James Breiner: Entrepreneurial Journalism

1. Clare Cook and Esa Sirkkunen of the Tampere Research Centre for Journalism, Media and Communication in Finland did a study of 69 journalistic pure players in nine countries in 2012, Chasing Sustainability on the Net. The searchable database allows users to look at, for example, 16 different revenue sources used by these media organizations. 

In interviews conducted by the researchers, many of the entrepreneurs repeatedly made the same recommendations on the keys to achieving sustainability. They were:

One of the 69 profiled in 2012 was MedCityNews, which was founded in Cleveland and focuses on investment  opportunities stemming from medical research. It has since expanded its coverage to several other cities and launched a major events business.

2. Nicola Bruno and Rasmus Kleis Nielsen studied nine digital publications in Germany, Italy, and France for their 2013 study, Survival is Success: Journalistic Online Startups in Western Europe. (Published by Reuters Institute for the Study of Journalism at Oxford University).

Some of the study’s observations and conclusions echoed those of Cook and Sirkkunen.

• There was no single formula that worked for all the startups.
• Diverse revenue sources were needed. Advertising alone could not support a meaningful digital news operation in Western Europe.
• European startups had a limited potential audience because of language, unlike English language sites that could attract a global audience.
• The most successful of the nine start-ups in the study identified niches poorly served by the incumbent industry. They focused on unique content and developed unique strategies around that content.
• Lean organizations did better.

Three years since the study, one of the more successful ones is France’s Mediapart, an investigative news site founded by a former editor of Le Monde; it is funded entirely by subscriptions.

3. Reuters Institute’s 2015 online survey of 24,000 media consumers in 12 countries did not focus on startups or digital specifically, but it did ask people whether they would pay for online news. The answer is critical for digital publishers looking to diversify their revenue sources.

Surveys and actual market behavior show that a small percentage of digital users will pay, depending on the country, the media brand, payment systems, and technology platforms. For some publishers, that could be the difference between thriving and merely surviving.

Although the chart below shows the majority in the U.K., U.S., Spain, and Australia saying they would not pay for digital news, from 9% to 18% said they would pay $2.50 a month or the local equivalent.

From Newman et al., Reuters Institute Digital News Report 2015 (p. 65).

In fact, 10 percent of the respondents said they had paid for news in the previous year. Media economics scholar Robert G. Picard sounded an optimistic note on the question of getting the public to pay for news online (p. 92 in the report). He pointed out that 24 percent of those surveyed already were paying for digital news or said they would be willing to do so, which he called “a significant proportion”.

Also on the positive side, improvements in payment technologies are making it easier and more attractive for users to pay. Digital subscription services have been signing up users and publishers rapidly.

4. A new study of sustainability of 31 hyperlocal news sites in France, Holland, and the U.K. by professors Piet Bakker of Hogeschool Utrecht and Clare Cook of the University of Central Lancashire found “a high diversity in content production and content strategies.”

The 31 hyperlocals rely heavily on volunteers and part-timers. Click to enlarge.

However, these hyperlocal sites have little diversity in their revenue models.

The stronger ones use more diverse income streams like partnerships, native advertising and sponsorship.

The hyperlocals have few full-time paid workers, as the chart at left shows, and rely heavily on volunteers and part-timers. Scale might be an issue in sustainability, the researchers concluded, since hyperlocals are, by definition, small with limited revenue potential. Sixteen of the 31 generated less than £25,000 (US$ 37,000) in 2014.

They concluded that 8 of the 31 are “resilient”, meaning they can make a profit and grow; 10 are “sustainable”, meaning they can maintain a flow of content and cover costs; and 11 are “viable”, meaning they are fulfilling a demand for content. Two could not be rated. 

5. The Press Association of Madrid, in its 2015 report on the state of the profession in Spain, included a list of 579 media launched by journalists since 2008, when industry-wide layoffs began. Since then more than 11,000 journalists in Spain have lost their jobs, and many used their severance packages to start media.

Of those startups, 458 were still active when the report was completed. The chart below shows the coverage areas of those active media. The longest bar represents the 131 that concentrate on local or hyperlocal news coverage. The next three largest coverage specialties, representing 41 to 44 media, are culture, sports, and national news.

Half of the startups generate less than 50,000 euros (US$ 56,000) per year. The study’s analysis concluded that the vast majority of these publishers had limited or no sales and technical skills, and were extremely vulnerable financially.

However, one of the startups that has thrived is Porcentual, which has contracts with more than 80 media around Spain for its data visualization services. In an interview, founder Manuel Benito Ingelmo described how he launched the service after the newspaper where he worked laid him off to cut costs. Another startup success story is Eldiario.es, which specializes in exposés on corruption. It generated US$ 2.6 million in revenues in 2015 and has more than 50 employees.

