This article was originally published on Northwestern University’s Medill Local News Initiative website and is republished here with permission.
Two local news sites – one a senior citizen in digital years, the other a relative youngster – represent both the opportunities and challenges confronting digital entrepreneurs today.
The San Jose Spotlight – one of the more than 60 local or state news sites founded in the past three years – covers a digitally connected city of a million residents in the heart of Silicon Valley. Established in 2019 by a husband-and-wife team, it focuses on the “local stuff” – City Hall, school board meetings, neighborhood events – no longer covered by the local daily newspaper, The Mercury News.
With significant financial support from more than 50 donors and corporate sponsors, the Spotlight had a budget in 2021 of almost $1 million. Then in January of this year, it received more good news, when the American Journalism Project (AJP), awarded the Spotlight a half-million-dollar grant designed to help the site “build upon (its success).”
Simultaneously, AJP made grants of between $500,000 to a million dollars to sites in three other major cities (Philadelphia, Chicago and Minneapolis), and in April, AJP made a grant of several million dollars to establish a start-up news site in Houston.
A mere 50 miles away in San Benito County, the Benito Link, established in 2012, is one of 100 sites founded 10 or more years ago. It serves a ranching community, where more than half of the 66,000 residents identify as Hispanics or Latinos, and almost a third commute to work in the San Jose metro market.
After a series of listening sessions revealed a strong desire by residents in the county for “reliable” information on issues not covered by The Mercury News or the local weekly, the Benito Link began life with an initial three-year grant totaling $150,000 from the Knight Foundation.
“When the grant was about to expire, we asked ourselves, ‘Are we going to fold up shop after all this?’” said Executive Director Leslie David.
Instead, the community rallied behind the Link and helped it stitch together an annual budget of approximately $300,000 in 2021 – supported by sponsored advertising from local businesses, grants of $50,000 or less from two local community foundations and an annual fundraising event that raises $100,000 in donations from local residents and NewsMatch (a campaign that matches financial gifts to nonprofits).
Community support vs. available resources
Both the Spotlight and the Link have strong support from their local communities. Yet resources available to build and sustain their local news operations are very different. This is indicative of an emerging funding issue that will ultimately influence the ability of both for-profit and nonprofit sites in smaller markets to reach and engage residents in their communities.
David, a veteran San Francisco television producer and reporter, considers San Benito part of the greater San Jose market. But she concedes that it is unlikely the Link will receive a major, transformative grant from regional and national organizations and corporations, such as those that support the Spotlight.
“We are a small, rural news organization,” she said. “Just a small share of the dollars that goes to PBS, for example, would make a big difference to small news operations such as ours. But major grant givers want (impact) in terms of reaching lots of people, and we can’t provide that.”
Despite a recent increase in both venture and philanthropic funding, the number of local- and state-focused news sites has remained stubbornly constant over the past five years – fluctuating between 525 and 575, as the number of new sites compensated for the closure of older sites. Of the 550 active local and state news sites identified in The State of Local News 2022 report, more than 90 percent are clustered around major metro areas where there is more access to corporate, venture and philanthropic funding.
Most nonprofit sites are in communities with a million or more residents, and many for-profit local sites are in communities with half a million or more people. The demographic profile of residents in communities with a digital site – whether for-profit or nonprofit – compares favorably with that of the average U.S. resident. They tend to be relatively young (an average of 38 years old), well-educated (almost 40 percent have a bachelor’s degree or higher) and relatively well-off (household income that meets or exceeds the U.S. average of $67,000.)
As David at Benito Link suggests, if digital-only operations are to fill the gap in existing news deserts, then funders and entrepreneurs must begin to address the disparity between the resources available to urban sites compared to those in smaller suburban and rural communities, as well as traditionally underserved urban neighborhoods.
Many of these communities are economically struggling and digitally deprived. Residents confront a host of health, environmental, educational, political and economic issues related to the long-term well-being of the community. Overlooked or ignored by many existing news organizations, these communities are the very places where residents most need reliable and dependable news and information to inform their everyday decisions.
To establish more enduring digital operations in more types of communities, both the Institute for Nonprofit News (INN), which currently has 400 print and digital nonprofit newsrooms as members, and the association of Local Independent Online News (LION) publishers, which has more than 700 print and digital members in the U.S. and Canada, have beefed up efforts in recent years to provide strategic and business training to digital entrepreneurs, many of whom are journalists.
