What independent publishers tell us about money

Posted on March 07, 2012 by Janet Coats

For the last two years, my work at The Patterson Foundation has focused on two things: finding ways to help journalism’s innovators connect and exploring methods to help independent news publishers build financial sustainability.

That work has brought me in contact time and time again with community news publishers. From the first time I was in a room of those publishers, at the first Block by Block Community News Summit, I was blown away by their passion for news, their commitment to serving the communities where they live and their willingness to share and learn from each other.

All of my listening to publishers since that time has helped me develop a decent feel for the issues they are facing. I can’t ever truly understand what they are up against – I’m not in their shoes – but like any good reporter, I think I’ve developed a pretty respectable understanding of their concerns and their needs.

That said, when Kevin Davis of the Investigative News Network and I were putting together the Financial Sustainability Workshop for journalism funders, we knew that we needed more than our own experiences and gut instincts to inform the conversation.

That’s why we surveyed publishers from both the Investigative News Network and the Block by Block network about the financial issues they face. More than 50 publishers took time from their crazy-busy schedules to respond.

The responses confirmed both what we knew in our guts and what earlier surveys of the Block by Block publishers have shown. But there’s nothing like fresh data to put a finer point on the matter. Here’s a glimpse at what we learned:

Tax status. Independent publishers divide into two basic financial approaches – for-profit and non-profit. In our previous surveys of Block by Block, the split was about 60/40, for-profit to non-profit. INN publishers are all taking a non-profit approach. In our TPF/INN survey, 83 percent of those responding said they were either a 501c3 organization or considered themselves to be a non-profit.

But saying you are non-profit and getting an IRS status that affirms that are two different things. And getting IRS status is a sticky situation right now. The IRS is holding up applications for 501c3 status from journalism organizations to determine whether they should be considered non-profits or commercial entities. Steve Myers just wrote about the issue at Poynter last week and gives a great summary of the issue. Ultimately, the decision about tax status could push sites that consider themselves non-profits into pursuing a for-profit model – a shift that, in truth, has more to do with mindset than the actual work of raising funds. Non-profit is, at core, a tax status and not a business model. Nevertheless, the question of tax status has created even more uncertainty in a field that is thick with it already – and that’s an important thing to know when you are working to support these publishers.

Budgets. Most of the people who have started independent news sites have a strong background in journalism. Many of them have been reporters and editors for newspapers. What they don’t have is a lot of small business experience.

That shows in the budgets of their operations. We’ve seen in every survey we’ve done of independent publishers that their budgets allocate resources heavily to journalism and skimp on revenue generation. That was true in this survey as well; as an aggregate, those responding allocated 60 percent of their budgets to journalism and just 19 percent to raising revenue. That mix does not bode well for creating financial stability.

This is one of the issues we’ve been trying to address in our Super Camp program, in which The Patterson Foundation has worked with the Knight Digital Media Center to provide business mentors to 12 Block by Block publishers to help them work intensely on sustainability. We’ve learned that budget allocations are a good reflection of not just money but time and energy. Publishers can’t sustain their sites, no matter what their business model, if they are spending only cursory amounts of money and time on raising cash. This is a key area where training and support can help: By teaching publishers the most effective ways to run the business side of their operations, as well as helping them to develop coping skills for the almost insurmountable time management issues they face.

Revenue. The publishers we surveyed said they would pursue local advertising as a source of revenue more than other funding stream in 2012. Sponsorships, also known as underwriting, come in a close second. The most familiar model to most of us of sponsorship is the NPR model – the businesses that support NPR and get a mention on the air are burnishing their reputation by sponsoring NPR’s work rather than paying for advertising that touts the benefits of their product.

No matter the business model – for-profit or non-profit – dollars from local businesses and organizations remains the most promising way of funding journalism. But it isn’t enough alone. Diverse revenue streams are vital to any news organization, of any size. That’s why the publishers we surveyed said they exploring other prospective lines of income, such as events, syndication and selling their services as trainers in technology and social media.

Foundation funding. All that said about earned revenue, our survey showed that the leading source of funding for independent news sites remains foundation funding. And when these publishers looked into their future, 51 percent said that by 2014, they would still be reliant on a significant amount of foundation funding.

But another 40 percent said they expect to be vital organizations with little or no need for foundation support by then.

For funders, this raises the question: How do we help that 40 percent achieve that goal, and how do we help move the other 51 percent toward more diverse funding streams? Are there some kinds of journalism that simply cannot be sustained by any other means than philanthropy? If so, how do we evaluate that and how do we make smart, targeted funding decisions based on that evaluation? Or is the best approach one that focuses on building capacity for journalism organizations in general rather than targeting particular types of journalism?

These are questions that we answered when we gathered in Sarasota last month, but they certainly were discussed with intensity. I expect that intensity to continue, whether within individual foundations or as part of future gatherings. That’s because just as publishers are trying to map their future, funders are trying to figure out what are the most effective ways to help.


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