This is the first of a two-part series looking at the growing variety of journalism startups and the business models that are powering them. The second part, which you can read here, examines for-profit news outlets, with a particular focus on the mobile video service NowThis News.
Cameras flash in the New Jersey statehouse. It’s early January, and in a back corner of the Assembly chamber, the Trenton press corps sit in three close rows of chairs as they await Gov. Chris Christie’s State of the State address. The aftermath of Hurricane Sandy is all anyone expects the governor to talk about.
As far back as you can get in the room, John Mooney stands in a doorframe, dressed in a suit and tie, laptop cradled in the crook of his left arm. He’s never live-tweeted an event before. An education reporter for the last 17 years, he’s usually scribbling on a notepad.
Once Christie and his entourage file into the chamber, Mooney gets to work, tweeting details and analysis of the 40-minute speech to followers of his personal account and that of his three-year-old news startup, NJ Spotlight. Spotlight has three desks upstairs in half of an office in the statehouse’s press row. From there, they will soon be processing Christie’s speech in snippets longer than 140 characters. Much longer.
By the following day, Spotlight and its team of three fulltime reporters and four additional fulltime staff members will have turned out three articles taking on different aspects of the speech and its implications, along with a video produced with its partners. Average length for the three articles: 930 words, fairly long in the Internet world, especially for no-frills state policy reporting. The audience: everyone who has a vested interest in the in-depth details of New Jersey policy, which Spotlight has made its journalistic bread and butter. That means a small crowd of lawyers, lobbyists, activists and other journalists –- 60,000 unique visitors to the website in a good month.
NJ Spotlight is something of an oddball in the world of journalism startups. While not a registered non-profit, about two-thirds of its $700,000 budget comes from sponsorships and foundation grants. Yet it also has aspirations of one day turning a profit. Until it does, however, it will be among a growing number of nonprofit and hybrid profit/nonprofit news startups popping up across the United States to fill gaps left by declining legacy media. All of them continue to search for a stable business model in an industry that is anything but.
Of course, Mooney didn’t start NJ Spotlight because of a business model. He started it because of the journalism he wanted to do, informative and focused on policy.
Mooney co-founded the website in May of 2010 with Tom Johnson, Spotlight’s energy and environment writer, and the late Dusty McNichol. All of them once worked for The Star Ledger, New Jersey’s oldest newspaper. It is in large part the decades of experience of Mooney, Johnson and the rest of Spotlight’s staff that have made it one of the most trusted sources on New Jersey policy issues. One reader survey showed 95 percent of Spotlight’s audience to have college degrees. Of those, half have a Ph.D. That audience is willing to read policy issues at length, sticking around for the hundreds of words Spotlight reporters think a story needs to carry the proper depth and context.
Andrew Kitchenman came to Spotlight in Nov. 2012 in order to focus his reporting energies on health policy in New Jersey. “I wanted to do something different,” he said. With 10 years reporting experience in New Jersey, he’s spent much of his time at Spotlight working in the capitol office. His pieces have focused heavily on state government, including Medicaid expansion, bills that would require healthcare workers to get flu vaccines and legislative efforts to fight diabetes.
In some ways, Managing Editor Lee Keough, who’s been with Spotlight from the beginning, has been surprised by how quickly the startup has become a must-read among the players in New Jersey policy issues. “We’ve really added something to New Jersey,” Keough said, filling “a desperately needed niche.”
“New Jerseyans just didn’t have the opportunity,” to learn what was going on in their state, said Ingrid Reed, chairwoman of Spotlight’s board of directors and a member of the New Jersey Community Foundation, under whose auspices Spotlight was created.
Spotlight’s larger rivals may produce more raw content but their stories are frequently about cataloguing some decision or event that’s transpired. For Spotlight and its audience, the importance is not what happened but “what are the implications,” Keough said.
While Reed said she hopes Spotlight will stand on its own eventually, she also acknowledges that the site, and similar community-focused news startups, will probably be reliant on foundation grants for some time to come. For Spotlight, that primarily means support from groups like the Knight Foundation, which helps fund a number of journalistic endeavors. Spotlight currently has a $252,000 grant from Knight, which is distributed over the course of two years. Another two-year grant of $260,000 comes from the Robert Wood Johnson Foundation. That money is aimed at furthering the foundation’s healthcare improvement goals by raising awareness.
“We don’t want to become just a business-to-business model. It may be more lucrative, but our task is to provide the general public information they’re not getting elsewhere, not to become a newsletter for lobbyists.” -John Mooney
The third of Spotlight’s funding that doesn’t come from nonprofit sources is what’s referred to as earned income. This includes paid sharing agreements with WNYC and WHYY, each of which pay Spotlight between $1,500 and $2,000 a month to run Spotlight’s content. Spotlight also has banner ads by businesses and organizations and takes in a large chunk of its earned income from events.
One such event was held on a frosty Thursday last December at the Marriot Hotel in Trenton, New Jersey. Mooney served as moderator for the Spotlight conference on the fiscal state of New Jersey. Another Spotlight reporter also covered the event for the website. For an hour, a panel consisting of a former lieutenant governor of New York, a former Federal Reserve chairman and the author of a report comparing five state budgets, discussed the challenges facing New Jersey and other states.
Mooney and the panelists spoke to a crowd that in many ways represents NJ Spotlight’s core readership — policy wonks willing to listen to state budget issues at length.
