited CPB for its long support for the news bureau but also urged it and other funders to be more nimble and supportive of entrepreneurial efforts in public media — reducing paperwork, paying grants promptly, and helping to pay for the fundraising that leads to sustainability.

CPB had nixed the funding renewal in July and its six-month grant officially ended in August, but news bureau clients were jarred to learn in September that CPB had pulled the plug and CNC would close.

The focus on CPB’s no-thank-you decisions and its difficult grant processes wasn’t well received at CPB either.

“I found that characterization to be inaccurate and frankly disingenuous,” Theriault told Current, “and I have told her point blank.”

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RELATED LINKS

Capitol News Connection, the reporting bureau that Wittstock founded and managed for more than eight years, covered Congress for subscribing public radio stations.

CNC’s audio module Power Breakfast ended its public radio run in April 2011.

The online widget Ask Your Lawmaker, helped citizens get answers about policy questions from their members of Congress.

Wittstock pitched NewsIt at Next Big Thing, a showcase for digital media start-ups, in November 2011.