If technology destroyed the profit model that supported news, maybe the answer isn’t chasing technology, but dropping the profit model.
By Nicole Rupersburg
In the past 20 years, arguably no other industry has been hit harder than journalism. Not even coal. The outlines of the disaster are by now well known: Thanks to plummeting revenues, the ranks of working reporters have been decimated across every news sector. The shuttering of hundreds of dailies has created vast news deserts throughout the country. As surviving legacy papers desperately lurched towards digital, it briefly seemed the new class of digital-first brands — Buzzfeed, Gawker, Vice, Vox — held the keys to the “new media” kingdom. But they too have been hammered by mass layoffs, buyouts, shut-downs, budget cuts, and newsroom closures. So far in 2019, the digital-first media outlets so recently hailed as the future of media have shed 2,100 employees.
The problem is not that digital advertising dollars are down. They are actually way, way up. The problem is that most of the money is going to Google and Facebook. In 2018, Google alone made almost as much money in digital advertising off of the news industry as every single American news media outlet combined. The “new media” upstarts find themselves alongside legacy media institutions fighting to survive against the whims of social media algorithms, digital advertising models that have yet to prove effective, and the FAANGs sinking their teeth into the carcass of the industry.
There is, however, an alternative to trying to solve the puzzle of new profit models: Reject the profit model. This is the strategy of an increasing number of nonprofit newsrooms launching around the country — close to 300 of them and growing, according to the Institute for Nonprofit News (INN). Collectively, INN’s 180 member organizations employee about 3,000 people, including 2,200 journalists, and have a combined annual revenue of nearly $350 million.
Is this the future of news?
The concept of the nonprofit newsroom is not new. Organizations like National Public Radio (established 1970) and the Associated Press (established 1848) need no introduction. Long-running investigative journalism organizations include the Berkeley-based Center for Investigative Reporting (1977) and D.C.’s Center for Public Integrity (1989).
New York’s City Limits and The Chicago Reporter, outlets that focus on civic and social issues in their cities, have been around since the 1970s, and Mother Jones magazine has been in operation since 1976. Newer outlets like ProPublica, Inside Climate News, and the Texas Tribune were all established in the 2000s, and have already earned significant audiences and reputations for their coverage of policy, government, and other issues in the public interest.
In lieu of advertising, nonprofit newsrooms typically rely on a hodgepodge of funding sources. Christopher Hass, executive publisher of the Chicago-based labor and left-politics magazine In These Times, says their funding breaks down into rough thirds: circulation revenue, grant and foundation support, and reader donations. Reader donations have been part of the publication’s financial model since the beginning. If In These Times does run advertising, usually in the form of partner promotions with book publishers, it constitues a fraction of total revenue.
“With advertising going digital over the last decade, our ad revenue has declined with everyone else’s,” Hass said. “But that overall impact on our budget was relatively minimal, even as it declined precipitously, because we were never ad-dependent.”
Too often, funding is an “all-or-nothing” situation, whether it’s a traditional news outlet relying on advertising, or a nonprofit outlet relying on foundation funding. “The ideal situation you would want is your foundation built on sustainable revenue that would use grants for special projects, with the understanding that it won’t be there forever,” said Hass.
Having multiple revenue streams, including reader revenue, gives an organization some breathing room, so when donations drop a bit, or a large grant doesn’t get renewed, it doesn’t become a crisis.
Julianne Markow, COO of the Voice of San Diego, said her publication relies on support from donors, individual readers, foundations, corporations, community partners, and earned income from events and other news media partnerships.
This year she expects 65-percent of revenue to come from donors of all membership levels. Anyone who donates $35 or more is considered a “member” and receives additional benefits that include invitations and discounts to member events. There are different memberships levels based on the donation amount.
“Our readers tend to be very engaged citizens who really care about community,” said Markow. “We’re trying to deepen our local support and build intimate relationships with our readers that makes them feel special and makes them want to support us.”
Efforts to diversify revenue streams have been paying off. According to the Institute for Nonprofit News’ 2018 survey report, more than half of news nonprofits reported three or more sources of revenue — an important indicator of financial stability — and a third had four or more. Reader support, including individual donations and membership dues, accounted for 30 percent of revenue, and earned income accounted for 10 percent. That said, nonprofit news outlets still have work to do when it comes to building sustainable reader support and cultivating long-term donors. According to the INN survey, “Individual donors and particularly major donors are relatively undeveloped revenue sources for news nonprofits.”