At $5,000 per sponsor, these events help Spotlight build its brand and revenue. They usually cost less than $5,000 to put together and attract three to four sponsors. The company held eight such events last year alone.
Still, funding does not come easily to Spotlight. Heading out to his car after the budget conference, Mooney suddenly remembered that he’d left a sign outside the conference room. Each sign costs $100. He hurried to retrieve it. “Every dollar counts,” he said.
Many news organizations with similar business models have cropped up in recent years. Most experts point to a few premier examples, including the Texas Tribune, which opened its doors in Austin in 2009. The Tribune is fully nonprofit as a registered 501(c)3, with 34 employees and a $4.6 million annual budget. Half of those 34 staffers are fulltime journalists — a decent-sized newsroom that turns out stories much like Spotlight’s, full of policy details, tax exemptions and water plans. The Tribune also builds extensive databases and directories on Texas power players available online for free.
Unfortunately, the Tribune’s success may not be scalable to places like New Jersey, says the Tribune’s Director of Development Maggie Gilburg. The Tribune benefits from founding members with deep connections and fundraising acumen. Moreover, “Whatever happens in Texas has an impact” that extends beyond the state, Gilburg said. On average, the Tribune has 550,000 unique visitors to the site each month. Thirty percent hail from other states and countries but want to read about Texas policy issues. New Jersey’s policy issues often don’t have that kind of reach.
Despite that audience, just 20 percent of the Tribune’s budget comes from earned income. That includes partnerships with other news organizations for Tribune content and subscription revenue from the Tribune-owned Texas Weekly magazine. The other 80 percent comes from events not unlike the ones Spotlight hosts, along with fundraising and sponsors. To be a Tribune sponsor means banners on the website similar to regular advertisements; the difference is that these sponsors cannot promote themselves as freely as they would in a paid ad.
The Tribune’s most recent financial report, from 2011, shows that the single largest part of its funding came from major gifts, which exceeded $1 million. Events and corporate sponsorship were the next biggest sources of revenue, each brought in about $600,000. Subscriptions took in $150,000 and advertising netted $50,000.
One of the oldest of the new nonprofit generation is the New Haven Independent, a southern Connecticut website with just four fulltime staffers that was founded by Paul Bass in 2005. “I never thought it’d be going this long,” Bass said in his cluttered broom closet of an office in downtown New Haven. Without the ‘critical mass’ needed to bring sustainable advertising, the Independent has no ads whatsoever and is funded entirely through philanthropy; Bass didn’t know he would have the full $420,000 operating budget for 2013 until November.
For Bass, the Independent is part of a larger shift to nonprofit models, particularly in urban settings. Some 75 percent of his funding comes from direct contributions. Bass believes his donors are people who appreciate the Independent’s watchdog function and its ability to produce quality journalism.
“They have to believe that New Haven is a better place if there is in-depth, engaged reporting and community conversation,” Bass said of his donors. About one-third of the Independent’s annual budget, $137,000, comes from those with five-year commitments, most of which are around $2,500 a year, though a few give more. Local organizations and businesses are charged $15,000 for a site sponsor logo that appears on every page. The 25 percent of the Independent’s funding not from direct contributions comes from grants.
Journalism outlets in general face many of the same problems across the industry.
Nonprofit news is already complicated by the fact that the IRS does not generally recognize journalism as a nonprofit venture. According to a March report by the Council on Foundations and the Knight Foundation, many news startups in recent years have seen an achingly slow process to 501(c)3 status.
Because the nature of each startup and its audience varies so widely, so too will the business models vary. Without a standard model for success, “everyone has to try everything,” said Dan Gillmor, founding director of the Knight Center for Digital Media Entrepreneurship at Arizona State University’s Walter Cronkite School of Journalism and Mass Communication.Longtime journalist Tom Stites sees a potential future for news on a co-operative model, crafted not unlike a local credit union, where community members buy memberships. His Banyan Project hopes to open the first such pilot version in Haverhill, Mass., which will start reporting news sometime this year. “We’re going to have advertising but we’re also going to ask people to buy memberships,” Stites said of the Banyan model. If the proof of concept works, Stites plans to license the software powering the site to anyone who wants to build a ground-up online local news operation. The hope is that community members will see value in a news operation that the people in the community effectively own and will be inspired to purchase memberships. “The community is developing its own voice,” Stites said. “And that matters.”
In its infancy, NJ Spotlight had originally been conceived as something along the lines of a “freemium” model. Most of its content would be free, but that free content would be paid for by a more in-depth, subscriber-only newsletter that would go out to policy insiders once a week. The idea, however, didn’t last long.
“Basically we threw that away right out the gate,” said founding editor Mooney, realizing in the very first week of operation that an additional newsletter would be entirely too labor intensive for such a small staff.
Still, Mooney hasn’t ruled out the possibility of one day charging for content, although that possibility remains a long way off. “It would close off the general public that we really want to serve. So we’re hesitant to do that,” he said. “We don’t want to become just a business-to-business model. It may be more lucrative, but our task is to provide the general public information they’re not getting elsewhere, not to become a newsletter for lobbyists.”
Meanwhile, Spotlight publisher Kevin Harold continues to dream of ways to turn a profit. Plans are already underway to ramp up events; different tiers for sponsorship may be added to the one already in place. Spotlight could also provide deeper research or offer online webinars and special videos. As for a paid subscriber model, “You have to have a certain critical mass of audience,” Harold said. Even then, “It’s a big risk.”