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CUNY’s verdict on non-profit news: No reprieve from selling advertising

One of the big debates about the nonprofit model in journalism is whether nonprofit news organizations should accept advertising. Some do. Some don’t. Some are thinking about it. Now, the City University of New York’s New Business Models for News Project has rendered its own verdict: Nonprofits can’t afford not to.

Jeff Jarvis and his team at CUNY have developed financial models for three different types of news organizations that could serve a metro area of 5 million people if the daily newspaper ceased to exist. They’re presenting the models this week at the Aspen Institute’s annual Forum on Communications and Society.

What may be most striking about the “Not-for-Profit News” model is the extent to which it relies on advertising as a source of revenues: In year three of CUNY’s model, advertising revenues account for about 50 percent of total revenues, up from 18 percent in year one. (Total revenues would be about $2.8 million in year three, up from about $1.4 million in year one.)

CUNY’s models were based on exhaustive research, including the amount of foundation money that likely would be available in a given community. I have no reason to doubt their assumptions. But the model, which can be neatly downloaded in an Excel spreadsheet, suggests that the new organization’s ad department would be in overdrive from day one, racing to push ad revenues from a standing start at $0 to a rate of about $117,000 per month.

The prospect raises a difficult question for nonprofits and would-be nonprofits: How can they keep a small newsroom in a small organization insulated from the pressures associated with that kind of metric? And is that possible when, as the CUNY model suggests, the editor is also CEO?

One of the supposed advantages of the nonprofit model is that it can help relieve news organizations of the financially driven biases that afflict for-profit newspapers. Given limited foundation resources and limited potential for membership development, it seems that might be a taller order than some had expected.

                                   
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  • http://www.invw.org Robert McClure

    Jim – Thanks for bringing this to our attention. Can’t wait to check it out and see how it compares to our business plan.
    Question(s): Limited potential for membership? Can you say more about this? And also, yeah, I know about the limited potential for foundation funding right now… but what about after stocks rebound? I’m hoping the potential isn’t *that* limited. Your thoughts?
    Robert McClure
    InvestigateWest

  • http://www.minnpost.com Joel Kramer

    I intend to spend more time analyzing Jeff Jarvis’s very interesting nonprofit financial model later. But at first blush I would say that, based on MinnPost’s experience, his team has underestimated both the traffic and the % conversion of uniques to membership, thus underestimating the membership revenue. On the other hand, I think they may be overestimating the advertising potential.

    As for foundation support, there will be some local dollars there, but the question is how many nonprofit journalism enterprises will be competing for them.

    Re the conflict questions, professional journalism costs money, the money has to come from somewhere, and therefore potential conflicts cannot be avoided. The key is the integrity of the enterprise and its commitment to journalistic independence.

  • http://socraticgadfly.blogspot.com SocraticGadfly

    Then non-profits will have the same problem as for-profits. Jeff Jarvis should note how Google is making ad monetization of non-paywalled media recede ever further away. Do any of his models call for paywalls?