5 Business Model Shifts for Local News in 2021 and Beyond
By: Mark Glaser
Tags: Business Models, Knight Local, Philanthropy, Entrepreneurship, Local News

For-profit publishers solicit more grants and donors, while nonprofits look for more earned revenues; DEI-led startups get funding and support

2020 was a very bad year for local businesses in America during the COVID-19 pandemic. By July, more than 420,000 small businesses across the country had closed permanently, according to Stephen Hamilton, an assistant professor of economics at George Washington University. Hamilton believes that 13% of U.S. restaurants permanently closed, leaving 1.4 million people unemployed.

Meanwhile, local publishers had more news than ever to cover, with a lot less local advertising support. How did they survive and thrive during such a challenging year? They made lemonade from pandemic lemons.

Some publishers were able to successfully leverage their increased COVID-19 coverage — often freely available outside paywalls — to sell more subscriptions. For-profit publishers, with an assist from the Local Media Association and Report for America, were able to take donations from readers, while nonprofit publishers looked to increase earned revenues from sponsorships and online events. Diverse-led startups, often struggling to get support and funding, have led the charge as new members of Local Independent Online News (LION) Publishers and the Institute for Nonprofit News (INN).

“Our members have been incredibly resilient this year,” said Chris Krewson, executive director of LION Publishers. “One small publisher had a couple rough months but this month his advertising sales went up. And another organization had its best December ever. I think that some federal pandemic support money for small businesses is trickling down to them.”

So what does that mean for 2021 and beyond? Will pandemic-induced shifts lead to long-term changes in the business models of local news? Most definitely, as the trends that were already happening (as I detailed in my earlier Knight story on business models) became more widespread this year. It’s hard to put the genie back in the bottle; a tactic that worked well in this worst of years is bound to yield even more returns in better years ahead.

Here are five profound business model shifts to watch in 2021 and beyond.

Publishers join collectives such as Brick House and Tiny News

In the recent past, local news publishers such as The Devil Strip in Akron, Ohio, and Berkeleyside in California have raised funds directly from their audience with a co-op model or direct public offering, respectively. And the Mendocino Voice became a worker-owned cooperative this year. Being a novice to the cooperative world, I even joined a funky smart News Co-Op Study Group, which has its own wiki, naturally.

But some publishers are taking the collective idea to another level, creating cooperatives that operate as umbrella organizations providing some business and tech infrastructure, allowing the journalists to focus on reporting. It’s a model pioneered by projects such as CoastAlaska, launched in 1994 as a way for public media stations to fundraise together when government funds were cut. The stations own their buildings and transmitters, but CoastAlaska handles all the revenues.

Newer examples include the Brick House Cooperative, launched recently with nine participating publications born from the ashes of the failed Civil blockchain startup. While it’s a mix of local and topical publications, from Sludge to FAQ NYC, Brick House lets each member publication buy one share for $1, which can only be sold back to the cooperative. There are no ads and the business model relies on monthly or annual subscriptions, which run $7 per month or $75 per year for access to all publications.

The cooperative’s FAQ lays out its ethos clearly: “The Brick House is not beholden to Jurassic-era media barons, vulture capitalists, or fickle billionaire patrons.”

Another new entrant is the Tiny News Collective, just announced this week, which will be a nonprofit news incubator that will support one- or two-person newsrooms, often startups who have typically struggled in the past. The newsrooms will be LLCs based in Delaware, where the collective operates as a Model L 501(c)(3), treating them for tax and insurance purposes as subsidiaries — parts of the whole. Tiny News is a collaboration between LION Publishers, News Catalyst and Google News Initiative, with support from Alley Interactive, Newspack from WordPress and even legal assistance.

“Our goal is to have 10 publishers in Year 1, and then 100 in Year 2, and 500 by Year 3,” said LION’s Krewson. “They will be nonprofits to start, but they can choose to go for-profit. The goal is to have them become independent operations in a couple years. We are focusing on founders of color and those who serve news deserts.”

The hope is that by providing the web platform, newsletter platform, payroll, legal liability protection, training and much more, the small newsrooms can focus on serving communities with vital news and information.

2. Underserved communities and founders of color are seen and supported.

The Tiny News Collective is just one example of several efforts being made to give publishers and owners of color a chance to shine in the local news business. Often marginalized or put into the “ethnic media” niche, these publishers are now being included as full partners in local collaborative efforts around the country. For example, the Charlotte News Collaborative includes publications serving Latinx, Black and gay communities.