The focus on recent startups often fails to take notice of the extraordinary success of the 15-year-old national news website El Confidencial, which has 100 employees, a strong journalistic reputation and ranks sixth among all news sites in Spain with 8 million unique users monthly, an audience half as big as El Pais, the country’s leader, according to ComScore.

Researchers have done several extensive projects about digital media in the region, but usually without a focus on financial sustainability. Poderopedia, a transparency organization, compiled data on the ownership structure of 509 media outlets in Chile and 220 in Colombia and found that they  were concentrated in the hands of a few powerful organizations.

Fourteen digital media startups in Latin America and Spain described their business models at the 2013 International Symposium of Online Journalism at the University of Texas. In reporting on the event, Anne Nelson noted that many of these outlets were started with grants from foreign foundations. Their path to sustainability was uncertain.

6. A recent addition to the research is SembraMedia.org, founded and run by Janine Warner, whose team of 16 has created a database of more than 220 Spanish language digital media. (Disclosure: I have worked with Janine on some teaching ventures and am on the advisory board of SembraMedia.) The SembraMedia database has filters that allow a user to sort media by the sources and amounts of revenue generated, number of employees, year founded, coverage areas and other factors.

The aim of SembraMedia is to create a community of digital media entrepreneurs who can share best practices and take advantage of the free resources available on the platform. The site will generate revenue from fees for some courses.

SembraMedia includes a directory of digital media as well as entrepreneurial tools. Click to enlarge.

7. The venture philanthropy organization Shaerpa commissioned a study in 2015 that included a list of 52 ways to make money with quality journalism.  

Authors Pieter Oostlander, Teun Gauter, and Sam Van Dyck looked at four traditional and nine new digital media in Holland and concluded that “quality journalism is a self-supporting proposition in this new ecosystem, and even a quite profitable one”.

To survive, publishers need to create hybrid business models to generate revenue, which are much more complex than in the past, the researchers admitted. “Self-employed information workers and small collectives do not have the skills, culture or supporting infrastructure to market and sell their work.”

Three of their recommendations and observations:

• New media should cooperate more and share infrastructure.
• There is more demand for high-quality journalism than supply, thus there is opportunity.
• Philanthropy needs to take equity positions and make loans, not just offer grants. This is the model used by Shaerpa and the Media Development Investment Fund

8. Digital news startups in the U.K. and Ireland were tracked for a number of years by a website called Local Web List. The database was originally funded by the Carnegie U.K. Trust. In 2015, it included more than 570 hyperlocal news sites. This online database has been limited in scope to identifying basic information about the location and geographic area covered by the websites.

However, researchers from Cardiff, Westminster, and Birmingham City universities used it as a basis to conduct a more detailed survey and received 183 responses. Among their findings, published in 2014:

• “Most hyperlocal news sites suffer from a lack of visibility in their own communities, with only very few reaching a high percentage of their potential local audiences.”
• 72% had fewer than 10,000 users. 
• Three-fourths of the publications operated on less than 40 man-hours per week.
• 63% of the publishers paid all the costs of the website themselves.
• Only 8 percent generated more than $3,100 a month. 

 As in other countries, the vast majority of publishers were small, poorly funded, short on trained personnel, but absolutely dedicated to the work they were doing.

9.  Several weeks after I presented my paper in New York, Arijit Sen and Rasmus Kleis Nielsen of the Reuters Institute for the Study of Journalism published Digital Journalism Startups in India.

“There are more new and interesting experiments in Indian journalism than in most other countries in the world,” the authors reported. They looked in depth at six sites but made observations on the enormous potential of the overall market.

Most startups in India are putting an emphasis on mobile-first design of their content and are focused on using social media to distribute it. While many are in English, some are focused on the much-larger Hindi market. Low ad rates and reluctance to pay for content make India a challenging environment for digital media entrepreneurs, they concluded.

10. Pew Research Center in 2013 published an in-depth survey of 93 nonprofit local news outlets founded in the previous 25 years. In fact, 71 percent had been founded since the beginning of the financial crisis in 2008. (The term nonprofit referred to the tax status and financial structure.) The study included sites ranging from nationally known to hyperlocal.

About one-fifth said they generated $50,000 or less in annual revenue in 2011, the latest year for which data were available at the time of the survey (see chart below), while on the high end, 15 percent generated more than $1 million.

“But about half of those organizations are still generating at least 75 percent of their income from a single revenue stream, almost always foundation grants.”

Other findings:

• Slightly more than half of the publishers identified business, marketing, and fundraising as the areas of greatest staffing need.
• About three-fourths had no more than five paid, full-time staffers.

11. One of the few databases of local news sites that was still being updated in 2015 was Michele’s List, produced by digital media researcher and consultant Michele McLellan. To be included in her list, a news website had to be “progressing on three fronts – content, management, and revenue.” The database includes 275 listings and has a filter function with 19 categories, including type of news, revenue sources, institutional partners, and location.

