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July 11, 2019, 11 a.m.
Business Models

Here’s how some for-profit local news outlets are building subscriptions

Sixteen percent of Americans pay for news, a report earlier this year found. It’s not exactly trickling down to local outlets.

Nonprofit status has been enormously helpful for local news outlets, both those kicking off as newbies or transitioning from the commercial (and profit-losing) life. Two hundred organizations are now registered with the Institute for Nonprofit News, collectively bringing in more than $350 million in revenue last year and, of course, doing the important work of the journalism itself.

But that doesn’t mean for-profit local journalism models are all lost. In a new Shorenstein Center paper, special projects director Heidi Legg reviews some the non- and for-profit leaders in local news (as well as the mobilizers infusing the local news market with more money and ideas, like the American Journalism Project and Report for America).

Sure, the billionaire model works sometimes — you know the drill, find a benefactor who has local ties and money to spend — but the odds of that happening in every local market aren’t great. “I just figured out how to become a millionaire in the newspaper business. It’s easy. You start out as a billionaire, and you buy a bunch of newspapers,” Gerry Lenfest, namesake of the Lenfest Institute that owns the Philadelphia Media Network as a public benefit corporation, said after he bought the newspapers in 2014. Lenfest’s move was one of the first examples of legacy newspapers in new, hopefully sustainable ownership models. John Henry bought the Boston Globe from The New York Times Company in 2013, Glen Taylor purchased the Minneapolis Star Tribune in 2014, and other incredibly wealthy folks made other national media purchases.

But putting down the first check was not the final answer. Digital subscriptions are a fickle business, with retaining subscribers and adding revenue with advertisers, but that also describes the news business in general. This is a mix of for- and non-profit outlet ownership:

Only 16 percent of people in the U.S. pay for news, according to this year’s Reuters Institute Digital News Report, and most of those pay for only one subscription. How do you recapture people in a local area who may already be chipping in for paper that got the most out of the Trump Bump (and then built out its products to prepare for the Trump Slump)?

This next chart isn’t perfect, as The New York Times and the Washington Post have deep bases of subscribers outside of their metropolitan headquarters, and I’m pretty certain the entire population of Minneapolis won’t be paying for digital subscriptions. But could these organizations get to that 16 percent of residents who’ve subscribed to something? The Boston Globe, the first local legacy paper to have more digital than print subscribers, has just under 2.5 percent; the Seattle Times has 1.19 percent, and Santa Rosa Press Democrat has 3.31 percent, for example.

Some newspaper chains, like Digital First Media, Tribune Publishing, and others, are relying on subscriptions to send that money back out to their investors. But not all are: Legg profiles over a dozen local media companies and how they make their money. (She also has a set of case studies on nonprofit news stars with home Nieman Lab readers are well familiar: The Texas Tribune, New York’s The City, VTDigger, Honolulu Civil Beat, etc.) Here’s a sampling:

Minneapolis Star Tribune:

With 62,000 digital-only subscribers, 225,000 daily print and digital subscribers, and 360,000 Sunday print and digital subscribers (it also has 28,000 replica edition subscribers), the Star Tribune has been much lauded for its turnaround in the digital era as other newspapers have failed. It takes in $200 million in revenue annually from circulation (50%), advertising (40%), and printing and distribution for third parties, e-commerce, and events (10%). It has 232 full-time equivalents currently in the newsroom, with some additional unfilled positions, as well as 350 active freelance contracts on file. “We have stayed profitable, but it gets tighter every year,” said Michael Klingensmith, the paper’s publisher and chief executive, in an interview with the WSJ. The Star Tribune will need to surpass 150,000 digital subscribers to be sustainable in the longer term, he said, and his hope is to double digital subscriptions by 2025 or sooner.

The Philadelphia Inquirer:

The Philadelphia Inquirer counts 32,000 digital subscribers but it arrived late to the digital subscriber game. It expects to catch up to its peers. As a for-profit-public-benefit-corporation owned by a nonprofit organization, it is an early model many local newspapers are exploring. Today, it has put all of Philadelphia Media Network under one digital brand, Inquirer.com. With over 250 journalists in Philadelphia that focus on eight counties, it is a big believer in collaboration, wrote executive editor Stan Wischnowski.

Richland Source:

The Richland Source was founded in 2013 by Carl Fernyak, on the belief that North Central Ohio was yearning for a forward-thinking, community-focused, digital newsroom dedicated to covering Richland County with daily stories by and for the people in the area, as per its website. It is a hybrid focused on local news while also providing social media consulting, ad models, community events organizing, and small-batch apparel production for businesses, foundations, and nonprofits in the area.

BoiseDev:

BoiseDev is a founder-run microsite focused on the development and growth of fast-growing Boise, Idaho. In 2013, founder Don Day began tweeting on the subject of his city’s hyper-development growth and it led to a newsletter in 2015, then the launching of its digital home in 2016. Day says BoiseDev’s editorial focus is on unique and unduplicated coverage of local city politics, business changes, and general growth. Day writes both long form and short news alerts, and maintains an extensive Project Tracker tool for monitoring city development and building projects…. His membership model, BoiseDev FIRST, is priced at $110 a year or $10 a month, and his popular development and business roundup has secured him 260 paid users after only five months.

Berkeleyside:

As the only news outlet dedicated to covering Berkeley, California, it is now counting an average of 1 million page views and 300,000 unique visitors a month. It has 15,000 newsletter subscribers, 61,000 Twitter followers, and 22,000 Facebook followers. With Berkeley home to around 120,000 people, its market size is niche. It also covers the local food scene in Oakland and the East Bay, which gives it a potential market reach of 500,000. [Berkeleyside’s model is especially noted for raising money from its readers through a direct public offering.]

Whereby.Us:

Focused on producing newsletters for five American cities, WhereBy.Us sends each city’s newsletter five days a week with a 30 percent open rate, according to an email interview with Chris Adamo, chief business officer… “We are a for profit, as are all five of our publications, and they all follow the same channels for sustainable revenue, plus revenue channels like event creation/ ticket sales, sponsored/ supported journalism products, product sales and creative consulting.” He also defined the use of foundation support: “We do work with many foundations on grant programs as well as partner with nonprofits on projects, as we are allowed to take grants as a for profit when the work is civic focused.” [Newsletter subscriptions range from 7,000 in Orlando to 39,000 in Miami.]

6AM:

Ryan Johnston, 6AM’s managing director and former executive vice president of Community Journals, called 6AM “a local, social and vocal brand” and reported being profitable through ads and local business partnerships. He also told Schmidt that 6AM would not be experimenting with paid membership… In late 2018, 6AM had over 150,000 email subscribers across the six sites and a 25 percent open rate, which is a hair more than those of WhereBy.Us affiliates at this time.

The full report is here, with for-profit case studies here and nonprofit ones here.

PHOTO OF THE BEST WAY MONEY IS MADE BY THEDIGITALWAY USED UNDER A CREATIVE COMMONS LICENSE.

POSTED     July 11, 2019, 11 a.m.
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