The Revenue Conundrum
This is Chapter 4 from a new report “Local Journalism in the Pacific Northwest: Why It Matters, How It’s Evolving, and Who Pays for It,” published last week by the Agora Journalism Center, University of Oregon. Previous chapters (Why Local Journalism Still Matters, The Evolution of Local Journalism, The Rise of Engagement and the Executive Summary) are also here on Medium.
“Our experience is not that there’s any lack of an appetite for good quality journalism…but it’s just being able to be creative in identifying ways to finance it.”
— Mark Zusman, Editor and Publisher, Willamette Week (Portland, Oregon)
Local news media remains important for many news consumers, but attracting advertisers and getting audiences to pay for content remains a challenge. According to Mark Zusman, editor and publisher of Willamette Week, a Pulitzer Prize–winning weekly serving Portland and the Willamette Valley, the key challenge local news organizations face is “sorting out the business model.” This underpins all other efforts explored in this report.
As John Costa of the Bend Bulletin (Oregon) reminds us:
“The business model is very important. You cannot have an artistic success without a financial one, not for long…. But the purpose of that business model is to make sure that you’re doing high-quality content because you have to collect readers/viewers in our business to stay vital.”
Achieving that goal, however, is not always easy. As Pew noted in its 2016 “State of the News Media” report, the trend lines for newspaper revenues and circulation are not pretty:
In 2015, the newspaper sector had perhaps the worst year since the recession and its immediate aftermath. Average weekday newspaper circulation, print and digital combined, fell another 7% in 2015, the greatest decline since 2010.
While digital circulation crept up slightly (2% for weekday), it accounts for only 22% of total circulation. And any digital subscription gains or traffic increases have still not translated into game-changing revenue solutions.
In 2015, total advertising revenue among publicly traded companies declined nearly 8%, including losses not just in print, but digital as well.
Those are the sobering statistics. But they’re also aggregated figures, so it’s worth noting that these headlines hide a myriad of experiences, including the view that many small community papers have weathered the storm better than their metropolitan counterparts.
Nonetheless, all publications — large or small — are being shaped by a number of underlying factors that have had a profound impact on the traditional revenue streams local media has historically tapped into.
These factors include:
1. Publishers receive “digital dimes” for what were previously “print dollars.”
Newspapers have typically found that in the digital arena, they cannot charge prices akin to the print monies of yesteryear. New channels for online advertising (such as Craigslist, Yelp, Google, and Facebook), coupled with new advertising practices, such as programmatic buying and targeted advertising, have changed the playing field.
2. Changes on Main Street have reduced the local advertising pool.
Former Gannett Editor Kevin Anderson described this evolution in Sheboygan, Wisconsin, noting the reduced number of local traders: businesses that used to advertise in their local papers. “The shift from local businesses to national chains started long ago, and it had a profound impact on local media,” he observed, highlighting a nationwide trend.
3. Online channels can deliver more targeted ads.
Digital platforms that can reach audiences searching for a specific product, experience, or passion may be a better route for some businesses than general advertising. Their potential precision — as well as a scalable cost model — can also be appealing. Subsequently, the maxim (attributed to Henry Ford and others) that “half my advertising is wasted; I just don’t know which half,” no longer quite rings true.
What this means, as Zusman explains, is that publications need to “identify other sources of revenue that are consistent with our core competencies but will allow us to continue to finance journalism, which is basically the reason for our existence.”
The need for this is particularly acute given that nondigital sources (often print advertising) still accounted for 75 percent of newspapers’ advertising revenue in 2015. The extent to which income diversification is a business imperative will vary across different outlets. Nonetheless, the need to diversify revenue streams is fairly universal. As a result, media providers in the Pacific Northwest and elsewhere are experimenting with a range of different way to secure income.
Here are five of the most popular ways that local media organizations are seeking to do this:
1. Paywalls and Digital Subscriptions
Research conducted by Alex T. Williams, a 2015 Research Fellow at the American Press Institute (API) found that “of the 98 newspapers we looked at, 62 papers used meters, which is nearly three times as many as those [21 papers] not requiring a digital subscription.”
