Monday, June 10, 2013

Floundering news start-ups need help

Although nearly $26 million was donated to 50 non-profit journalism start-ups in recent years, most are flubbing the mission-critical task of finding ways to financially sustain their efforts for the long term. 

The casual approach at most news start-ups to the serious business of identifying next-generation models for journalism has got to stop. More on that in a moment.  First, the background: 

The scale of spending on news start-ups was captured in an unprecedentedly thorough study released today by the Pew Research Center’s Project for Excellence in Journalism. 

In surveying 178 non-profit news ventures formed since 1978, Pew learned that 57 of them started with “a major seed grant,” according to Mark Jurkowitz, the associate director of the project, who kindly responded to my request for funding details not contained in the published report. 

While only 50 of news ventures receiving major seed grants reported the amount of their  backing to Pew, those groups collectively raised “just shy of $26 million,” said Jurkowitz in an email exchange. That makes for an average or more than $500,000 per organization. 

So far, so good. But here is the problem:

Although the intentions of both donors and recipients undoubtedly were noble, Pew found that many non-profit news organizations, including bootstrap operations not benefitting from significant seed funding, “face substantial challenges to their long-term financial well-being” because they “do not have the resources or expertise necessary for the business tasks needed to broaden the funding base.” 

While most of the 178 organizations surveyed by Pew said they brought in more money than they spent in 2011 (the most recent year studied), Pew noted that the bulk of funding for most organizations came from a single foundation or donor. “That funding source may not provide long-term sustainability,” said Pew, noting that only 28% of the organizations at the time of the report said their key donor had agreed to renew the initial grant “to any degree.”  

Of the organizations whose seed funding was renewed partially or not at all, only 28% “were able to make up the entire deficit from other sources,” said Pew.  

Despite the risk of depending on a single source for long-term viability, Pew found that nearly a third of the news start-ups spent less than 10% of their staff time on business development, while more than half said such activities occupied between 10% and 24% of their time.  By contrast, 85% of the ventures said editorial tasks consumed at least half of their time. 

In other words, most start-ups are concentrating on their journalistic missions without giving due regard to the equally vital task of building financially healthy organizations to sustain their efforts over the long term. 

This has been a consistent theme among most of the news start-ups that have emerged since the wheels started coming off the traditionally profitable newspaper and newsmagazine businesses in the middle of the last decade.

Inattention or ineptitude with respect to business matters killed off such high-profile efforts as the Chicago News Cooperative, which flamed out in 2012, and the Bay Citizen, which was euthanized last month in San Francisco. 

The Pew report is not the first to identify the want of business acumen at most journalism start-ups. 

In a 2010 study of 46 news ventures that collectively received $833,000 in funding, Jan Schaffer of the J-Lab at American University reported that nearly a third of the organizations had failed and that the balance were hanging by a thread because the founders were toiling for little or no pay.  “Community news sites are not a business yet,” she concluded.  

The weight of the available evidence over the years makes it clear that small, isolated groups of journalists – regardless of their passion and talents – are not going to spontaneously discover ways to fund the news business. 

If all the nation’s newspaper publishers have been unable to arrest a 50%-plus decline in advertising revenues since 2005, how can a handful of writers and editors be expected to do better? 

For all the millions of dollars that have flowed into starting news ventures, almost no serious research has been funded to identify the business models and best practices necessary to ensure the success of those investments. 

With each news start-up left to its own devices, many have failed. Without significant help, many of the remaining ventures will succumb, too. 

These wonderfully well-intentioned people need help. Before anyone backs another journalism start-up, let’s put some time and money into figuring out how to make sure they can succeed.  

5 Comments:

Blogger tooter2 said...

Knight has done a lot of work in this area. Check out Michele McLellan and also the organization known as LION (Local Independent Online News publishers).

11:35 AM  
Blogger frank h shepherd said...

While the editorial and reporting content is the heart and soul of a site(or print product)... revenue is the life blood that feeds the heart and keeps the soul "alive"... If these or any editorial content "publication" have 10 problems 9 of them are revenue related....and most editorial people forget this in their start-up business model... and my guess is when then do estimate revenue they overestimate what they will do my DOUBLE... and when they fall shot they are forced to make cuts in content and the beginning of the end...

5:27 PM  
Blogger donica said...

Two questions:

Could it be that until the products and services these businesses offer is better defined, expecting sustainable levels of revenue is premature? In other words, could all of these experiments be useful for helping discover and shape what news consumers want and need? Understanding demand seems to be an essential requirement for a sustainable business plan.

Secondly, what happens if it can be determined that these organizations have been producing value for their communities in terms of public good, but there is no commercial demand for that value?

1:15 AM  
Blogger Mike Lange said...

Excellent assessment of the problem. People want hard-hitting local news on the Internet. They just don't want to pay for it.

2:01 AM  
Blogger John McManus said...

The media economist Robert Picard argues that the public has never been willing to pay the cost of gathering and disseminating news of general interest. Across time and geography, news has always needed subsidies to survive. Those were first provided by rulers, later by advertisers.

As a society we need to recognize that the news media constitute the nation's most important institution for civic education. Just as government funds public education as a necessary foundation for an informed citizenry, it must find a way to help fund news organizations. And it must do so without controlling their content.

The McChesney-Nichols book, The Death and Life of American Journalism , has some useful suggestions.

9:12 AM  

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