Monday, April 26, 2010

A non-profit news model that might work

MinnPost, a scrappy news start-up in Minnesota, is beginning to show how to run a sustainable non-profit venture without depending on major philanthropic support.

And it is doing so in two ways: First, by keeping costs low. Second, by raising money almost continuously through such diversified initiatives as advertising, NPR-style user contributions and even an annual gala featuring organic-vodka martinis.

In other words, the highly regarded Minnesota news site is the antithesis of such large-scale journalism projects as Pro Publica, Texas Tribune and Bay Citizen, which at this writing all rely on multimillion-dollar endowments from wealthy individuals and institutions.

MinnPost not only started life without a multimillion-dollar nest egg but also is committed to fully supporting its ongoing operations without major philanthropic donations by 2012, says Joel Kramer, a former editor of the Minneapolis Star Tribune who launched the site in 2007.

As of the end of 2009, Kramer was about halfway to his goal of achieving philanthropic independence. Even if MinnPost makes it, Kramer won’t rule out taking charitable donations to pilot additional projects at an operation already providing thoughtful and high-caliber coverage of news, issues, politics and culture in the Twin Cities and beyond.

Kramer’s quest for philanthropic independence is a matter of necessity, because MinnPost since 2007 has raised just $1.1 million in seed funding from multiple sources. Bequests range from $455,ooo from the Knight Foundation to a grant of $60,000 from a Minnesota foundation.

Compare its modest endowment to the substantial resources enjoyed by these notable non-profit news ventures:

:: Pro Publica has a cornerstone commitment of $10 million per year from a single benefactor for three years that is renewable at $10 million annually in subsequent years. Pro Publica, which recently earned its first Pulitzer Prize, got $1 million last year from the Knight Foundation just to look for more money.

:: Texas Tribune was launched last year with a $5 million grubstake from a handful of wealthy patrons in the Lone Star State. Like MinnPost, Texas Trib hopes to diversify away from big-ticket grants. In the meantime, however, it is operating on a comfortable cushion.

:: Bay Citizen got a $5 million jumpstart last year from San Francisco financier Warren Hellman. Even though the venture won’t publish its first story until May 26, Bay Citizen is in full fund-raising mode and recently leased stylish offices in downtown San Francisco.

But things are different at MinnPost, where low overhead is a way of life.

Although Kramer and his wife, Laurie, have worked tirelessly on the project since they launched it in 2007, neither ever has drawn a dime of pay. Their commitment, which includes personal donations in excess of $120,000, contrasts to the hefty six-figure salaries paid at Pro Publica, where editor Paul Steiger makes $570,000 per year; the Bay Citizen, where CEO Lisa Frazier earns $400,000 annually, and Texas Trib, where editor Evan Smith gets $315,000 a year.

With an operating budget of $1.2 million in 2009, MinnPost employed a staff of 18 (including the unpaid Kramers) and four-dozen freelancers, according to its annual report. By contrast, the Pro Publica payroll in 2009 was budgeted at $9 million for a staff of 37, plus a few short-term interns and fellows.

Setting aside freelancers in both cases, the average budget allocation per full-timer was $66,667 at MinnPost, which would include pay, benefits, office space, expenses and more. That compares with an the average of $243,243 allocated for each head at the New York-based Pro Publica. Subtract pay for freelancers at MinnPost and the average budget allocation for each full-time staffer drops at the Minnesota shop.

Lacking a hefty endowment to underwrite its operations, raising money also is a way of life at MinnPost.

The good news is that MinnPost is making headway toward Kramer’s “stated goal” of breaking even on “basic operations” without foundation support by 2012. The bad news is that he is only about halfway there. Considering the dicey economic environment in which he launched the site, that’s respectable progress. But it also means Kramer has a way to go.

MinnPost’s highly diversified revenue stream includes selling advertisements, soliciting sponsorships, collecting pledges from some 1,700 individuals, syndicating content, consulting and even organizing an annual gala called MinnRoast, where local dignitaries tonight will be spoofed before a 700-person audience put in the proper frame of mind by the aforementioned martinis.

In 2008, the first full year of operation for MinnPost, the above activities raised $577,ooo, or 37.9%, of the organization’s $1.5 million operating budget. Last year, according to its annual report, MinnPost raised $675,000 in earned revenues, or 55.7% of an operating budget that was trimmed to $1.2 million in light of the expectation that income would be lower because of the recession.

Thus, MinnPost moved in 2009 to the point that more than half of its operation was funded without support from institutions and large individual bequests. However, that still meant MinnPost had to dip into its modest $1.1 million nest egg to cover its budget shortfalls.

If MinnPost can’t achieve philanthropic independence by 2012, it either will have to seek additional foundation funding, curtail operations or both. For the moment, however, Kramer’s plan seems to be on track. You’ve got to hope he makes it.


Blogger Unknown said...

Alan - glad to see you're coming around on nonprofit news. However, I wanted to clarify the distinction that you seem to draw between MinnPost's business model and The Bay Citizen's model.

Any nonprofit organization worth their salt will tell you that relying wholly on large philanthropic gifts - whether from major donors or from foundations - is unsustainable in the long run. Instead, these large "seed" grants serve a clear purpose: to help a new nonprofit get off the ground, start producing content, and start building a loyal audience.

You seem to imply that The Bay Citizen intends to "rest on our laurels" by continuing to rely on large gifts for eternity. Not so.

Indeed, we would view that as a failure. Our mission is to re-invigorate civic and community news coverage in the Bay Area and foster civic engagement. To accomplish this, our journalism must appeal broadly to the Bay Area community - not just wealthy philanthropists. We must have the support of the community to survive. In fact, our goal is to be a member-funded organization in five years' time.

I won't pretend to know ProPublica's strategy, but I do know that they are also exploring ways to ensure their sustainability going forward.

I'm happy to talk to you more about The Bay Citizen. Give me a call sometime.

Rose Roll
Director of Membership and Marketing, The Bay Citizen

10:44 AM  
Blogger Matt Day said...

MinnPost has done some great work, but I'd worry about the sustainability of their audience. One of the factors that helped seal the fate of big metro papers was their overwhelming whiteness, both in the newsroom and in the topics they chose to cover.

MinnPost's audience, based on their own data, is overwhelmingly middle aged, upper middle class, and white. Basically NPR (or MPR, in this case) listeners +a few years. That base will allow them to earn a living (especially in civically engaged Minnesota), but isn't going to draw any underrepresented constituencies into the business of buying or consuming news, a questionable move if you look at where the country will be demographically 10 or 20 years down the line.

I'm not sure what the solution is, but MinnPost just feels like a streamlined online-only version of Minnesota Public Radio to me, not necessarily anything terribly new or innovative.

6:03 PM  
Blogger Justin Arenstein said...

Alan - one of the problems with a lot of these discussions in that no-one is looking for models or case studies outside of the US.

There are great examples of investigative or in-depth reporting projects elsewhere in the world that use a variety of hybrid business models -- and that have survived & thrived for decades.

6:12 PM  

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