Williams’ research — which covered 98 daily newspapers in the United States with a combined daily circulation (across print, digital, and branded editions) above 50,000 readers — showed how, since 2012, U.S. newspaper publishers are embracing metered paywalls (where content must be paid for after a certain number of free articles) and full digital, or combined print and digital, subscriptions are the leading mechanisms for securing online revenues.
These experiments are not unique to larger titles.
Paywalls are also present at smaller entities from weeklies such as the Cottage Grove Sentinel (Oregon), a weekly title with a circulation of 4,200, as well as newspapers like the Vancouver Columbian (Washington) and the Bend Bulletin (Oregon) (circulation: 26,986 Monday through Friday, 27,253 on Saturdays, and 27,599 on Sundays).
As shown in the chart above, the models that publishers in the Pacific Northwest use, as elsewhere, vary considerably.
This reflects considerations such as frequency of delivery — the Oregonian, for example, moved to four days a week of home delivery in late 2013 — and economies of scale for longer subscriptions.
The Seattle Times has also experimented with selling subscriptions on Groupon. A recent offer included $18.50 for a 26-week Sunday newspaper subscription ($103.74 value) or $27.50 for a 52-week Sunday newspaper subscription ($207.48 value).
These deals are substantially discounted.
Commenting on whether the future lies in “readers paying for content or through advertising,” Jim Simon, the former managing editor of the Seattle Times, observes that “obviously it’s going to be a blend of those things, but there is real debate about which things you should really concentrate on or put your primary focus on.”
“I think there’s a debate [to be had about] whether those new revenue sources around online really [are] the most fruitful,” he says. This important strategic question plays out against a backdrop where “like a lot of folks in the legacy business, revenue remains stubbornly coming from print [and] a diminishing print base.”
For the Seattle Times and others, the need to capture digital subscribers remains important, but it is just one of a myriad of income sources that local media providers are trying to unlock.
Attracting revenues in the digital world, for many publishers, has simply involved migrating their traditional strategy (display advertising and subscriptions) into the online arena.
Although these efforts have not resulted in a like-for-like income stream, it arguably hasn’t inspired them to innovate much either. In contrast, the event space — an area that a number of local media outlets have been moving into over the past couple of years — has required them to think — and do — things differently.
For local media players, events are an opportunity to engage your community in the real world while potentially attracting significant revenue in the process.
These communities can be both geographic and communities of interest. In March 2017, Seattle-based GeekWire — a “national technology news site with strong roots in the Seattle region” — hosted its Sixth Anniversary Bash.
“This is a party first and foremost,” the company’s site stated, highlighting dodgeball, ping-pong, and arcade games.
It also noted, however, that you might “find your next great tech job, employee, customer, business connection, startup partner — heck, maybe even your future husband or wife.”
The site also hosts other events aimed at the local and national tech community, including summits, meetups, a gala event, awards, and a daylong entrepreneurial bootcamp called GeekWire Startup Day.
Following in these tech-led footsteps is TechFestNW, a convening of entrepreneurs, investors, and startups in Portland, Oregon, founded by Willamette Week’s Mark Zusman in 2012. Zusman also co-founded MusicFestNW, which takes place in Portland’s Tom McCall Waterfront Park.
In pursuing this model, PNW media organizations like GeekWire and Willamette Week are not alone.
Emily Ramshaw, editor-in-chief of the Texas Tribune (Austin, Texas), also observed that “we have a really robust events business, a politics and policy events business that has been lucrative for us and allowed us to [produce] a lot of great journalism as a result.”
In January 2017 alone, the Texas Tribune hosted seven events, featuring politicians and academics and covering topics such as race and public policy, ethics and open government, and mental health. It also hosted a trivia night.
Back in Philadelphia, around 80 percent of Billy Penn’s revenue in 2015 came from events. As CJR noted, these activities “can have up to a 75 percent profit margin.”
Its events program includes “everything from happy hours to celebrations of the site’s “Who’s Next” list to a pope-themed pub night. Gala events, like Billy Penn’s birthday party, can be sponsored by multiple institutions, and tickets are sold at prices from $20 to $40. Print programs present an opportunity to sell ads.”
