Industry Insight: To Sustain Journalism, News Organizations Tweak the For-Profit Model

By: Matt DeRienzo

Profits have disappeared. Survival is in question. So why don’t local news organizations just become nonprofits? It’s a question that’s been posed with increasing frequency in recent years, often in the wake of steep newsroom cuts.

Hundreds of independent online news sites operate as nonprofits. Public radio is an increasingly important and active part of local news ecosystems. The Philadelphia Inquirer is a for-profit daily newspaper now owned by a nonprofit. And a handful of similar newspaper ownership models have existed for years in places such as Manchester, N.H., Saint Petersburg, Fla., and New London, Conn.

Considering how many daily newspapers have been acquired by big, profit-driven corporate chains such as Gannett, GateHouse and Digital First Media, a widespread movement toward nonprofit status is unlikely.

But especially among independent local news outlets, a third way is emerging. You might call it the “mission-driven for-profit.”

The shift from advertising to reliance on reader revenue is forcing news organizations to articulate why individuals should purchase a digital subscription or membership. Unlike traditional print subscriptions—a more transactional purchase of a physical product, in which scarcity was a factor—getting people to pay for digital news can be mostly about convincing them that your work and mission are vital.

Some for-profit newsrooms are gaining reader revenue through voluntary paid membership programs, public radio-style, instead of via paywalls and subscriptions. For that to work, they really do have to walk and talk like a nonprofit—articulate the altruistic nature of their mission, be somewhat transparent about their finances, and engage with and be accountable to their readers (who include both paying members and potential members).

Others are going beyond reader revenue in blurring those lines. Knight and other foundations focused on journalism have funded a small but growing number of projects at for-profit newsrooms. Report for America is placing subsidized AmeriCorps-style reporting positions at for-profit daily newspapers. And arguably, one could make the case that the occasional billionaire’s purchase of a major daily newspaper is more philanthropic than a business move.

And in the Rust Belt town of Mansfield, Ohio, local independent online news site Richland Source recently raised $70,000 from a group of local businesses to support a series of “solutions journalism” stories. They will be “thanked for their support across all mediums (text, audio, video, and live events).” But it wasn’t an advertising contract. The $70,000 was a donation representing “a financial show of support for solutions work at Richland Source” and something that “associates a brand with rigorous and responsible local journalism; work that has a visible impact in the community we call home.”

Like a nonprofit, Richland Source’s website has prominent references to “Our Story” as an organization, and “Our Mission and Goals.”

Switching to nonprofit status could provide a significant help in asking readers and businesses for money. It would become exceedingly clear that there is an altruistic mission behind what you do.

And for publishers whose profits are negligible and prospects for cashing out slim, there are few downsides. Yes, the organization would be formally mission-bound and you’d cede control to a board of directors. But beyond some restrictions on formally endorsing political candidates, nonprofits can operate a media business very similarly to for-profits. An example is Mother Jones, which brings in millions of dollars in advertising and other earned revenue in addition to reader donations and foundation support.

As a for-profit, Richland Source is unable to offer the incentive of tax deduction to readers who become a member or businesses who underwrite solutions journalism coverage. But its results are perhaps showing that’s an exaggerated factor. Remaining for-profit allows ownership to maintain equity and continue taking profits, obviously, but also flexibility and control.

Similarly, for-profit status hasn’t stopped local independent online news site Berkeleyside from building voluntary paid membership into a major source of revenue. It also invited readers to become investors in the site and raised more than $1 million. Before the direct public offering, Berkeleyside took advantage of California’s “public benefit corporation” law and has a corporate structure that is for-profit but binds shareholders to remaining focused on its mission of local news coverage.

A mantra of the Institute for Nonprofit News, which works with 150-plus nonprofit news organizations across the country, is that nonprofit status isn’t a magic formula for sustainability. Foundation funding to support local news is scarce and rarely straight-out covers operations. Nonprofit and for-profit publishers alike need diverse revenue streams and a business model beyond the tax status.

Matt DeRienzoMatt DeRienzo is executive director of LION Publishers, an organization that supports local independent online news publishers from across the country. He is a longtime former newspaper reporter, editor, publisher and corporate director of news.

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Published: August 20, 2018

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