The Tiny News Collective is being built to launch new outlets by founders of color — and help them succeed. The goal is to give them the all-in-one support they need to become sustainable businesses within 18 to 24 months.

“There’s a need now more than ever to help amplify the voices of underrepresented communities large and small,” said André Natta, principal of Urban Conversations and a board member of Tiny News Collective. “I’m excited to provide long-needed support for tiny news organizations, particularly those led by people of color, as they navigate the process of getting started and not throwing away their shot.”

Another project to watch is the News and Information Community Exchange (NICE) at public radio station WHYY in Philadelphia, funded with a two year grant from the Philadelphia COVID-19 Community Information Fund. (The Knight-Lenfest Local News Transformation Fund has been the principal funder of NICE, Tiny News Collective and News Catalyst.)

NICE is led by Chris Norris, community contributors and engagement editor at WHYY, and WHYY’s first-ever community outreach organizer, Eric Marsh Sr. It uses the mutual aid model of support for a growing group of grassroots media creators, including community organizers and those who run hyper-local newsletters, podcasts, videos, internet radio programs and more. Most are serving communities of color.

NICE members are able to network and share their insights and skills with each other, and work on their own goals, while also becoming sources for WHYY and helping the station build relationships and trust in their communities. WHYY is currently organizing a series of trainings, and some members, such as Revive Radio’s Tamara Russell, now have regular features on WHYY radio and online.

“So far the creators have gotten to know each other, and have organically wanted to work together,” Norris said. “There’s a real appetite for collaboration, because it’s very isolating doing grassroots media work.”

Clark said Norris, who used to cover issues of criminal justice as an independent journalist and joined WHYY a year ago, was an inspiration for the project.

“Mainstream newsrooms often don’t give due to journalists and creators whom we consider too close to their communities,” said Sandra Clark, WHYY’s vice president for news and civic dialogue. “We dismiss them under words like ‘advocates’ or ‘organizers.’ Most of them, often through heart and soul, have always been there for their communities. When Chris told me he worked in the spirit of Ida B. Wells, I told him he was hired.”

3. For-profit news organizations raise more money from grants and donors.

There is an obvious connection between local news being a public good, and philanthropic support. As a civic good, journalism should be supported by foundations and donors just like the opera, symphony or other nonprofits. But there’s also a proud tradition of local TV, radio and newspapers being part of the local business community as commercial enterprises. With the collapse of the commercial models for news — especially during the pandemic — these local outlets finally overcame their hesitancy to reach out for help.

And there’s a very good chance that these new fundraising muscles will only grow in strength over the coming years. Two catalysts for this growth are Report for America (RFA), which requires local fundraising to support their corps member reporters, and the Local Media Association (LMA), which ran a successful COVID-19 Local News Fund this year, and created a new Fund for Local Journalism, which helped fund the Word in Black collaboration for top Black publishers.

Each newsroom that gets a reporter from Report for America must fund one-quarter of their salary through local fundraising or crowdfunding. I previously wrote about how RFA has helped for-profit local newsrooms find large donors in their communities, including a $50,000 donation from a former newspaper employee to the Everett Herald in Washington and a $20,000 donation to the Berkshire Eagle in Massachusetts from a local woman who works at a Fortune 500 company.

Meanwhile, the LMA helped more than 200 for-profit local news publishers raise more than $1.8 million from the public through its COVID-19 Local News Fund. LMA CEO Nancy Lane points out that a small publication such as the Houston Defender was able to raise $110,000 during its campaign, which its publisher Sonny Messiah Jiles considered to be life-saving.

“Through our lab for journalism funding, we are seeing a lot of success with community foundations and philanthropists in local communities,” Lane said. “The Seattle Times has 18 reporters paid for through philanthropic funding. The Fresno Bee has 10 of 30 in their newsroom covered by philanthropy. Even the smallest members of our lab are setting goals of over $500,000/year to fund journalism projects and reporters. It is an exciting new development.”

Alec Saelens, revenue project manager at the Solutions Journalism Network, told me that the LMA fund helped break the ice, and that other for-profit publishers ran their own fundraising campaigns so they wouldn’t have to pay the LMA a cut of donations. Saelens believes there’s been an important change of mindset from news publishers who would have been wary about fundraising in the past.

