Industry Insight: Fight for Survival Will Push More For-Profit Toward Philanthropy

They were easing into it before coronavirus and an economic crisis happened. Now faced with an unprecedented fight for survival, we can expect newspapers across the country to reposition themselves as a public good and seek philanthropic funding.

Some may go as far as the Philadelphia Inquirer and Salt Lake Tribune, converting ownership structure to formal nonprofit status. Many others will realize that the pitch they’ve started making with digital subscriptions can be expanded to requests for corporate underwriting and community foundation funding.

As the plight of local news has worsened, national foundations focused on journalism have stepped up their funding and convinced new funders to enter the space.

But in rough terms, 90 percent of that effort has been focused on supporting nonprofit journalism organizations, while more than 90 percent of the local journalism that happens in North America comes from for-profit companies.

The Knight Foundation, Democracy Fund, Lenfest Institute and others have funded capacity-building organizations and programs—the digital transformation accelerator Table Stakes initiative, for example—that have helped for-profit local media companies transition to more sustainable business models.

But direct funding of for-profit newsrooms, particularly from local community and place-based foundations, could now be key to survival in a world that turned drastically worse for local media almost overnight.

There are hurdles to clear.

Funders worry about bad actors that have had a hand in consolidating newspaper industry ownership and cutting journalism resources while sucking up profits without any kind of eye to the future. How do they distinguish between “good owners” and those who might take philanthropic support and line their own pockets with it? Publishers who go this route will have to be more transparent about their investment in local journalism and the kinds of profit they’re taking from it.

Some newspaper companies, like the Seattle Times and McClatchy, have set up their own 501(c)3s or sought fiscal sponsorship from a local nonprofit to accept tax-deductible charitable donations. But it would be onerous and impractical for hundreds of newsrooms to do this.

Intermediaries such as Local Media Association (where, full disclosure, I serve as a paid consultant) could serve as a fiscal sponsor for grant programs. It is also developing News Fuel, a platform funded by Google News Initiative that will aim to be a match-making service for news organizations and philanthropic funding opportunities.

There are also certainly limits to foundation funding. Unless Google, Facebook, Amazon or the world’s wealthiest stepped in with billions, the scope would be too big for national funders to make much of a dent in direct funding of for-profit local news organizations. But they could continue to ramp up support of capacity-building organizations.

And local foundations won’t be immune from the impact of an economic downturn. Funding could dry up as they look at the stock market and try to protect their endowments.

But a shift toward framing local journalism as a public good goes far beyond the potential for foundation funding.

In promoting digital subscriptions, newspapers are already honing a message to the public about the role that local journalism plays in protecting democracy and strengthening community.

The same case can be made to local businesses. Advertising can be framed in sponsorship and underwriting terms. Have your brand associated with quality local journalism that builds community, vs. paying for X number of eyeballs. Because the reality is that businesses don’t need local media to simply get eyeballs anyway.

The local bank has a stake in the economic development and planning issues and opportunities that can’t be fully vetted without local journalism. The local hospital has a stake in public health issues that can’t be confronted adequately without local journalism. And so on.

And a few newspapers that already have a paywall and digital subscription program are starting to experiment with upselling readers to membership programs that offer additional perks, or simply offer people who can afford it and understand the value to support local journalism at a higher level.

Matt DeRienzo has worked in journalism as a reporter, editor, publisher, corporate director of news for 25 years, including most recently as vice president of news and digital content at Hearst’s Connecticut newspapers, and previously serving as the first full-time executive director of LION Publishers, a national nonprofit that supports the publishers of local independent online news organizations.

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2 thoughts on “Industry Insight: Fight for Survival Will Push More For-Profit Toward Philanthropy

  • May 22, 2020 at 11:18 am

    Hi Matt

    Thank you for the most helpful background here.

    Here is my thinking on profits. Freedom of the press is profit dependent. I recall the story of the Washington Post and I think it may have been the Pentagon Papers, or perhaps some aspect of Watergate. In any event, the ad department told the publisher, whose personal fortune was the newspaper, that if the paper ran with the story it would cost the Post $500,000 or perhaps even $1 million. Numbers don’t matter. The response is what matters. Still, I think. “Fortunately, we can afford that.”

    In the heyday of newspaper profitability it was a $60 billion national industry, with a 40%, give or take, profit margin, reproduction, distribution and overhead of at least 50%, leaving the newsrooms with 10% of the $60 billion. I figure $6 billion. But, let’s be generous. Make it $10 billion.

    So the challenge is straight forward. How to raise $10 billion for America’s newsrooms and another $10 billion in profits to indemnify the newsrooms from external challenges. Without advertising, the external challenge indemnification can be cut to $5 billion in profits.

    So would a household be willing to spend $29.99 a month for universal access to all of the newsrooms in America for each of their household members? There are well over 100 million households. The math is $3 billion a month for 100 million subscriptions. $36 billion annually.

    People have spent as much as $300 a month for basic and pay cable televion before NetFlix came alone. Not all, of course. Households are, though, spending $300 to as much as $500 for Internet access, a couple of smartphone subscriptions, streaming services, and even whatever remains of ‘basic’ cable channel packages.

    Is there room for $29.99 a month for universal news access to the nation’s newsrooms, including traditional publishers plus broadcaster such as NPR and local TV stations and such.

    One requirement would be to instantly make paper news publishing a separate service at an additional price, though it should be at cost. The future may be a newspaper printed on a home printer that could be read with Apple Glass or the like. The future is going to be amazing.

    But the core question is how to raise at least $15 billion annually for America’s newsrooms. And can this be done with digital subscriptions totally independent of advertising?

    Just thinking …

  • May 22, 2020 at 12:24 pm

    There are good reasons to favor non-profit local community ownership as the best solution to both maintaining a strong and independent press and improving the ability of newspapers to do their job. Attacks upon the alleged bias of a private owner disappear when a newspaper is owned by its entire, diverse community. The active support of the community can bring sources forward that might otherwise withhold their information, both about newsworthy events and details important to a particular story. Community support gives local advertisers an additional incentive to use the product. Everyone can add more to this list once they begin to see our industry as a truly public service rather than a tool of special interests or a way to make money and gain influence.


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