The events space, which creates opportunities to create content — as well as revenue — is an arena we can expect more publishers and local media companies to move into in the future.
3. Digital Media Services
Events, Zusman argues, build on “the core competencies of journalism companies” by applying them in different contexts. Good publishers, he suggests, have transferable skills:
Number one, you know how to create content. Number two, you know how to aggregate an audience of readers. And number three, you know how to sell that audience, in essence, to advertisers.
“Those are core competencies that any decent media company already has,” he says. “The question is, can you apply those competencies in other ways to help find ways to support and broaden your journalism?”
One clear way a number of publishers are doing this is by leveraging their experience as news and information providers to support paying clients seeking digital marketing solutions.
The Eugene Register-Guard (Oregon) is one news provider doing just this, through its spin-off RG Media Company.
The company’s website and Twitter bio clearly outline how they seek to harness their primary expertise in delivering the Register-Guard across print, online, and mobile apps to offer services such as print and digital advertising design, website design/development, search engine marketing, video production, and content marketing. The Register-Guard also publishes the daily print edition of the Gannett-owned paper Salem Statesman Journal.
Other newspaper outlets pursuing similar strategies include much bigger publications, such as the Dallas Morning News (average Monday through Friday print and digital replica circulation: 264,908,) and efforts led by larger media groups, such as Hearst’s offshoot LocalEdge.
A number of media outlets have benefited from foundation funding, with the John S. and James L. Knight Foundation being perhaps the best known donor to U.S. journalism. Recent projects benefitting from their support include the Baltimore Reporting Project, efforts to provide legal assistance to individual journalists and new organizations, the newsroom digital transformation project run by the Institute for Journalism in New Media, and a two-year, $200,000 grant to support Local Independent Online News Publishers.
In early 2017, the Knight Foundation supported 60 nonprofit news organizations, such as Charlottesville Tomorrow, IowaWatch.org, and St. Louis Public Radio, through a $1.5 million fund offering to match donations from individual donors of up to $25,000 for each participating organization.
For transparency, it should also be noted that the Knight Foundation has also supported efforts led by the Agora Journalism Center at the University of Oregon to “support [a] digital gathering space for people passionate about journalism and civic engagement.”
Other bodies have often had a more specific geographic or subject focus.
This includes the Dodge Foundation’s work in New Jersey — worth more than $3.25 million in the last five years — and the Public Square Program at the Democracy Fund, which supports innovations and institutions designed to help people understand and participate in the democratic process.
The Democracy Fund’s website notes that “current grantees of the Public Square Program include the Institute for Nonprofit News, the American Press Institute, and the Engaging News Project.” It has also supported the work of the Agora Journalism Center.
Given this, “one thing that surprised me,” admits Matthew Powers, assistant professor in the Department of Communication at the University of Washington (Seattle, WA), “because we hear so much about foundations in the U.S. is, at least within Seattle, how small a role they play.”
In fact, I had multiple people at online startups tell me basically good riddance with foundations. And their reason was pretty straightforward. The claim was — and I think it’s a reasonable one — that foundations tend to be interested in the latest ideas, and they want to fund new things that are exciting and interesting. They don’t want to fund sites that already kind of work but actually need support.
And so, in a lot of ways, there’s this kind of skepticism built in because they don’t think that they can actually get resources to support the type of work that they do. And they’re right. I don’t think they’re entirely right, but I also don’t think they’re entirely wrong.
One notable exception in the Pacific Northwest is Education Lab at the Seattle Times. Launched in October 2013, the initiative “spotlights promising approaches to some of the most persistent challenges in public education.”
Education is an important topic, but a subject area that “wouldn’t draw huge audiences,” suggests Jim Simon, the paper’s former managing editor. He says:
Most of the stories don’t draw huge audiences. Some of them do really, really well. But we can monetize it with outside funding too. Or continue doing that kind of reporting with outside funding.
A similar foundation-supported approach enabled the paper in 2016 to travel to South Africa to produce a two-part series exploring how research led by Seattle scientists could help eradicate HIV. Reporter Nina Shapiro made the trip to South Africa on an International Reporting Project fellowship, and funding for overseas reporting by the Seattle Times is provided by a grant from the Seattle International Foundation.
