Business models must change

By Mark Glaser

Predictions are a tricky business, but there is one sure thing for 2020: local news publishers cannot depend on the old ways of doing business. The time for chain newspapers wielding a monopoly in communities is ending, and more independent and nonprofit news organizations are taking root around the country and making sure that watchdog journalism continues to thrive.

The old business model was largely dependent on print advertising and circulation revenues, and newer digital ads have been gobbled up by the voracious tech giants, Facebook and Google. That leaves local news publishers in a tough spot, but they’re increasingly finding new ways to serve the public while diversifying revenue streams. I previously highlighted “9 Great Local News Business Ideas” to show just how ingenious these publishers have become. 

Now let’s dig a little deeper into some of the more interesting business models that are cropping up, from the co-op ownership model to government subsidies and “information districts” to state-level ecosystem support. There are pioneering efforts being made around the country, and while it’s hard to predict which models will win out, it’s important to watch them all to see which one is most relevant to your community.

The Cooperative 

Many local news organizations talk about working more closely with their communities, listening to what they want, engaging over social media and at in-person events. But some have taken that idea much further, allowing community members to actually buy a stake in the publication. In 2018, Berkeleyside ran a successful “direct public offering (DPO),” raising $1 million from 355 investors, including author Michael Pollan. “The notion of free journalism is simply not sustainable, and if Berkeleyside is something we value then we should show that with our support,” Pollan said at the time of the DPO.

Other publications have gone further, becoming cooperatives where the readers become part owners and have a direct say in business decisions. The Bristol (UK) Cable has been run as a cooperative local news organization since 2014, with 2,000+ members paying £3 ($4.20 USD) per month to get a vote in major decisions of the publication; they also donate their skills and time to help out. A more recent entry in the cooperative field is The Devil Strip in Akron, Ohio, which lets people pay as little as $1 per month to join, but when they hit $330 in donations they become a fully vested “shareholder for life.” Those shareholders get a say in deciding on which investigative stories The Devil Strip will cover, as well as other business decisions, and they can run for the governing board of the publication.

There’s also the related idea of a multi-stakeholder cooperative, with readers and employees becoming owners. The Mendocino Voice in Northern California will be re-incorporating in the next six months as a reader-worker co-op, with readers paying a sliding scale monthly fee and all employees becoming members automatically. The co-op will have legal ownership of the publication and the members will elect a board to provide oversight of hiring and budgets, though the editorial staff will maintain day-to-day control of the newsroom.

“The beauty of the co-op is how it’ll allow us to work together with our readers to dial-in exactly how our publication can serve them, creating a more equitable and responsive distribution of news,” said Adrian Fernandez Baumann, managing editor of the Mendocino Voice. “Our model is centered on the idea of news as a public utility — particularly in rural news deserts like ours, where people rely on local news in emergencies like wildfires, to build community resiliency county-wide. We also want to incorporate the perspectives of underserved community members that have been excluded and fill their needs.”

Nonprofit Conversion

Can local news operations become known as a public good, a cause for philanthropy and giving, a non-partisan platform for communities? That’s the aim for local news publishers who are converting from a for-profit model to nonprofit. Just this year, publications as varied as the Salt Lake Tribune newspaper, Berkeleyside and alt-weekly Chicago Reader have announced their intention to become nonprofit ventures. 

Why make the move to nonprofit status? Is it just about making less money? Not really. As Matt DiRienzo, former executive editor of LION Publishers, told MediaShift: “It’s a tax status, not a business model.” Nonprofits don’t have to pay taxes on their income, but their activities must serve the public interest rather than the interest of owners or shareholders and they can’t “participate in any campaign activity for or against political candidates,” according to the IRS.

But they still have to make enough revenues to pay everyone and keep the lights on. It’s just easier to take in tax-deductible donations and raise grants from foundations. But nonprofits also have to create a Board of Directors that oversees the them, approves the budget and the hiring of the executive director. In the case of the Salt Lake Tribune, its owner had to give up control of the news organization for it to become a nonprofit. For Berkeleyside, it must get unanimous consent of all its shareholders from the DPO to convert. 

“For the shareholders, it means they take a capital loss on their investment,” said Lance Knobel, who will be CEO of the new nonprofit. “It legally can’t ‘convert’ to a charitable donation (which many people have asked about) because at the point of conversion, the shares become valueless (nonprofits don’t have shareholders). So there’s technically no value to the shares post-conversion. All of our shareholders will remain what we’re calling Foundation Members. We’ll stay in touch with them and keep them as a vital group of supporters.”

In an era of newspaper chains being owned by hedge funds that have strip-mined local outlets, it’s a good change for local news publishers not to have to worry about voracious owners or shareholders.

“I hope to see more for-profit newsrooms considering and making the switch to nonprofit,” said Debbie Blankenship, director of the Center for Collaborative Journalism at Mercer University. “Communities need access to well-sourced, factual information and I think nothing shows a commitment to providing that kind of journalism better than saying we are going to do this as a service to our citizens. Nonprofit fundraising and support also gives community members a ‘buy in’ on your service without concerns or questions that the type of reporting you see is being influenced by outside interests. This model has worked well for public radio and I think more organizations should give it a serious consideration.”

Government Support

For a long time, the U.S. government has supported local news through the Corporation for Public Broadcasting, mainly for the infrastructure of public media stations, even though funding has been threatened many times over the years from Congress. That support pales in comparison to other countries such as the United Kingdom, Germany and others in Europe that fund public media much more generously. But is there a way for local news to be funded by the public, through the government at the state or local level? The idea is starting to become more of a reality, with New Jersey – yes, New Jersey! – leading the way.

