Pew Report Finds Nonprofit Journalism Growing, but Fragile

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A report released today from the Pew Research Center has found a growing number of nonprofit journalism sites have emerged since the start of the recession, but they tend to be small. Most brought in less than $500,000 in 2011, and are in need of more sustainable income. But the field in general has a high level of reserves and optimism for such risky endeavors. What many in the field do not already have are built out business sides.

Nonprofit journalism sites are popping up all over the U.S. as larger news outlets are divesting themselves of reporters. The ecosystem of the news is changing to include more local and niche based news outlets. Some of these provide content for larger news operations, some are specific to a particular field or discipline, and some are geographically based. Many of the new sites are struggling, along with publishing in general, to come up with sufficient sources of reliable, renewable revenue to allow them to survive over the long haul.

What is their current state? This report, authored by Amy Mitchell and Mark Jurkowitz, examined the financial stability of 93 nonprofit journalism sites. The completeness of the information about sustainability may be obscured to some degree by the vagaries of nonprofit accounting but the report provides a useful set of facts.

Nonprofit status, of course, brings a number of benefits, in that funders will more easily make contributions and that it can attract volunteer labor and donations. These characteristics have been put to good use. We were happiest to see that the use of volunteers was very active across organizations of varying size, although more so in organizations with smaller budgets. Fifteen percent of the sites use 25 or more volunteers.

About that sustainability…many of the nonprofits studied started with relatively large grants. Almost two-thirds started with a grant that provided nearly one third of its annual funding, and most of those were for $100,000 or more. But only 28 percent of those studied said that that original grant had been renewed “to any great degree.” On the other hand, only 1/3 of these organizations reported have less than six months cash in reserves so there is a bit of running room.

But reserves are not all that is necessary to make these organizations robust and independent; survivability takes investment of that cash in the creation of renewable, reliable income and that is very often derived from pools (like subscribers or donors or advertisers) that have built in diversity. Although 55 percent of all the sites have at least three separate revenue streams (which generally include grants, individual donors, advertising, media partnerships and events), half of these still rely heavily on one stream for at least 75 percent of their income, and most often, that’s grants. One third of the 25 percent that remain reported that two income streams accounted for 90 percent of their revenue. An interesting observation in the report was that “”some of the organizations with only a few months’ worth of cash on hand also have been around for as many as a few decades and are unlikely to disappear anytime soon.”The streams that were most often cited were 1) grant money, 2) small donations, 3) advertising and sponsorships, 4) event-related income, and 5) payments from media-related partnerships. The first two were mentioned approximately twice as often as the third, and mentions descended from there. It was interesting to see that simply making the original grants larger did not really seem to encourage income diversification. Kevin Davis, CEO of the Investigative News Network (INN), believes that for most of the emerging outlets, small donations and subscriptions will probably be the best shot at sustainability. He says this means that it is crucial to have “a brand that your target community appreciates and supports.”

Many nonprofit journalism sites feel like they have underinvested in and understaffed for the business sides of their operations. So it is perhaps not surprising to hear that nearly one third of these sites say that business, marketing, and advertising functions consume less than 10 percent of their staff time, and more than half said that it consumed only between 10 and 24 percent of staff time.

One of the more surprising findings is that two-thirds of the groups that fit the researchers’ definition for a nonprofit journalism site existed under the auspices of another nonprofit, like a foundation or a university. This seemed to have a significant effect on the state of the sustainability model. As they reported, the independent sites ran greater surpluses, but had fewer reserves and their revenue was more diverse. Thus, as far as we can surmise, these sites tend to make money, but invest it immediately, and likely in the business model.

NPQ is somewhat confounded by the combination of these findings. It is clear that those providing grants in most cases do not wish to be mainstay funders for the long haul. But we wonder to what degree there is any clear sense of how long it might take not only to begin a new news site and build readership, but then to get that readership and those advertisers to give you their money in an environment that is challenging even for very well-capitalized outlets. Strong subscription and donation programs can actually be expensive to build. They take an investment off staff time and cash. How much have the funders thought through the need for patient capital?

Overall, however, even if many of these nonprofit journalism outlets are struggling, they are optimistic, almost beyond reason. The authors of the report write that, “financial stability is not a prerequisite for a sense among editors and directors that their nonprofit news outlet would survive far into the future. Indeed, there was no difference in optimism between outlets that had their startup grant renewed and those that did not.” —Ruth McCambridge