NPQ looked forward to this year’s INN Index report on the state of nonprofit news with three sets of interests in mind:
- First, we are interested in this excellent effort to document the business models in an emerging field.
- Second, as a nonprofit news site ourselves, we are interested to see how we stack up. This second perspective came in handy this year as we read the report, because some of the conclusions one might draw from the findings may be dangerous to depend upon, and we’d like to provide a friendly critique.
- Finally, we are interested in the ways in which the business models embedded in different “enterprise models” have developed over time.
On that last point, before we go any further, we should note, as does the report, that this is a field in very rapid development, and within that expansion, one finds great diversity. Some sites concentrate on local news; others do big national investigative stories. There are also sites that focus on specific sectors, like NPQ, or on neglected topics, like The Trace, which addresses gun violence, and Inside Climate News. Each type has a slightly different value proposition to offer foundations, large donors, and small to mid-sized donors. If earned revenue is part of the business model, each publication may be more or less attractive to advertisers and paying subscribers—and that last proposition may depend on the unique characteristics of the niche and how big a community may take an interest in it.
Additionally, some revenue-generation endeavors require a few years of capital before they produce more cash than they cost. The trick for all of these sites is to find the right mix to achieve sustainability over time.
The Business Model’s Big Change this Year
Based on information provided by the 108 sites surveyed for this report, nonprofit news sites have become less dependent on foundations and more dependent on individual donors in the past seven years. The numbers flow in opposite directions proportionately, with giving from foundations declining from 63 percent of revenues in 2011 to 43 percent in 2018, while giving from individuals increased from 23 percent to 39 percent.
The study, however, also notes that the average gift is $5,000, and that major donor gifts (here defined as $5,000 and up) make up 71 percent of donor dollars overall, suggesting to us that the lion’s share of individual donor money is flowing in larger chunks to larger sites. The remainder comes from membership fees (three percent) and from small to mid-sized donor gifts are, which come in at less than $5,000.
No Pot of Gold at the End of this Logic Rainbow
But what follows this finding is where our argument with the report’s conclusions lie:
“Donor revenue has proven to be a resilient source in the nonprofit field as a whole,” write the authors. “Seventy percent of funding for all nonprofits comes from donors, according to Giving USA.”
Here, they have not only read the information wrong but, perhaps because of that, they may misdirect news sites. What they’re saying implies there is plenty of room for growth of donor revenue for nonprofit news sites, and that it is relatively reasonable to expect that donor dollars will support half of operations.
- When you look beyond donated income, two revenue sources dwarf individual giving, those being fees for service ($1 trillion) and the federal government ($491 billion). Individual giving comes in at $265 billion. (All of these figures come from NPQ’s soon-to-be-published 3rd edition map of the nonprofit economy.)
- A bit less than $100 billion of that $265 billion in individual donations goes to religious congregations.
- There is a trend afoot among individual donors toward fewer donations from small to mid-size households. Overall, this is bad news for nonprofits, because that money is often the most fungible and least dangerous type of revenue. Still, for a field where there is not an established giving pattern, this trend will have to be corrected for, because most sites will not likely see the really high individual gifts.
On the Other Hand…
We are surprised whenever we see one of these reports at the smallish contribution that earned revenue makes to nonprofit news sites. Overall, earned income accounts for only 12 percent of the total revenue of the surveyed sites, and the report acknowledges that many of the sites surveyed had “minuscule” contributions from earned revenue. This seems to us a significant underperformance that could be corrected with some field-wide focus of the kind that has been devoted to the development of donors through the NewsMatch program.
NPQ comes at this last point from a clear understanding of what it takes – including capital and focus – to build these revenue streams, which include advertising, sponsorships, and event fees, among other things. The strategies will vary greatly from site to site, but the proportion seems low to us, and the expectations for individual donors may be—though, of course, we hope not—a little high.
We would like to take note of the demographics of this new field, which very much resembles the old, primarily for-profit landscape. Seventy-three percent of those who work at nonprofit news sites are white, with nine percent Black and eight percent Latinx. At more traditional outlets, a just slightly higher 77 percent are white. This is a situation that clearly needs to change, and while some foundations are spending more of their money on news voice diversity, it’s evident that all of the foundations helping the field develop should also focus attention here.
Long Story Short
Philanthropy’s strategic interventions into this expanding field have born much fruit to date in helping to encourage a greater emphasis on business models even as the entire news economy changed, and in helping to establish infrastructure, but there remains much to be done in diversifying not only the staffs but also the revenue streams of those increasingly central to our democracy news operations.
As we look at the stats reflected in the report we see that more than half of the field functions on budgets of less than $1 million a year but the work of finding and implementing the right financial models for the various types of news sites requires constant experimentation, proper staffing and the capital to support that, so the role of foundations in the field needs to be kept central and growing even as it becomes less needed for operations in some cases. But while those foundations are providing necessary capital, they should also be insisting upon attention being paid to the demographics of leadership and editorial voice in these new operations.
Disclosure: NPQ is a member of INN and was one of those surveyed for this report. We are also the recipients of a 2019 NewsMatch grant.