State of Dependency: How Funders Keep Nonprofit Journalism Afloat

Nonprofit news has been booming over the past decade, as funders and entrepreneurial journalists have rushed to fill a void left by the decline of for-profit media. As they got going, some of these new ventures talked a good game about becoming self-sustaining over time by finding viable business models. 

That hasn't happened. Rather, it seems, funders have acquired a bunch of new mouths to feed for the foreseesable future and, in turn, nonprofit journalists remain locked in financial relationships that are problematic in ways. 

At least that's how we read a new report by the John S. and James L. Knight Foundation on nonprofit news organizations, which shows that those organizations still depend on foundation grants for most of their funding, years after they launched.

"Gaining Ground, How Nonprofit News Ventures Seek Sustainability" is the third Knight Foundation report about nonprofit news outlets since 2011. This one specifically analyzed 20 state, local and regional newsrooms by looking at revenue, expenses, strategy, and readership. Among the groups covered are several recipients of Knight Foundation funding.

So what does the financial picture look like for these groups? 

Overall, grantmakers supplied 58 percent of the revenue of the organizations profiled, while proceeds from advertising, events, sponsorships, subscriptions and training made up just 23 percent of revenue in 2013, increasing by 5 percent over 2011.

Just pause to read those numbers again. In the old media model, advertising and subscriptions didn't just cover costs, they often generated a profit, too. For most nonprofit news groups, though, these traditional sources of revenue haven't been panning out yet. 

The median total revenue for these groups was just over $518,000 in 2013, a 7 percent increase over 2012. The median amount of foundation funding was $268,272. State and regional newsrooms were better able to get foundation support compared to those with a local focus. Only a few outlets didn’t need grants. The Rapidian got no foundation funding in 2013. Both Charlottesville Tomorrow and MinnPost got just 15 percent of their overall revenue through grants.

Respondents noted that it was harder to raise funds for operating expenses the longer the newsrooms were in existence. For half of the sites, grants shrank between 2012 and 2013. Sites that were relatively new, founded in 2009 or later, got 75 percent of their revenue from grantmakers. That support declined to just 41 percent of revenue for news organizations older than seven years. 

These are ominous trend lines to anyone who's a longtime student of philanthropy. Foundations love to help start new things, but can often be reluctant to stick with them, and may look askance at their support being taken for granted as a budget line item, year after year. Also, of course, foundations tend to move in and out of issue areas. The collapse of newspapers has generated tremendous alarm in recent years, but at some point, that urgency might not be so keenly felt. 

If we had to guess, there will probably be some contraction of the nonprofit news sector in coming yearsunless these groups can expand their revenues. Not surprisingly, the Knight study concluded that it’s important for nonprofit news organizations to set business goals and experiment with new services to attract revenue, such as events and webinars. It highlighted the significance of building a membership base instead of donors. (Inside Philanthropy has no donors and is mainly dependent on subscribers, as well as growing revenue from job listings.) With paywalls spreading, and readers becoming accustomed to paying for content, it's becoming easier to monetize journalism online. Also, as nonprofit sites pull in more traffic, as many are doing, advertising can become a bigger revenue source. 

"These sites are beholden to philanthropic revenue now, but they’re showing incremental progress," said Jon Sotsky, director of strategy and assessment at the Knight Foundation.  

A challenging financial picture aside, this remains an exciting time in nonprofit journalism, and the report highlighted best practices for nonprofit newsrooms. Most sites have developed social media strategies through Facebook and Twitter. A few sites have started experimenting with other venues including Tumblr, YouTube, and Instagram. All sites have seen a surge in mobile usage, up to 22 percent in 2013 compared to 14 percent in 2012. Expect that trend to continue, making responsive design websites esssential. 

The report highlighted some striking success stories. Four sites doubled the number of visitors in 2013: the Lens, IowaWatch, and the Midwest Center and New England Centers for Investigative Reporting. The Center for Investigative Reporting increased its unique site visitors nearly fivefold from 243,000 in 2012 to 1.2 million in 2013, driving traffic through its I-Files investigative news channel on YouTube, funded by the Knight Foundation, which averages more than 3 million viewers each year. The center is the first media outlet to employ a full-time researcher with a Ph.D. in social sciences to analyze the social impact of its news stories.

The Voice of San Diego analyzed its readership. Learning that it had an audience very concerned about improving the city, it launched a partnership program with local nonprofits, engaging freelance writers to profile the charities on the site charging $1,000 to $1,500 for individual promos or $10,000 for one promo per month. By the end of 2014, the site had taken in $127,000 in revenue from its community partners. That creative strategy offers another sign of hope.