New Knight study identifies 3 surprising keys to nonprofit news business success

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The Knight Foundation has a new study out this morning examining the business models for seven locally-based nonprofit news sites in their drive to achieve sustainability.

Focusing on high-profile ventures such as Texas Tribune, Voice of San Diego and MinnPost, the report, “Getting Local,” concludes that none of the sites are all the way to sustainability yet.  But they are well along and developing best practices that other geographically-based ventures can learn from.

The report identifies three “next-stage” opportunities, each with a flavor of paradox:

  • While the sites were founded in part as a reaction to declines in newspaper and other traditional media coverage, they do better if they set editorial goals beyond simply replacing what is gone. Engaging a specific audience and demonstrating social utility will be key to attracting continued and broader support.
  • While all relied on foundation grants and/or a few big-ticket donors to get started, the best are diversifying income streams to include membership campaigns, events, sponsorships and advertising.
  • Being online-only slashes production and distribution expense and allows the sites to put a majority of their budget into editorial (unlike newspapers which typically devote only 10 to 15 percent to news). But there is a strong case for “balancing resource allocation” by adding technologists, development professionals and engagement specialists — rather than just hiring more reporters and editors.

The report, written by consultant Michele McLellan and Knight’s Mayur Patel, examines Bay Citizen, Crosscut (of Seattle), MinnPost, New Haven Independent, St. Louis Beacon, Texas Tribune and Voice of San Diego.  All are geographically based and have “modest sized professional staffs.”

The report highlights a variety of engagement-building initiatives — a “Politifest” community event in San Diego, MinnPost’s annual political roast and a “You Fix the Budget Deficit” interactive that drew 10,000 visitors. The Bay Citizen has a Bicycle Accident Tracker, and the St. Louis Beacon hosts regular discussions of neighborhood development issues and of race and class.

Despite the efforts at diversification, the seven sites studied collectively  got 57 percent of their 2010 income from foundations and another 34 percent from donations.

Further, many of the sites rely on a a small circle of foundations and donors. At the St. Louis Beacon, 94 percent of the donations came from seven individuals with an average contribution of $174,000.

Several of the sites are making big progress on funding diversification, the report finds.  Texas Tribune showed 37 percent of its $1.8 million in revenue earned, as opposed to donated, in 2010; For MinnPost, it was 26 percent of $1.3 million.

Some of the 7 nonprofit news sites studied relied on diversified revenue sources; others depended more on foundation support. One factor could be how mature the nonprofits are.
The Knight Foundation
Some of the 7 nonprofit news sites studied relied on diversified revenue sources; others depended more on foundation support. One factor could be how mature the nonprofits are.

Since the report’s financial information ends at 2010, I wondered how the sites are weathering this year’s tough economy.

Paul Bass, founder of the New Haven Independent, e-mailed me that the site is fine for 2011 and already has financing locked in for 2012.

Similarly, Joel Kramer, editor and CEO of MinnPost, wrote that spending will be up 25 percent this year, advertising and sponsorships are on track to be up more than 30 percent, and that he is more than halfway to goal on a special $1 million growth capital campaign.

The study also tracked expenses for the 7 nonprofit news sites, showing where they spent their money.
The Knight Foundation
The study also tracked expenses for the 7 nonprofit news sites, showing where they spent their money.

Join Joel Kramer from MinnPost and Melissa Bailey from New Haven Independent at 2:30 p.m. EST today to discuss how they have developed sustainable nonprofit news sites. To participate, just click here and scroll to the bottom of the page to join the conversation.

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