Why CNC is closing

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James OShea
  • James O'Shea
James O'Shea, founder and editor of the Chicago News Cooperative, told his staff Friday afternoon that on February 26 the CNC would shut down. Or to be more specific, it would stop publishing in the New York Times and stop maintaining its website, the two forums in which it publicly exists.

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.

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