“The technology (means) it’s never been cheaper, easier to launch your own publication,” Chris Krewson, LION’s executive director, said recently on a podcast. However, developing a sustainable model requires a strategic approach. A survey of digital outlets in 2020-21, co-sponsored by LION, found more than half of the 255 sites that responded – three-fourths of which were for-profit – had annual revenues of less than $100,000. Only one in five believed they had achieved sustainability.
Many of those surveyed relied on a single source for the majority of annual income. For-profit sites depended on local advertising for the majority of their revenue while nonprofit outlets depended on major grants and donations from foundations and individuals.
As a result, both INN and LION have developed workshops and programs that assist members in diversifying their revenue sources, stressing especially the benefits of developing subscriber and membership programs, as well as increasing the number of small individual donations.
Block Club Chicago shows the way
Strong and consistent support from subscribers has enabled the founders of the nonprofit Block Club Chicago, which went live in 2018, to scale quickly. Today, the outlet, which focuses on covering the day-to-day local news in 12 Chicago neighborhoods, has an annual budget of $3 million, boosted by a recent multi-year, half-million-dollar grant from AJP.
Publisher and co-founder Shamus Toomey, a veteran Chicago journalist, said that acquiring the email list of DNAinfo Chicago, a for-profit website that shuttered in 2017, was key to boosting Block Club’s early success, first raising $183,000 on Kickstarter, and then converting those donors to yearly subscribers. “When DNA Chicago failed, we realized there was interest in the community for another organization to cover the local neighborhood news,” he said. “We launched Kickstarter with a goal of raising $25,000 to start a nonprofit and hit that before 11 a.m. on the first day.”
In 2021, 18,500 subscribers to the online newspaper paid either $59 yearly or $6 monthly to contribute a total of $1.1 million in revenue that supports a full-time staff of 20 people, including both local journalists and those focused on audience development and engagement.
Donations from local residents also played a key role in the survival of The Saline Post, established in 2012 to provide coverage of important events and issues to the 28,000 people who live within the boundaries of one the nation’s top-rated school districts, located in the western suburbs of Ann Arbor.
In 2017, Tran Longmoore, founder of The Post, announced that he planned to shutter the five-year-old site because advertising revenue was not enough to cover expenses. At the suggestion of several people in the community, he asked for donations, and within 24 hours received enough to continue publishing. Today, roughly 25 percent of his annual budget relies on donations from local residents, who give an average monthly donation of $5.
However, The Saline Post, like most for-profit sites with membership in LION, still relies on local advertising as the main source of revenue. Even after 10 years of publishing online, Longmoore is still “not sure I would call it a success since some years we’ve had a loss. But my wife has her own business, and we get by.”
“Getting by” means that founders of small for-profit and nonprofit sites – especially in economically struggling communities – often forgo salaries, especially in the beginning. In 2021, Les High, a third-generation publisher and editor, sold his family’s newspaper, and, with a three-year, $500,000 grant from the Kate B. Reynolds Charitable Trust, established a nonprofit site, Border Belt Independent, in May 2021. Its mission is to provide in-depth coverage of some of the most pressing issues confronting the 250,000 residents of four of the poorest counties in North Carolina. Minority populations – Blacks, Native Americans and Hispanics – account for a majority of the residents in three of the four counties.
To fund the salaries of two full-time journalists, he budgeted to pay himself only $25,000 annually to oversee their work and has convinced his wife to do the bookkeeping and administration for free. For the moment, at least, said High, “It is definitely a passion project because there is such a need for credible news and information in this region.”
Sustainable models in less-affluent areas
The unique business challenges of smaller for-profit and nonprofit local sites attempting to develop sustainable business models are often overlooked by potential funders, as well as INN and LION, according to Howard Owen, founder of one of the oldest local news sites in the country, The Batavian, established in 2008 to provide news to 60,000 residents in upstate New York’s Genesee County.
“Bootstrapping remains the biggest hardship for many news sites, especially those in smaller markets,” said Owens. “Do good journalism and you will get an audience and advertising. But what has been a struggle for us is developing a long-term business plan and having enough (runway) to devote to developing other revenue streams. There is a cap on how much I can charge and how many potential advertisers and subscribers are in this market.”
Small local nonprofit news outlets face similar constraints that hinder growth and sustainability – and most rely initially on only one or two major donors or organizations to fund their enterprises.
In 2017, the nonprofit site, Carolina Public Press, realized its local focus was limiting its ability to grow donors and grants. Originally established in 2011 to focus on local issues, topics and challenges faced by residents in western North Carolina, the investigative news site relied on major support in its early days from two foundations – the Community Foundation of Western North Carolina and the Z. Smith Reynolds Foundation.