The filter function has 19 categories, including revenue sources, and institutional partners. Click to enlarge.

With the support of CUNY’s Graduate School of Journalism, McLellan produced The 2015 State of Local News Startups, with data on 84 of the 275 sites in her database.

Among the key findings:

• Two-thirds generate $100,000 a year or less annually, and half make $50,000 or less.  9% make more than $500,000.
• 47 percent said they turned a profit in 2014, and another 22 percent said they had developed a steady flow of revenue but were not profitable.
• Most were highly dependent on local advertising that they sold directly, as opposed to using advertising networks.
• Just over a third had full-time paid staff as content contributors. Most relied on freelance or part-time staff.
• On the business/marketing/sales side, 46% had full-time paid staff.
• Only a third of the publishers drew a full-time salary from their site; 40% of them were not drawing any salary.

In addition to this study, McLellan produced a guide of best practices in sales at 22 of the sites.  

McLellan found that, unlike digital media that aim to sell advertising based on audiences in the tens or hundreds of millions, the more successful digital operations “do not use a rate model based on cost per impression (CPM), pay per click, or deals (such as Groupon) that require a large audience to make any money. Instead, these organizations use direct sales to advertisers and offer exposure to smaller, highly engaged audiences. This enables them to command higher rates, as they are unlikely to be sustainable at the lower rates.” 

12. The leader in funding studies and projects aimed at improving community engagement and sustainability in digital journalism in the U.S. has been the Knight Foundation. (Disclosure: This writer has benefited from five years of support on three Knight-sponsored journalism projects.)

In a series of three reports over five years, the Knight Foundation tracked up to 20 nonprofit news ventures, some of which they had invested in.

• Budgets ranged from $34,000 for the Rapidian in Michigan to $7 million for the Texas Tribune.
• Average revenue growth from 2011 to 2013 was 73%. However, five either had no growth or a decline in revenue. 
• The publications relied heavily on foundations, which provided 58% of total funding.
• Only 23% of their revenue came from earned income (advertising, events, sponsorships, trainings and subscriptions).  
• The sites that grew substantially invested in full-time staff in fund-raising and technical innovation.

Click to enlarge.

 Professor Jake Batsell of Southern Methodist University added an extensive coda to the report that included best practices of the Texas Tribune and some other leading news nonprofits. Among them:

• Know all about the audience and sell its value.
• Give sponsors options for exposure beyond banners, such as native advertising or sponsored content.
• Sell the value of the publication’s mission; sponsors respond to it.
• Syndicate content to generate revenue and exposure.
• Monetize data sets.

Watchdog journalism has suffered, particularly on the local level, with the cutbacks by major media outlets. Communities have not been served well. Striding into the breach have been a variety of new digital players that have not yet demonstrated they have the skills needed to replace what has been lost.

The new digital ecosystem is enormous, with tens of thousands of new players, but it is fragile. The migration of the audience to mobile devices and the competition for ad revenue from technology platforms like Google and Facebook have challenged news organizations of all sizes.

After reviewing all of these studies, it appears there are some common strategies and tactics that the most successful digital media operations have adopted:

• Diversify revenue sources. Advertising and subscriptions aren’t enough.
• Don’t sell CPM advertising or eyeballs, sell sponsorships. Sell the publication’s mission; it has more value and sponsors will pay more.
• Don’t sell subscriptions, sell memberships in a community-service organization. As with ads, sell the mission. People will pay more to support a publication’s mission than they would pay for a subscription. If only a small percentage of users pay, that can be enough.
• Hire or develop staff in the fund-raising and technology areas. They will accelerate the publication’s growth. 
• Invest in training staff in technology, business, marketing, and social media distribution.
• Collaborate with other organizations that share a community-service mission — universities, publicly funded media, nonprofits, even some government agencies (but with caution).
• Share infrastructure costs with collaborators.
• Keep costs low and expand only as revenue capacity allows.
• Monetize the databases you build and publish by finding sponsors.
• Events strengthen the brand, attract sponsors, and develop new revenue streams.
• Innovate constantly. If you don’t, your competition will overtake you.

Digital entrepreneurs cannot meet the challenge of the new media monopolies by using the old zero-sum models of competition, in which one organization’s loss is another’s gain. The new digital players have to make the pie bigger by finding new ingredients, and more ingredients, for the pie. 

This is not just a business challenge but a social and political challenge, because in the democratic model of governance, a well informed public is an essential ingredient for making decisions in the best interests of the society as a whole. 

The road ahead looks a bit scary. Someone mapping a path for a digital media organization today, using the style of a Renaissance cartographer, might show vast blank areas whose hazards are unknown. The monsters would not be dragons or sea serpents but technological giants with globally recognized logos. The navigators of these uncharted waters will need pluck, skill, vision, courage, and creativity to find a path toward sustainability. It would help if they also had a bit of luck.

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