How Publishers are Exploring Alternative Routes to Fund Journalism

In an era where print advertising revenue continues to decline rapidly and the lion’s share of digital advertising dollars are sucked up by Google and Facebook, it’s more important than ever for news organizations to focus on developing as many revenue streams as possible.

Some, like the Atlantic, have created significant revenue through a focus on events. Others, like the New York Times, see a sustainable future provided by a mix of digital subscriptions and advertising revenue (just because it’s not as beefy as it once was doesn’t mean it can’t be part of the mix). ProPublica has had great success going the philanthropic route, while the Guardian has garnered significant revenue by instituting membership programs and simply asking for donations from readers.

Annie Madonia, the chief advancement officer of the Lenfest Institute in Philadelphia, points to the Texas Tribune as an example of a news organization really working to bring in money in as many different ways as possible.

“They were established in Austin, which already had this huge festival. But they have philanthropic donors, they have sponsorships, they have event revenue. So, I think they have a pretty healthy model” Madonia said. “It’s about a $9 million organization. So, the question becomes, can you scale that to cover a $120 million dollar news organization?”

One thing is clear—there is no one-size-fits-all model that will rescue news organizations and provide the fertile ground for local news coverage to continue out into the distant future. But executives can take a look around and borrow ideas from what’s actually working out there for some news organizations.

Philanthropy

If there was an overriding trend in journalism last year, it was the growing embrace of philanthropy throughout the world of journalism. Even the robust New York Times is putting together a team focused on philanthropic income led by Sharon Chan, who launched successful fundraising initiatives at the Seattle Times.

Leading the charge is the Salt Lake Tribune, which became the first legacy newspaper to make the leap and become a non-profit media company thanks to several factors, including the generosity of owner Paul Huntsman, who gifted all of the newspaper assets (and none of its liabilities) to a newly-formed 501(c)(3) nonprofit organization.

Fraser Nelson

While the move was heralded throughout the journalism world, there remains some confusion over what the change actually means for the nearly 150-year-old newspaper moving forward. Fraser Nelson, the newspaper’s vice president of business innovation who is leading the Tribune’s work to become a nonprofit, said the switch alone won’t magically rescue the newspaper.

“It does not save our bacon. It’s not like money just falls from the sky now that we’re a nonprofit, or that we don’t have to make revenue,” Nelson said.

Nelson compared the Tribune to the local symphony. The newspaper will continue to sell subscriptions and ads, just as the symphony does. But now, people who want to support local journalism can donate to the Tribune the way they would to the symphony. There will also be a separate endowment—in the Tribune’s case, it’s the Utah Journalism Foundation—that can offer financial support in a myriad of ways, from helping with building costs to funding specific projects.

“We’ve always had this model in the United States,” Nelson said. “It’s just that no one has used that particular setup for the purposes of a daily metropolitan newspaper because it’s never been necessary before.”

Another newspaper that is exploring philanthropy is the Philadelphia Inquirer, where I currently work as a reporter. Unlike the Tribune, the Inquirer is a for-profit public benefit corporation, but it’s owned by the nonprofit Lenfest Institute for Journalism, which invests in news initiatives and technology with the goal of creating new business models for sustainable journalism.

The Lenfest Institute can’t fund the operating expenses of the newsroom due to IRS rules, but the foundation’s financial support has enabled the Inquirer to launch an investigative news fund and Spotlight PA, a 12-person investigative team with a focus on state government and urgent regional issues. Lenfest also joined with the National Geographic Society and the William Penn Foundation to kickstart a collaborative reporting project on the Delaware River Watershed.

“You can’t rely on just one source of revenue exclusively, because you just run a huge risk if that dries up,” said Lenfest’s Madonia. “And if you’re going to rely on philanthropy, then you need a very diverse cohort of donors and funders so that you’re not overly reliant on any one donor or type of donation.”

The list of news organizations turning to philanthropy and local community funds to support journalism is growing exponentially. In Alaska, the Anchorage Daily News turned to a large group of foundations to support the State of Intoxication, a year-long look into alcoholism throughout the massive state. Following the success of three community-funded initiatives—Education Lab, Project Homeless and Traffic Lab—the Seattle Times formed its own investigative journalism fund supported by donors. And community foundations allowed the Fresno Bee and Fresnoland Media to partner up to add four journalists to focus on land use, water, housing and neighborhood opportunity.

Free Press Action members gather at the New Jersey State House for a lobbying day in February 2017 (Photo by Timothy Karr/Free Press Action)

Government Funding

Considering the bleak landscape for local news and the sheer amount of publications that have been forced to shut their doors over the past 15 years (one in five, according research by the University of North Carolina’s School of Media and Journalism), some might welcome government funding with open arms.

