Part One of “Business Models for Local News: A Field Scan” from The Shorenstein Center and The Lenfest Institute.

This post is one section of a new report published by the Shorenstein Center on Media, Politics and Public Policy at the Harvard Kennedy School and The Lenfest Institute for Journalism, “Business Models for Local News: A Field Scan.” On May 18, 2018, Shorenstein and The Lenfest Institute gathered industry leaders discuss prospects for finding and seeding new business models for local journalism — and how best to support those working in communities across the country to facilitate change. The report is based on those conversations. The full report is available here.

The Issue: Growing a sustainable journalism enterprise in the current environment requires seeking out diverse sources of revenue. How should publishers be thinking about diversifying and strengthening revenue streams?

Key Takeaway: Direct reader revenue must be at the center of sustainable business models for local journalism. But paid subscriptions, donations, and memberships alone are not likely to support a news business by themselves. Publishers need to figure out which supplemental revenue sources work best for them and their audiences.

Existing Experiments and Initiatives

• The News Revenue Hub, a nonprofit funded by multiple foundations, helps news organizations build comprehensive subscription programs, increase audience engagement, and incorporate custom software solutions into their workflows.
• The Membership Puzzle Projectis a two-year public research initiative looking at how news organizations can optimize for trust. They study the social contract between news organizations and their members, including people who contribute their time, money, and knowledge. MPP published a Tow Center guide to audience revenue and engagement with Elizabeth Hansen, along with other research into what supporters of independent news say they need and a database of membership-driven news sites around the world.
• The American Press Institute (API) conducts subscriber research that examines motivations, triggers, and background factors for people subscribing to newspapers, both print and digital (three of their publications in this space include “The 9 Paths to Subscription,” “Types of News Subscribes and How to Convert Them,” and “Paying for News: Why People Subscribe and What It Says about the Future of Journalism”). This fall, API expects to launch a reader revenue toolkit on its site.
• Facebook’s Digital Subscriptions Accelerator, a three-month pilot program in partnership with The Lenfest Institute started earlier this year, worked with 14 metro news organizations to increase local subscriptions. On August 2, Facebook announced it was extending the project through the end of the year and adding an additional $3.5 million in funding after reporting early success. The platform also announced the launch of its Facebook Membership Accelerator, another pilot project intended to help nonprofit news organizations and local publishers with membership models grow their businesses.
• Google and Facebook are both testing products that will support subscriptions on their platforms. Google offers Subscribe with Google, which enables readers to subscribe to participating publications using their Google accounts, and Facebook is experimenting with a subscription pilot that includes meters for Instant Articles and subscribe buttons that send users directly to a publisher’s website.
• Advance Publications is creating high-priced, business-to-business subscription news projects. It recently launched NJ Cannabis Insider, a subscription-only site covering the marijuana industry in New Jersey.
• Gannett has focused energy into building out its events business, running gatherings for its readers in newspaper markets across the United States. Taco festivals, wine tastings, and other events attract major corporate sponsorships.
• The Guardian has created a successful membership campaign that asks readers to voluntarily contribute to support its journalism, using prominent calls to action throughout its site. The publication now has 575,000 members and in the past year received an additional 375,000 one-time donations. The outlet’s digital revenue recently outpaced print revenue.
• Berkeleyside, a local, digital-only news site in Berkeley, California, raised $1 million through a direct public offering (DPO). More than 400 people invested at least $1,000 in the news outlet, and most investors saw the DPO as a way to support an important community institution, rather than a way to generate huge returns on their investment.

Opportunities and Challenges

Reader revenue

Much of the conference’s discussions centered around membership and subscription- driven models to increase revenue for local news organizations. Above all, attendees highlighted the importance of emphasizing a publication’s journalistic mission as a way to drive support — in the vein of The Guardian’s successful campaign to get its readers to donate. This was seen as far more likely to grow reader revenue than offering exclusive access to events, extra content, or free gifts like tote bags.

Participants noted that initiatives such as Table Stakes and Facebook’s Digital Subscriptions Accelerator have practically helped publications address nuts-and-bolts issues that need to be dealt with to implement reader-revenue strategies. “It’s not as complicated as we make it out to be,” one person said. The initial focus can be low- hanging fruit — building up email lists, increasing the reach of stories, and focusing on the conversion funnel.

An attendee who was in the process of working with newspapers to “reduce the stickiness” of subscribing said some local news organizations offer “upwards of 10 options for subscriptions.” That’s too many. Subscribing should be a streamlined, easy- to-understand process — and publishers need to work on providing simple options that are easy to sell to readers, the person said. Getting people on your email list in the first place should be organizations’ first priority.

Customer relationship management tools — with professional-level support — can help further drive customization of membership and subscriber offerings. Participants cited needs around segmenting audiences based on behavior, including models and data- sharing to manage lapsed members or subscribers, and those who meet article thresholds but decline to subscribe. Some even referenced more advanced methods involving building individual interest graphs to inform customized offers suited to different types of audiences, readers, and subscribers.

Platforms

Because Facebook and Google are major players in the publishing space — both in terms of their domination in the online advertising market and as distribution platforms for journalism — attendees wanted increased collaboration between publishers and platforms. Platforms are already engaging in some of this collaboration through existing programs, but participants sought more systematized conversations focused on local news, with solutions scaled across the industry instead of existing, limited pockets of knowledge.

Others asserted that platforms need to diversify and create more flexible sources of support for a variety of publishers. WordPress.com, for example, is rethinking how it serves smaller sites on its enterprise VIP platform.

Advertising/sponsorship

While Facebook and Google are dominant, local publications can offer unique sponsorships, underwriting, or advertising opportunities to civically minded companies that hope to align themselves with journalism that supports and informs the community. One participating nonprofit news organization said it was developing job listings and classifieds as a way to generate additional revenue, and help advertisers and readers reach its sizable audience. Some attendees, however, voiced the need to shift to low- or non-advertising models to sustain local journalism.

Sponsored content, people said, can be another way to generate revenue, though participants cautioned that these types of posts can take a lot of work to create — and undermine the journalism if not done carefully. Publishers in attendance were interested in mechanisms or tools that could help them integrate sponsored content onto their platforms or into their journalism.

Events

Many publishers said they have had success with events both as direct revenue generators — through ticket sales and sponsorships — and as key parts of their membership or subscription conversion funnels.

Gannett runs events in dozens of markets across the country, and the company sees value in providing sponsors access to national audiences. The company is templatizing its model for food and wine festivals, planning to hold events around the country similar to those it’s already hosted. As a product outgrowth, Gannett has also created a standalone food and wine portal on USA Today’s website. “Sponsors don’t want to sponsor just one event. They want to get more out of it for exposure,” an attendee said.

Small outlets, however, may not have the resources to pull together these types of gatherings. Some are focusing on low hanging fruit to build rapport with readers, such as happy hour meet-and-greets. Participants wanted a centralized toolkit or guide that could help streamline the process, suggesting that working with a large-scale event manager — such as wedding planners during their slow seasons — could help produce the resource.

A number of other revenue generation ideas included crowdfunding, training, licensing, franchising fees, transaction fees, professional services, bundling, and email marketing. Philanthropy, which is discussed in depth in another portion of this report, should also be a key source of revenue.

Even as participants highlighted different strategies for diversifying revenue streams, they stressed that not every tactic will work for every news organization. Ultimately, news outlets will have to test strategies and see which are the best fit for them and their audience.

This report continues with Part Two, “Field-Building to Grow a Culture of Philanthropy.” You can find the executive summary here, and the full report is here.Lenfest Institute for Journalism

Thanks to Abigail Ronck Hartstone.