“A lot of [for profit] publishers are vying for funding from philanthropic donors, trying to tap into the resources that are out there,” he said. “It breaks the mold that it’s just for nonprofits. That’s been a big shift in thinking and mindset. The pandemic hit so hard that publishers aren’t just thinking about subscriptions but also running donation campaigns.”

4. Nonprofits focusing more on sponsorships and events.

While for-profit newsrooms are taking a page out of nonprofit newsrooms’ and public media’s playbook, the same is happening in reverse as nonprofit newsrooms consider more “earned revenues” such as sponsored content and events to branch out from philanthropic giving. In a time of need, publishers are basically reaching outside of their comfort zones to diversify revenues.

INN found that earned revenue made up only 11% of its members’ income in its recent INN Index for 2020, while a standout local publisher such as the Texas Tribune made a third of its income from earned revenues. How could it help bridge that gap? INN worked with Google News Initiative on an Ignite Sponsorship program for eight newsrooms around the country, with a goal of increasing earned revenues by 30% in June 2022.

The program also produced some case studies of nonprofit newsrooms who have succeeded with earned revenues, including one on Madison365, which serves communities of color in Madison, Wis. The publisher has made more than half its revenues from a “business membership” program that includes advertising and consulting — with a big chunk from event sponsorship. This chart outlines how that works:

“Madison365 has a business membership offering, which is a little different than sponsorships,” said Courtney Hurtt, program manager for NewsMatch at INN. “Clients do advertising on their podcasts, newsletters and website, but the memberships go beyond advertising. They provide an opportunity for clients to align with their audiences, which are communities of color in Wisconsin. The business receives recognition for its investment in the news that serves those communities. It’s more like a brand alignment opportunity. They’re finding a lot of success with this type of offering.”

GNI and INN recently released a new playbook to help nonprofit publishers increase revenues from display ads, event sponsorships, sponsored content and more.

5. Driving revenues related to pandemic coverage and projects.

During the pandemic, local news publishers have become trusted sources of vital information in communities, so it follows that they have been able to sell more subscriptions and donations by building more trust and proving their value. But it’s not always obvious that the special coverage of a disaster would lead directly to increased revenues. In fact, most coverage has been put outside of paywalls, but still led to more paid subscriptions.

Kristen Hare, editor of the Local Edition newsletter at Poynter, told me that many newsrooms grew their audience by covering “the story that will define us for generations — the coronavirus.” She also ran down a list of the ways publishers creatively brought in new revenues, based on the great reports from API’s Better News collection on diversifying revenues:

The San Antonio Express-News created a timeline around COVID-19 news that brought in 600+ new subscribers to the newspaper, as well as thousands of new email newsletter subscribers.

The Atlanta Journal-Constitution generated more than $35,000 from sponsorship of an “Art from the Heart” project asking children to create artwork related to front-line workers and send it to the paper. They received 268 submissions along with sponsorships from local hospitals and even the city of Atlanta.

Scalawag pivoted to offering an array of virtual events targeted to people of color, and raised $1100 in donations from one documentary screening online.

Local publishers have had to change their mindset to include themselves as front-line workers during local crises, so that the future fundraisers will go to their journalism as well as to other nonprofits in the community.

Succeeding against the odds

In the crucible of the COVID-19 pandemic, local news publishers were forced to grapple with once-in-a-lifetime stories while facing a challenging business climate. And despite the many publications that suffered furloughs, layoffs and closure, many local outlets persevered. Their business creativity was often awe-inspiring, and will serve them well in years to come, in the cycle of disasters we have come to expect.

Most importantly, these local news publishers have shown their staying power in diverse communities, and a growing cohort of funders and donors means that journalists can do more by working together and serving the best interests of their audience. That’s an important lesson from 2020, and one that will resonate long into the future.

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Interested in supporting the work of local nonprofit newsrooms? Find out how your donations can be doubled at the NewsMatch website, and keep an eye out for your local nonprofit newsroom’s fundraising campaign, running through the end of the month.

Mark Glaser is a consultant and advisor with a focus on supporting local and independent news in America. He was the founder and executive director of MediaShift.org, and is an associate at Dot Connector Studio, and innovation consultant at the New Mexico Local News Fund

Photo (top) by Christian Wiediger on Unsplash