In Michigan, former newspaper owner Phil Power founded the Center for Michigan in 2005 as a “think-and-do tank” to find reasonable, nonpartisan solutions to major problems facing the state, like road funding and childhood education. To this end, the Center produces the web-based Bridge Magazine as an outlet for Center research and long-form reporting on state policy topics.
The Phil Power Family Foundation contributes $1 million annual to the Center, accounting for about 25 percent of its operating budget. Foundation funding accounts for another 40–50 percent. The remaining portion of the budget comes from reader revenue they are actively trying to increase, according to Bill Emkow, growth strategist for the Center and Bridge Magazine.
In 2018, Bridge was one of 17 nonprofit news organizations invited to participate in the Facebook membership accelerator, a 12-week program sponsored entirely by the social media giant. Emkow jokes that he refers to this as “blood money” in the wake of 2016, a year that saw yet another round of mass layoffs at both of Detroit’s major newspapers, the Detroit Free Press and the Detroit News — layoffs that affected him directly.
“I’m obsessed with developing and implementing a news model that works and thrives, especially after having to lay off several people while I was at MLive, and then being laid off myself from the Detroit Free Press,” he explained.
“This nonprofit model seems to be stable, but it’s not yet thriving in most places,” Emkow continued. “For us, after several cycles of funding from the same foundations, they’ll sometimes want to alter what they are underwriting, and that creates a scramble to change on our end — even when we are doing well. So, the only real answer for long-term stability, in my opinion, is growing reader revenue.”
The goal of participating in the Facebook membership accelerator is to develop a membership program that will contribute to paying the bills and stop relying on Google and, ironically, Facebook for page views that don’t pay the bills.
The publication is already seeing tremendous growth in reader revenue, Emkow says. They’re on track to bring in $300,000–400,000 this year, up from $210,000 in 2018. The goal is to have $1 million in reader revenue, and to do so quickly, so they can reduce their reliance on foundation funding.
“After you go through several rounds of funding with the same foundation, it’s harder to write grants. That’s where reader revenue comes in,” he said. “Members truly love the journalism and are willing to pay for it. We don’t need 100 percent of readers to become members; we just need a small percentage to do it, and that’s where sustainability comes in.”
Emkow believes that the shift towards reader support from major news outlets like the New York Times and Washington Post helped “prime the pump” for other news organizations to focus on reader revenue. “The work they did in 2016 really did set people up to support news, and we’re rising in the wake of that.”
A similar story is unfolding at the Nevada Independent, which produces in-depth public policy coverage as well as campaign and political reporting. Its own nonprofit model includes a gold-standard in transparency: every single donor, from $5 individual donations to major corporate bequeaths, is disclosed on their website.
The majority of the NVIndy’s funding has come from corporate sponsors like MGM Resorts International and Switch, but recurring donors are on the rise.
“People I’ve never heard of have become small but recurring donors, and that’s how you become sustainable,” said Jon Ralston, veteran political journalist and founder of the NV Indy.
The publication is currently at about 12 percent “sustaining” revenue, and he would like to get that number up to 25 percent. There are different membership levels based on donation amounts that include perks like free access to premium content and early registration to select events. They’ve recently started applying for grants, and also produce a number of events for earned income and sponsorship opportunities.
“We’re doing more to get more donors and diversify,” said Ralston. “We don’t want to have to worry about a major donor leaving and being forced to close our doors.”
There are other success stories. Perhaps the best-known is the U.K.-based nonprofit Guardian News & Media, which recently announced it has broken even thanksto reader support — a heartening development for news media nonprofits.
Andy Hall and his wife Dee J. Hall, both veterans of the Wisconsin State Journal, co-founded the Wisconsin Center for Investigative Journalism (WCIJ) in 2008 and began operating the investigative news outlet Wisconsin Watchin January 2009.
When Wisconsin Watch launched, their $150,000 operating budget all came from foundations. Ten years later, foundation funding accounts for about half of their $700,000 budget, a third comes from individual and business donations, and the rest from earned income and sponsorships.