But direct funding also creates potential problems when newspapers, who are used to covering politicians, are now also benefiting directly from their policies. Outside of local NPR affiliates that are often supported directly by state governments (and receive high grades for trustworthiness), funding often takes a circuitous route to newspapers, showing up in the form of advertisements for public meetings or discounted postal rates.

In New Jersey, a new approach has taken shape in the way of a first-of-its-kind allocation of millions of dollars from the state government to a nonprofit with a mission to help grow and support local news.

In February, the state made its first $1 million payment on $2 million allocated to the Civic Information Consortium, a nonprofit initiative designed to help support local news and grow civic participation throughout the state. The state has promised through its budget $7 million, with the possibility it could offer more in the future. It’s ultimately up to the consortium’s board—made up of political appointees, university representatives, and a few others—how that money is ultimately spent to support the state’s news ecosystem.

Mike Rispoli

“I don’t want this money going to the Gannetts and the Advances of the world,” said Mike Rispoli, director of the News Voices project at the advocacy group Free Press Action, which put public pressure on the government to allocate and release the funds. “This money should be used to reimagine what local news looks like in New Jersey…not who has the most amount of influence in the journalism space and let’s give them money.”

Following New Jersey’s lead, lawmakers in other states, including Ohio, Colorado and California, have signaled an interest in examining what role public policy can play to help address the erosion of local news. In Massachusetts, lawmakers have created a commission to study gaps in local news coverage across the state and present suggestions for direct action.

It’s a different approach than Canada’s attempt to help support local journalism, which has garnered its fair share of controversy.

The Canadian government pushed through a $600 million, five-year funding commitment that supports journalism through a mix of tax breaks and grants. Among other things, the new initiatives allow Canadian citizens to temporarily claim a tax credit if they have a digital subscription to qualifying news source and offer a refundable tax credit for each staffer employed by qualifying news organizations.

On top of that, the country has allocated $50 million over five years to fund the Local Journalism Initiative, which provides funding to Canadian media organizations to hire reporters to cover underserved communities impacted by the decline of local news. Inspired by international programs like Report for America and the BBC’s Local Democracy Reporting Service, news organizations apply for funds to hire new reporters to cover news deserts and areas of news poverty. An independent panel of industry experts reviews the applications, selects recipients, and allocates the funding, an attempt to keep the decision making as far away as politicians as possible.

The response within the country has been decidedly mixed. While many Canadian journalists welcome any money being spent on local journalism (and there is certainly a beefy list of job openings on the Local Journalism Initiative’s website), some are leery that the government’s approach has benefited national chains over locally-owned media companies and smaller digital news outlets. And at a time when trust in news organizations is already low, it also creates tension among certain readers who think Prime Minister Justin Trudeau and his government is trying to buy off the media.

Steph Wechsler, the managing editor of J-Source, the English website of the Canadian Journalism Project, suggests governments looking to support journalism should consult a diverse cross-section of independent news organizations and locally owned digital media outlets at the outset. That way, they can’t avoid the potential appearance or criticism they are simply propping up ailing newspaper chains.

Paywalls

Raise your hand if your publication has a digital paywall.

Once considered unworkable, charging readers for digital content has become a staple of the move to digital sustainability and the shift in focus to reader-supported revenue. Seventy-six percent of newspapers had a paywall in place in 2019, up from 60 percent just two years before, according to the Reuters Institute for Journalism. But clearly, some media organizations have been more successful in selling their wares online than others.

The New York Times easily leads the pack, boasting more than 5 million digital subscriptions with a goal of reaching 10 million by 2025. As new media columnist Ben Smith wrote in his first piece for the newspaper, the Times now has more digital subscribers than the Wall Street Journal, the Washington Post and the 250 local Gannett papers combined.

Among the leaders on the local level has been the Boston Globe, which first launched BostonGlobe.com as a paywalled site back in 2011, and was one of the first newspapers in the country where digital subscribers outnumber print subscribers (partly because it has aggressively raised the price on its print subscription plans).

The Globe ended 2019 with more than 148,000 paid online subscribers, and subscriptions grew faster in the last three months of the year than in any quarter in the previous three years, the newspaper confirmed to E&P. And the Globe has done this without lowballing its price, charging customers $6.93 a week ($360 a year) after offering a four-weeks deal for $0.99 a week. As Nieman Lab’s Joshua Benton pointed out, that’s more than the New York Times ($4.25 per week) or the Washington Post ($1.92 per week) charge their subscribers.

How has the Globe managed to be so successful while other major metro news organizations have floundered? The newspaper didn’t answer specific questions about its online strategy, but Heidi Flood, the Globe’s strategic lead, partnerships and outreach, cited their “continued investment in new products and engagement initiatives” as a major factor behind their digital success.

Another important factor is the Globe boasts a market penetration of 23 percent, measured by examining unique visitors as a percentage of total digital desktop audience in their market. That placed the Globe at number two amongst its peers in a report released last August by the Shorenstein Center and the Lenfest Institute.

