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April 15, 2014, 10:48 a.m.
Business Models

Paying for news by filling a need: Lessons from Austin’s Digital News Revenue Summit

The daylong summit on new models for supporting journalism examines how the Texas Tribune diversified its funding, the injection of venture capital and private wealth into media, and the future of philanthropy for news.

Editor’s note: Dozens of leaders of online news organizations — for- and nonprofit — gathered recently in Austin to talk money. Here, Jake Batsell, the gathering’s organizer, distills what they discussed.

Reprogramming your thermostat every time the seasons change can be a maddening exercise. But that humdrum annoyance created a market opportunity for Nest Labs, whose $249 self-programming thermostat allows users to more easily manage their personal comfort.

What can the news business learn from the Nest thermostat? It solves a problem, and people are willing to pay for it. News sites should similarly aim to fill a need for — and, better yet, delight — their audiences, argues Michael Maness, the Knight Foundation’s vice president of journalism and media innovation.

Nest was one of the examples Maness cited during his provocative keynote talk, “Does Anyone Need It?” (slides/video), at the Digital News Revenue Summit earlier this month at the University of Texas at Austin. The one-day summit, part of my activities as a Knight-funded Texas Tribune fellow, brought together more than 90 participants from 27 countries on the day before the always-stellar International Symposium on Online Journalism.

The goal of the revenue summit — which I organized with my fellow Tribune fellow (and newly promoted publisher) Tim Griggs — was to discuss, debate and brainstorm ways to fund digital news. Tim set the ground rules in his opening remarks: We would not be discussing well-worn journalism conference topics, like The New York Times’ Snow Fall or Twitter’s role in the Arab Spring. The #newsrev summit had a singular focus: how to pay for journalism in an era when news consumers have infinite choices.

Subsidizing news through corporate sponsorships

An increasingly popular way to subsidize journalism is by courting corporate sponsors looking to reach an influential audience. As Nieman Lab has noted, the nonprofit Texas Tribune is a national leader in this area — last year, the Tribune generated more than $2 million through corporate underwriting and sponsored events. At the summit, I moderated a panel that took a deeper look at the evolution of the Tribune’s business model (slides/video), with practical tips from the Tribune managers who specialize in revenue streams including sponsorships, events, philanthropic donations, membership and crowdfunding.

Since its launch in 2009, the Tribune has significantly diversified its sources of revenue, becoming less dependent on donations from foundations and individuals while generating more cash from sponsors, members and supplementary streams including syndication and a Kickstarter campaign.

Given the growing scrutiny surrounding the role of corporations, foundations and wealthy individuals in funding nonprofit news, I was a bit surprised that the panel drew only one question regarding the ethics of sponsorships. Tom Laskawy, executive director of the Food & Environment Reporting Network, said that for his national, subject-specific news organization, “corporate sponsorships have appeared to be a deeply problematic thing to move into.” He asked Tribune panelists how they address the potential church/state conflict between sponsors’ business interests and the site’s editorial independence.

April Hinkle, the Tribune’s chief revenue officer and former publisher of Texas Monthly magazine, replied that the church/state divide has been a constant presence throughout her career. “There has always been that line, and no matter what, we will not cross it,” Hinkle said, adding that sponsors do not control the content of Tribune events or news coverage. (The Tribune recently expanded its disclosures of donors and corporate sponsors.)

The changing revenue mix

Advertising still dominates the overall U.S. media landscape, accounting for 69 percent of an estimated $65 billion in total news revenue, according to the Pew Research Center’s Jesse Holcomb, whose summit presentation (slides/video) was packed with nuggets from Pew’s State of the News Media 2014 report. But as Holcomb explained, audience revenue and non-traditional sources represent a growing share of the news revenue pie.

Nonprofit news outlets, a “growing but fragile” part of the U.S. media ecosystem, are clamoring for more time and resources to devote to business development, Holcomb said. Meanwhile, for-profit digital news startups attracted an eye-popping $300 million last year in venture capital, although their long-term sustainability — and venture capital’s staying power as a revenue stream for news — is far from proven.

Lara Setrakian and Kristin Nolan, fellows at Columbia University’s Tow Center for Digital Journalism, outlined early findings from their year-long Single-Subject News Project (slides/video). Most of the nearly 20 niche news sites participating in the Tow fellows’ study are seeking to establish diverse revenue streams, Setrakian and Nolan said. But the revenue combinations differ wildly as each site concocts its own individual mix of subscriptions, foundation funding, “freemium” paywalls, events, merchandising and the like.

Philanthropy: Still a “bridge to the future”

After spending all day exploring ways that both nonprofit and for-profit news outlets can generate more of their own revenue, the summit’s final panel (video) focused on the continued importance of philanthropic backing for important, public-interest news projects that are unlikely to be supported by sponsorships or subscriptions.

Seen Hau Tham, senior executive producer for KiniTV, an online television venture in Malaysia, said her for-profit social enterprise relies on philanthropic grants to “give us the opportunity to experiment into something that is risky, that we don’t know for sure that it could make money, but it’s very essential.” For example, she said, grants are enabling KiniTV to distribute online television reports to reach rural Malaysians who don’t read the newspaper.

Indeed, for all the day’s emphasis on self-generated income, panelists concurred that philanthropic donations remain critical to the survival of public-interest journalism.

“The fact is, there’s not a business model — definitely for nonprofits — without donations,” said Brant Houston, board chair of the Investigative News Network and Knight chair of investigative journalism at the University of Illinois. “Philanthropy is our bridge to the future right now. So please don’t pull the bridge up yet.”

The most fascinating part of the day may have been the late-afternoon working groups, when international attendees raised issues that even news nerds like me had never envisioned. If your news site is published in different languages, should you charge differently for content in each language? How do you respond when a militant group offers to “sponsor” your news organization?

So, what’s next? My final fellowship report, to be released later this year, will distill best practices in the business of digital news that I’ve encountered at the Tribune and its peers across the country. In the meantime, all slides and video from the Digital News Revenue Summit can be accessed via the #newsrev landing page on my fellowship blog, NewsBiz.

Jake Batsell, an assistant professor of journalism at Southern Methodist University, is spending the 2013-14 academic year as a Texas Tribune Fellow in Austin.

POSTED     April 15, 2014, 10:48 a.m.
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