Editor’s note: Tom Stites had a long career in newspapers, editing Pulitzer-winning projects and working at top newspapers like The New York Times, the Chicago Tribune, and the Philadelphia Inquirer. In recent years, he’s shifted his emphasis to trying to figure out a new business model for journalism through the Banyan Project. Here, Tom outlines where he believes web journalism stands today and one model he thinks might work; here’s part one, here’s part two, and this is part three.

Maybe we’ve been looking for models in all the wrong places. To find the elusive secret to making web journalism sustainable in community after community, maybe we need to take a peek behind the curtain into the secret sector of the economy.

For years now, people have been trying to devise business models for online community journalism that are both sustainable and replicable, but the usual sectors aren’t delivering: Only a few isolated for-profit sites are generating enough advertising revenue to support themselves while producing the original reporting that’s so crucial to civic health and democracy; on the nonprofit side, there are nowhere near enough philanthropic dollars to support enough sites, at least not for long (see part one of this series). And the idea of public-sector news publishing gets tangled up in the First Amendment.

It’s common to think these three sectors are all there are, but there’s a fourth — the cooperative sector — which future-of-journalism efforts are just starting to explore. U.S. co-ops take myriad forms and represent $3 trillion in assets, $500 billion in revenue, and $25 billion in wages; they include 7,794 credit unions and 864 utility co-ops that distribute electricity over 75 percent of the nation’s land mass. Few people know that co-ops are such a significant and healthy slice of our otherwise ailing economy — the U.S. government doesn’t keep statistics on them and, because co-ops are structured to build community wealth rather than investor wealth, business journalism largely ignores them.

What’s magic about co-ops is that for a long list of industries they offer stable and replicable business models that work in economic settings too arid to support for-profit models — the kind of situation many communities are experiencing with journalism after five grim years of plummeting newspaper advertising revenue that’s led to drastic cutbacks in original reporting (see part two of this series). Now that the news ecology has turned from verdant to desert-like, particularly in less-than-affluent communities where the majority of the U.S. public lives, might co-ops grow the hardy cactuses that journalism needs to thrive again?

Judging by experience in other countries, the answer is yes. Long-established reader-owned co-ops publish newspapers in Italy, Germany, England and Mexico. A worker-owned cooperative is creating an ambitious city-by-city set of news sites across Canada that combine to publish a national weekly newspaper. Also in Canada, listener-owned co-ops operate radio stations.

But to date there are no such co-op journalism efforts in the United States.((Despite their names, the Chicago News Cooperative and KOOP radio in Austin, Texas, are standard nonprofits. The Associated Press is a cooperative, but a producer co-op owned by the news organizations that it provides with state, national, and foreign news.))

Disclosure: The Banyan Project, which I lead, is building a reader-owned co-op model that’s designed to scale massively, the way depositor-owned credit unions and shopper-owned food co-ops have scaled community by community, coast to coast. Banyan has chosen Haverhill, Massachusetts — a middle-income city of 60,879 whose daily newspaper has devolved into an under-resourced weekly and whose radio station has shut down — as its pilot community. As a news desert, Haverhill has very little focused coverage of issues facing the community or of life-issue reporting that its people can use to make their best life and citizenship decisions. Presuming that the pilot thrives, Banyan envisions scaling with each added community site run by its own democratically run co-op with hundreds of local member/owners; a federation would provide the co-ops with turnkey licenses for sophisticated software and other centralized services.

If other co-op approaches are being planned in the U.S., I’ve not discovered them — but there are many other possible approaches, such as the worker-owned co-op being developed in Canada. I’m cheering for lots of social entrepreneurs to jump in and cultivate their own ideas. The Citizen Media Law Project, part of the Berkman Center for Internet & Society at Harvard, wants to help all comers — it is researching the legal issues that journalism cooperatives will face and will post its findings on its online legal guide.

Recent events are making co-ops less of a secret: In 2009 the University of Wisconsin Center for Cooperatives published a comprehensive study of co-ops’ role in the U.S. economy; more than 700,000 people moved their accounts from major banks to credit unions in response to the Move Your Money campaign inspired by the banks’ just-rescinded fees for use of debit cards, and the United Nations has proclaimed 2012 the International Year of the Cooperative. Co-ops are more common in Europe, where the form originated more than a century and a half ago, and in less developed countries where economic deserts are more common; worldwide, more than 1 billion people are co-op members.

Cooperative firms are fundamentally different from other business organizations. They are neither investor-owned businesses nor nonprofit organizations, although the IRS grants tax-exemptions for some forms. Community-Wealth.org, a project of the Democracy Collaborative, based at the University of Maryland, offers this definition: “A cooperative can be any business that is governed on the principle of one member, one vote.”

So the cooperative view of capital differs quite a lot from Wall Street’s. For example, the International Cooperative Alliance has established seven principles that include concern for community; many co-ops pursue the triple bottom line of financial soundness plus positive social and environmental impact. In this era of rampant deceptive business practices, says Tom Decker of the National Cooperative Business Association in Washington, a significant source of co-ops’ strength is the trustworthiness inherent in their democratic and accountable structure.

This is also an era of rampant mistrust of journalism, so co-op news sites’ trustworthiness has the potential to add value to what they publish. Further, the co-op form allows, or rather demands, that news coverage decisions arise from the what a community’s people need rather than from today’s dominant approaches: finding ways to sustain legacy news institutions or designing Web models to conform to various ideas about what technology seems to demand. The web is inherently collaborative — just as co-ops are — and at the local level this creates the potential for civic synergy that could add still more value to co-op community journalism.

Cooperatives arise as a bottom-up response to market failure: It’s a lot of work to start a co-op, so if for-profit businesses were providing needed goods and services at fair prices, why would people go to all the bother? Without economic deserts, there would be no co-ops, but over time there has been no shortage of deserts and there is no shortage now.

The Wisconsin study reports that the great boom in credit unions came, no surprise, in the Depression, after widespread bank failures created a credit desert. That’s also when electric utility co-ops came on the scene, with a boost from the Rural Electrification Administration, a New Deal effort. In the 1930s, cities were 90 percent wired but 90 percent of rural homes were not — investor-owned utilities shunned the high cost of wiring rural areas. Co-ops filled the void.

In today’s struggling economy, Decker says, co-ops are on the rise. The scarcity of reliable child care and home health care are arid zones that are inspiring co-ops to form. “Worker-owned home care cooperatives,” the Wisconsin report says, “are emerging as a way to both address high staff turnover and to improve the quality of home care services provided to the elderly and disabled.” Decker reports a rise in worker co-ops in other fields as people come together to invent livelihoods for themselves in a time when jobs are so scarce. He also estimates that as many as 300 food coops will form in 2011, many to meet demand for a coherent supply of local food that supermarkets don’t supply. “Local,” he says, “is the key.”

Now, news deserts are proliferating and the need is great. It may be that co-ops will be the only new journalism business model that can take root in current market conditions. May many species of news cactuses bloom.

Tom Stites, president and founder of the Banyan Project, which is building a model for web journalism as a reader-owned cooperative, was a 2010-2011 fellow at the Berkman Center for Internet and Society at Harvard.

Photo by Andrea Marutti used under a Creative Commons license.