Education Lab is funded by grants worth $530,000 from the Bill & Melinda Gates Foundation ($450,000) and the John S. and James L. Knight Foundation ($80,000). These funds are used to “pay for the salaries of two education reporters, allowing us to expand our education team; an editor and photographer primarily dedicated to the project; and a newly hired community-engagement editor.” Other monies are used “for community outreach and public forums, creation of a blog and design and data work.”
Produced in partnership with the Solutions Journalism Network, Education Lab seeks “to create a new conversation that connects teachers, parents, students, and others around innovation in schools.” Outputs include articles, events and community meetings, and a weekly newsletter.
The initiative’s website notes that “foundation funding is not new” for the paper, citing a grant from Pew back in 1994, through to more recent support, such as a grant from the Seattle International Foundation to help cover “international reporting on global poverty issues.”
The website notes: “The Seattle Times would neither seek nor accept a grant that did not give us full editorial control over what is published,” and that “the Seattle Times is pursuing foundation funding to support public-service reporting projects that are particularly costly or resource intensive.”
Although these efforts have been successful enterprises for the Seattle Times, these types of relationships are not without their challenges.
One key consideration is that the timelines foundations operate on are often very different from those of newsrooms. Another consideration is that success metrics may also vary.
A further issue, as previously identified by Matthew Powers, is the perception “that foundations tend to be interested in the latest ideas, and they want to fund new things that are exciting and interesting.”
That’s potentially a big issue for online start-ups. Powers estimates there are between 50 and 100 startups in Seattle, many of which potentially feel discouraged about developing relationships with foundations because of their perceived focus.
As a result, Powers argues that there’s a strong sense among the news start-up community that foundations aren’t necessarily for them, even though many of these local start-ups “already kind of work, but actually need support.”
5. Membership Schemes
For some local media operators, such as NPR stations and their affiliates, memberships are a revenue model they’re already very familiar with.
According to the OPB website, for example, “approximately 64% of the funds we raise comes from individual membership contributions from viewers and listeners.” OPB provides content for Oregonians on TV and radio and via its website, apps, and podcasts.
“I think one of the main ingredients of our secret sauce, if you will, is pledge drives,” indicates OPB’s senior vice president and chief content officer, Morgan Holm.
It forces you to articulate on a regular basis to your audience what you do for them and why it’s of value to them. And you know pretty quickly whether that’s working or not, because if people don’t call and make a commitment to you, you’re either not doing the work that you say you’re doing or they’re not getting the point of what you say.
In Eugene, Oregon, KLCC — a charter member of National Public Radio and the primary NPR member station in the Eugene/Springfield area — lists a number of ways audiences can contribute to their financial well-being, including sustaining membership (monthly ongoing donations), stock transfers, business underwriting, and vehicle donation.
The station, which reaches over 80,000 listeners each week within a 100-mile radius of Eugene, celebrates its 50th anniversary in 2017. The milestone coincides with a temporary cut in funding that the station has asked listeners to help meet.
The News Revenue Hub, which launched in late 2016, is working with a number of local and national news organizations to “set up comprehensive membership and crowdfunding programs so they can achieve greater sustainability.” Hub participants include state-focused outlets such as Honolulu Civil Beat, NJ Spotlight, CalMatters, and the Rivard Report, an independent outlet that focuses on San Antonio, Texas.
For those organizations, OPB’s Holm offers some advice:
When it lines up and you’re doing the work, and you’re articulating to the audience that you’re doing the work, and you’re signaling to them [the audience] this is how you recognize the value of this, and you make that a relatively easy transaction, then you start to build a viable membership model.
Recap and Reflections
Business and revenue models underpin the ecology of the local media landscape.
As in other regions, organizations are exploring a plethora of different means to generate revenue, including paywalls, events, creative media services, and support from foundations, while NPR and PBS outlets continue to place a strong emphasis on donations and membership drives.