So, who was number one? The Minneapolis Star Tribune, which as of January, boasted a digital subscriber base of around 90,000 readers, with a goal of 150,000 digital subscribers by 2025, according to Poynter. The Star Tribune also doesn’t cheap out, charging readers $3.79 a week for digital access after a limited introductory rate.

Unlike the paywall at most newspapers, which are triggered by reading a certain number of articles, the Star Tribune looks to a reader’s visit frequency to determine when to make the subscription pitch. It’s the same approach the Wall Street Journal uses to convert readers to subscribers, where an algorithm determines where a reader is in the conversion funnel based on 65 different variables.

“Your visitation count plays a big role, the device type you’re on—desktop, Android, iPhone—play a role, and the type of content you consume can play a role,” Karl Wells, the general manager of the Wall Street Journal’s subscription and membership business, said on a Digiday podcast last year. “The third-party data like where you live has a huge bearing on whether you will subscribe or not.”

From Coffee Shops to T-shirts

Digital subscriptions are one thing. But what if your bosses announced they were opening a coffee shop to help support the business?

That’s exactly what the new owners of the Big Bend Sentinel did down in Marfa, Texas. Appropriately named The Sentinel, the coffee shop and bar is open every day from 7:30 a.m. until 10 p.m., closing between lunch and dinner, ostensibly so reporters can bang out stories in their offices in the back of the building.

As The Sentinel proudly proclaims on its website, the popular spot in the town of about 2,000 people “supports local, independent journalism with every coffee, cocktail, taco and retail item sold and with every event hosted.” In fact, the additional income has been able to keep the newspaper’s annual subscription costs steady, publishers Maisie Crow and Max Kabat told the New York Times.

The Devil Strip, an arts and culture magazine in Akron, Ohio, went a different route in February by becoming the first cooperatively owned news organization in the country. Chris Horne, the magazine’s founder and publisher, wanted to create a sustainable model that would enable the publication to remain free and vibrant in a city where the average income is about $36,000 and nearly a quarter of residents fall below the poverty line.

Readers can own a piece of the Devil Strip starting at $1 a month, and when they reach $330, they become a fully vested shareholder, enabling them to have a voice in what the magazine covers. The magazine’s membership goal is 600 readers.

Drive about six hours west and you’ll hit Chicago, where one media company capitalized on an unusual sighting to generate both interest and revenue for their subscription-based news site.

When an alligator was spotted in Humboldt Park Lagoon on Chicago’s West Side, it took the city by storm over the summer, the employees at the news startup Block Club Chicago had an idea: sell a t-shirt.

Shamus Toomey, the website’s editor-in-chief, told Chicago media reporter Robert Feder the news organization sold nearly 4,000 “Gator Watch 2019” shirts, netting about $100,000 in revenue to support the publications news operation, not a small sum for the non-profit site.

“All good journalism is good. Support it by philanthropy, advertising, events, reader revenue, or by winning lottery ticket,” media analyst Ken Doctor wrote in a recent edition of his Newsonomics column. “Given the peril, we all need to look more widely for support, not more narrowly.”

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2 thoughts on “How Publishers are Exploring Alternative Routes to Fund Journalism

  • April 7, 2020 at 4:37 am
    Permalink

    Good overview of the variety of new/additional revenue streams which us few remaining local independents are all experimenting with – by Rob Tornoe , Pa. Inquirer.
    Fact is our Free Press System has gone from a crisis of disinvestment and ghost newspapers { thank you hedge funds } to a crisis of survival with the the pandemic driven loss of advertising.
    To save it we need short term federal stimulus targeted at keeping local newspaper newsroom employees working while we recreate our once strong national Free Press System comprised of local ownership dedicated to local public service.
    Which means recreating local ownership, replacing the lost postal subsidy, holding the big internet platforms accountable for what they publish and reforming their practices which artificially prevent newspapers from profiting.
    Frank Blethen
    Publisher
    The Seattle Times – 123 years of local independence and public service

    Reply
    • April 23, 2020 at 6:35 am
      Permalink

      While we must continue to pursue alternatives to newspaper traditional revenues, we must remain cautious of asking for government hand-outs and special treatments.
      Our public credibility as “watch dogs” suffers from too cozy a legislative-administrative relationship. History showed that for newspapers too blinded by “The Newspaper Crybaby Act” — the Newspaper Preservation Act that gave us Joint Operating Agreements.
      There are other routes: the U.S. Postal Service’s historic newspaper delivery relationship can be strengthened, taxing newspapers could be adjusted based upon news (but not opinion) content, and that darn good idea of putting a public coffee shop/saloon in the newspaper’s front office are great workable ideas.
      W. Edward Wendover,
      media critic and retired newspaper publisher
      Tukwila, WA

      Reply

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