With a push from advocates at Free Press and the public, New Jersey passed a law creating the Civic Information Consortium, a nonprofit that will give grants to collaborative projects that improve access to information, nurture civic engagement and train community members in storytelling and newsgathering. While the initial law called for $5 million, the funding started at $2 million–which is still a great start, if the money gets released by the governor. “I’m speechless,” tweeted Josh Stearns of Democracy Fund. “Make no mistake, this victory is the result of thousands of NJ residents standing up for local news. That’s a message we need now more than ever.” According to Free Press, there is growing interest in this model in Colorado, Massachusetts and Ohio.

There have been some other ideas for government support of local media. In New York City, Mayor Bill de Blasio issued an executive order requiring all city agencies to spend at least half of their ad budgets on community and ethnic media. This could provide a real boost to smaller independent media in New York, as the city spends millions each year on advertising. And some academics, led by Guy Rolnik at the University of Chicago, suggested a check-off box on tax returns that gives U.S. citizens a $50 voucher to contribute to their favorite local news outlet. It would cost $13 billion, which would be a pretty big hurdle for Congress. 

However, there’s another intriguing idea at the local level: creating information districts. The idea is modeled after business improvement or library districts in cities. Info districts would fund participatory media and civic communications projects to meet local info needs. Simon Galperin, who developed this idea with support from the Craig Newmark School of Journalism at CUNY and the Reynolds Journalism Institute, helps run the Community Info Coop to help communities create public-funded journalism projects.

“There’s broad consensus that the market failure in local news is having devastating effects on civic participation and community welfare,” Galperin said. “But it’s more than an economic failure. It’s a social one, too. So we need a holistic solution that’s broadly applicable but still adaptable enough to meet a community’s unique needs. That’s an info district. The process for setting up and governing a special district dedicated to local news and information requires the adoption of the best of journalism: community organizing, transparency, listening, and co-creation.”

Public Media + Digital Media Merger

Speaking of public-supported media, the legacy NPR and PBS local broadcasters are also starting to up their game when it comes to local and civic news coverage. There have been a series of mergers involving public media stations and digital media startups in their communities. Among the many mergers over the past few years: Colorado Public Radio bought Denverite, WAMU bought DCist, and most recently NJSpotlight merged with NJTV and WNET. 

“Public media brings scale, a mature business model, and stable, diversified revenue,” said Melissa Davis, interim director of the Colorado Media Project. “Nonprofit digital startups bring new ideas, lots of energy, and younger and more diverse members. Because they share a mission to serve communities, it’s an easier move toward collaboration and a willingness to experiment. These innovations are going to be a huge win for the community – and it’s a direct result of public media’s public service orientation and the vision of local leaders.”

Rachel Sadon is editor in chief at DCist and she definitely has seen the light when it comes to merging digital media startups with public media.

“Synergy might be the most annoying word in the English language, but it’s really applicable here–and exciting,” Sadon said. “There’s no silver bullet for the local news crisis, but public media offers one important path forward, not only for financial stability, but for making our journalism more responsive to our audiences.”  

So are these mergers working and really serving the public? Academic researcher Elizabeth Hansen will be focusing on this question with the new Public Media Merger Project. As she writes on Medium: “Addressing market failures in local journalism is not going to be an either/or proposition. When I say I lead the local news sustainability research at Shorenstein, people often ask me, ‘so what’s the solution to the local news crisis?’ My answer: there isn’t one answer, and it’s going to look different in different places.”

State-Level Ecosystem Support

Another promising approach is to support local news through state-wide initiatives. This includes the collaborative work of the Colorado Media Project (CMP), which has helped local media with research, events and a new coworking space next year in Rocky Mountain PBS. Following in the footsteps and model of CMP is the New Mexico Local News Fund, which will offer fellowships, training and events for local journalists.

Can this kind of ecosystem-building approach work in more states around the country? Nancy Watzman, former executive director for CMP, certainly thinks so.

“In today’s climate for local news, it’s hard for any one news organization to meet all the challenges alone,” she said. “State-based organizations that serve as hubs to support local news ecosystems can help local news organizations by fostering collaboration, exploring ways to generate more revenue together, build cost-saving infrastructure, and developing community support. With this kind of support, the sum is much larger than the individual parts.”

Another interesting state-level approach is SpotlightPA, a nonprofit collaborative funded by the Lenfest Institute for Journalism and place-based foundations around the state of Pennsylvania. The partnership includes reporting from newspapers such as The Philadelphia Inquirer, the Pittsburgh Post-Gazette, the PA Post, the Caucus (in Lancaster) and Harrisburg’s Patriot-News, but is run as a nonprofit startup with 10 staffers in the state capital, Harrisburg. 

“The revenue model for SpotlightPA is membership, foundation support, and civic-engagement driven events—similar to many other digital news start-ups—but the impact of the news has been maximized and the cost structure optimized by the use of the broad distribution of Spotlight’s partner network,” said Jim Friedlich, executive director of the Lenfest Institute. “There’s much to be said for the financial (and financing) appeal of hybrid business models and strategic alliances between like-minded start-ups and heritage news media.” 

Finding the Way

That kind of collaborative spirit is what’s needed for local news publishers to truly find their way in a time of transition and transformation. Working together has never been more important, whether it’s collaborations between former competitors or local news publishers working in tighter connections with the community they serve. The idea of a cooperative alone is revolutionary for a news organization that always saw itself standing apart from the masses, penning the first draft of history. Instead, the business models to watch bring the community ever tighter, either as owner-readers, donors, members or even contributors.

A special thanks to all the people in the local news ecosystem who suggested ideas for the year-end roundups, especially Mara Jezior at INN, who helped shepherd more ideas my way!

Mark Glaser is executive editor of MediaShift.