These efforts are part of a wide move to diversify revenue and reduce reliance on print advertising and subscriptions, income sources that are typically declining. Finding the right revenue mix to support acts of journalism is therefore a strategic priority for all news providers, whatever their size or scale.
 http://www.journalism.org/2015/03/05/local-news-in-a-digital-age/, accessed July 7, 2017
 http://www.journalism.org/2016/06/15/state-of-the-news-media-2016/, accessed July 7, 2017
 See: http://www.newspressnow.com/opinion/editorials/don-t-cry-for-local-newspapers/article_84898eeb-8d96-5cee-997f-13a4b2244f9d.html and http://www.voiceofsandiego.org/topics/news/as-dailies-vanish-local-community-papers-stubbornly-survive/, both accessed July 7, 2017
 If you’re unfamiliar with these terms, a few definitions and explanations may be useful: “Programmatic advertising helps automate the decision-making process of media buying by targeting specific audiences and demographics.” http://marketingland.com/library/display-advertising-news/display-advertising-programmatic-media-buying. Social networks like Facebook, allow advertisers to target demographics by profile — including location, gender, and other interests: http://www.socialadstool.com/facebook-ads-guide/how-facebook-ads-work/. You can also find targeted advertising on your Google searchers based on previous searches and your internet history: http://www.theglobeandmail.com/technology/tech-news/how-google-uses-your-searches-to-target-ads-at-you/article16356560/. Meanwhile, dynamic video advertising enables marketers to offer personalized video ads on services you watch on your TV: https://www.bloomberg.com/news/articles/2015-09-29/tv-ads-are-about-to-get-personal-with-new-targeting-tools and http://www.tomsguide.com/us/google-customize-tv-ads,news-22576.html. All accessed on July 7, 2017.
 https://www.themediabriefing.com/article/watch-retail-to-know-the-direction-of-local-media, accessed on July 7, 2017
 https://www.facebook.com/business/learn/how-much-facebook-ads-cost, accessed on July 7, 2017. See also this experiment: https://blog.bufferapp.com/facebook-ads
 http://staff.washington.edu/gray/misc/which-half.html, accessed on July 7, 2017.
 http://www.journalism.org/2016/06/15/newspapers-fact-sheet/, accessed on July 7, 2017.
 https://www.americanpressinstitute.org/author/alextwilliams/, accessed July 7, 2017
 Website readers get 10 free articles a month. When they click on the 11th article, they hit a paywall and are asked to subscribe. Subscriptions cost $37.65 per year for home delivery and online access, and $35/year if subscribers want online access only and no physical paper. The paper runs $29/year specials all the time for first-time subscribers. At the end of their first year, they go up to the regular rate. Information provided by email from Caitlyn May, Editor of the paper, July 5, 2017.
 All details correct as of March 4, 2017.
 http://www.oregonlive.com/business/index.ssf/2013/06/the_oregonian_will_go_to_four-.html, accessed July 5, 2017
 https://www.groupon.com/deals/i-the-seattle-times-i, accessed March 4, 2017
 Image generated on March 4, 2007
 Interview with the author, August 3, 2016
 Unpublished interview with Dr. Christopher Ali, summer 2016, part of joint project with the author
 http://www.cjr.org/united_states_project/billy_penn.php, accessed March 4, 2017
 http://www.editorandpublisher.com/feature/trend-watch-digital-marketing-services/, accessed July 3, 2017
 https://localnewslab.org/2016/02/01/lessons-from-the-local-news-lab-part-one/, accessed July 3, 2017
 http://www.democracyfund.org/portfolio/entry/agora-journalism-center, accessed July 3, 2017
 Part One: http://www.seattletimes.com/seattle-news/health/we-have-only-one-shot-the-hutchs-quest-to-wipe-out-aids-in-south-africa/ and Part Two: http://www.seattletimes.com/seattle-news/health/ongoing-hiv-vaccine-quest-has-taken-a-long-hard-road/, both accessed July 3, 2017
 http://www.seattletimes.com/education-lab-about/#education-lab-faq, accessed July 3, 2017
 https://opb.desk.com/customer/en/portal/articles/1632463-membership-drives?b_id=4477, accessed July 5, 2017. Information last updated April 18, 2016.
 http://klcc.org/post/help-mitigate-klcc-funding-cuts, accessed July 5, 2017