“North Carolina is like many states. It does not have a lot of wealthy benefactors,” said Lisa Lopez, director of development. “So, you have to cast as wide a net as possible.”
Repositioning itself in 2018 as a statewide investigative news outlet – “bringing a local focus to every story we do” – the site has a 2022 goal of raising a third of its total budget ($125,000) from individual donations of at least $10 monthly. Despite the push toward individual donations, however, the Press is still reliant on foundations for 70 percent of its funds, and one of the original funders – the Reynolds Foundation – has indicated it may redirect its funds toward other causes in the future.
“Revenue always has to be top of mind for a nonprofit,” said Lopez. “Journalism is always competing with other worthy causes, so you have to make the point to foundations that investing in strong journalism helps those causes as well.” Arnold Ventures, which has supported the investigative journalism of the Press, recently noted that the site’s coverage of sexual assault cases in the state’s rural and tribal areas led local lawmakers to seek $30 million in federal funds to boost training of sexual-assault nurse examiners.
By repositioning as a nonprofit site with a statewide focus, the Press is hoping it can attract funding from national organizations, such as the American Journalism Project, as well as other foundations, like Arnold Ventures, which supports “evidence-based funding” of projects related to such topics as criminal justice, education and public finance.
Becky Pallack, co-founder of azluminaria.org, which launched in October 2021, made a similar determination in positioning her nonprofit site as having a statewide mission of providing “local journalism that’s accountable to all Arizonans, especially our most vulnerable communities.”
As co-founder and product manager of #ThisIsTuscon, a sister site of the Arizona Daily Star, Pallack said she has learned “the importance of having as many revenue streams as possible.” So, she established an initial goal of raising at least $30,000 from small donors. AZ Luminaria launched with a yearly budget of $300,000, financed primarily by several large donors who have an interest in statewide issues. She currently counts seven donors who have contributed more than $5,000, and 90 donors who have contributed less than $5,000.
While nonprofit sites that cover state and regional issues are typically located in state capitals, Pallack felt that locating in Tucson would allow journalists “to focus on important issues that aren’t being covered by all the news outlets concentrated in Phoenix.”
Serving residents in underserved communities
Like AZ Luminaria, most nonprofit sites have as their mission serving residents in traditionally underserved communities – including immigrant, minority, tribal and rural communities, many of which are poor and lack affordable high-speed internet. The sites have employed various tactics to reach people in those communities and make them aware of the vital news and information they are producing.
All news articles on Benito Link in California are free “because we don’t believe in charging people to read the news,” said David. To aid those for whom English is a second language, the Link articles can be automatically translated into Spanish, Korean and Portuguese.
Block Club Chicago limits non-subscribers to five free articles a month, yet keeps a number of articles outside its paywall, including postings about the South Side and West Side areas of Chicago.
“Residents in those communities have a lack of trust in local news organizations that have historically ignored them,” said Toomey. “We’re trying to build back trust.”
After receiving a $75,000 grant from the Google News Initiative, Carolina Public Press hired a rural engagement manager, who is surveying the news and information needs of rural North Carolinians, as well as their preferences for getting the news. For example, do they want the news in Spanish? Via text?
Between 50 and 70 of the 100 counties in North Carolina are rural. “We know there is a significant digital deficit in the eastern and western counties of the state,” said Lopez. “If we are going to be a statewide news organization, then we need to make every effort to reach all residents.”
The Kate B. Reynolds Charitable Trust, which contributed a half-million dollars to establish the nonprofit Border Belt Independent in eastern North Carolina, typically invests in projects aimed at improving the health of residents in rural, low-income regions of the state. Articles in the Border Belt Independent not only deal with traditional health issues, such as Covid-19 and opioid addiction, but also criminal justice, economic development, education and politics – all of which, High, the founder, said, “affect the quality of life of residents in this part of the state.”
Recently, High was asked by the Reynolds Trust to speak before a gathering of national and regional philanthropic organizations that fund various health projects. His message to these potential funders emphasized, “When you support local journalism, you are also supporting your own goals of improving the health of residents in those communities by giving them the information they need to improve their own lives and their communities.”
High is heartened by the recent increase in journalism funding by philanthropic organizations, corporations and venture funds. But he hopes, “Now that we’ve shown that both for-profit and nonprofit business models for local news sites can succeed in large cities, funders and entrepreneurs will train their attention on smaller markets. Reaching residents in these markets as well is critical to a well-functioning democracy.”