Individual donors have been the fastest-growing segment of their budget in the last few years, sustaining double-digit increases in 2018 to more than $100,000. This year, Hall hopes to hit $200,000. To help them reach this goal, they’ve received training from the Institute for Nonprofit News on major donor development as well as from the same Facebook membership accelerator that Bridge participated in to help them improve their digital infrastructure, branding, and marketing.
Wisconsin Watch operates on a small staff and relies on skilled volunteers as well as student interns and fellows who come in with their own outside funding from sources like Fulbright fellowships and the Department of State’s Edmund S. Muskie Internship Program.
“We’re training the next generation of investigative journalists though internships, fellowships, and classroom collaborations, and some donors are inspired to support us to make sure that there will be more investigative journalists out there keeping watch on the people in power in the future,” said Hall.
The WCIJ also earns revenue through speaking engagements, events, contracted content creation for other outlets like NPR and National Geographic, and, most recently, a partnership with the Associated Press that has made 1,500-word versions of their reports available to AP members nationwide, which has led to a dramatic increase in readership.
“Our goal has always been to make content available to the public wherever public consumes news,” said Hall. “We try to make it as easy as possible for editors to use and share our stories with their audiences.”
Wisconsin Watch offers universal free access, though there is a password-protected side of the site where hundreds of media partners can access reports before they are published.
Wide access is a common feature of the new nonprofit model and a reflection of its animating civic spirit. The Voice of San Diego has no pay wall, Markow said, because “we are a nonprofit and we believe very strongly that everyone should have access to the news.” Ralston said the NVIndy does not and “will never” have a pay wall or run any kind of ads or pop-ups. Emkow, in Michigan, said the Bridge not have a pay wall because “the mission is to “do the research” and “spread it far and wide.” In These Times has no pay wall, either, though they do charge for a subscription-based print magazine.
“[That decision not to have a pay wall] has to do less with economics and more with the mission itself, of being a nonprofit and being a public good,” Hass explained. “We’re trying to create content for diverse communities including working class people, people of less economic means, activists, young people. It seems counter to the mission to prevent those audiences from accessing the content. Readers with means allow us to continue to make this content free and available to those without.”
You would be hard-pressed to find any news nonprofit that does have a pay wall, despite the fact that they all increasingly rely on reader revenue to operate sustainably. To this point, Emkow simply said, “We can generate a lot more revenue out of memberships rather than with a pay wall or even a metered pay wall.”
Operating a nonprofit newsroom presents its own challenges, some more obvious than others. There can be fierce competition for foundation support, which many nonprofit newsrooms rely on heavily, and there is no guarantee that any foundation will support any particular outlet indefinitely — which is why there is such an effort underway to grow readership support.
Nonprofits are also not immune to the ebbs and flows of the economy: Hass said In These Times’ most recent struggle came during the Great Recession when foundation endowments were hard-hit and individual donors were able to give less. And nonprofit newsrooms are just as susceptible to the whims of social media algorithms and having to break through the media cacophony to reach readers.
“It’s just a different struggle,” said Voice of San Diego’s Markow. “Being a nonprofit is not a cure-all. There’s nothing magical about it. This organization has spent 15 years cultivating a core group of readers and building those relationships and building that trust.”
The “growth spurt” in nonprofit news started about a decade ago — about the same time as the recession, for those keeping score. The average nonprofit newsroom is just eight years old, and it’s just too soon to tell if the nonprofit model will come to dominate hard-hitting, investigative, issue-driven media, though some might argue it already has. According to the INN’s 2018 survey report,” the nonprofit sector generates an outsize amount of…reporting that requires significant investments of time and expertise.”
But if it’s too soon to assess the longevity of the nonprofit model, it is not too soon to root for and do everything possible to cultivate it. As for-profit news institutions continue to downsize and blink out of existence, nonprofits represent a promising path forward to continue producing the investigative journalism that our communities, to say nothing of our national democracy, so desperately needs.
Nicole Rupersburg is a freelance writer who covers the new economy, urban development, and social justice issues, but to some she’ll always be a food blogger. Find her on Twitter @ruperstarski and on Instagram @eatsdrinksandleaves.
Production DetailsV. 1.0.2
Last edited: July 5, 2019
Author: Nicole Rupersburg
Editor: Alexander Zaitchik
Artwork: Institute for Nonprofit News / In These Times