Submojour Report: 2.2 USA: Moderate success after a long crisis

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Pekka Pekkala

  • There is no magic one-solution-fits-all formula to surviving. Advertising still the major source of income but new revenues from community support and consulting are emerging.
  • Frugality is key. Costs are kept down and newsroom growth is in sync with growing revenues, not with expected revenues.
  • There’s very little promise in citizen contributions if you’re running a small, niche web site. Contributions are sporadic and the one-man-publisher- editor model seems to create most of the stories by themselves.
  • Niche sites seem to enjoy strong community support, which can be backed up with financial support. People are willing to pay small sums to support the pub- lications, in a form of exclusive access or newsletter. People pay to be part of the community and support a publication they think is important and worthwhile.
  • Entrepreneurial thinking remains a problem. Traditional newsroom work doesn’t require any business intelligence and journalists start their entre- preneurial path from zero. It takes time for them to realize that they are probably the best people to run the business side of things as well as the editorial. A business mindset grows gradually. The skills are there but they need time to develop.
  • The case studies included are: TheBatavian.com, DavidsonNews.net, MedCityNews.com, Ars Technica, BargainBabe.com, Technically Philly, ArtsJournal.com, PatientPower.info, MedCityNews.com


The news industry has been in crisis in the US for several years now. Many newspapers have closed down and the remaining ones have significantly trimmed their operations. This has meant, in particular, staff layoffs and buyouts. According to information gathering website Paper Cuts the newspaper industry lost almost 16 000 jobs in 2008 and 15 000 in 2009, closing down 143 newspaper print editions (Paper Cuts 2012). Of those surviving, there have been significant cuts such as the fifth-largest newspaper of the country, LA Times. It has cut newsroom staff from 900 to just over 500 since 2008 (Shaw 2011). This mirrors a situation in Europe. The European Journalism Centre reports that in 2010, 5 500 journalists lost their jobs in Spain. In the UK, the number of unemployed journalists rose by over 140 percent between April 2008 and April 2009 (Barkai 2011).

This round of layoffs and buyouts has created a large number of unemployed journalists who are looking for new challenges. At the same time, it might have also lowered the quality or at least the quantity of news articles produced by newspapers. Special sections have been cut, like the LA Times Science section. According to Knight Science tracker there are fewer and fewer stories about science (Tenore, M. 2011). Local editions are in trouble as well: The New York Times stopped publishing their local coverage in New Jersey, paving a way to hyperlocal startups like Baristanet (The NYT 2010). These two factors combine to create a new media ecosystem in both the supply and demand market for news outlets around the country.

Advertising potential

At the same time advertising dollars have been moving from print and TV to Internet and mobile. The total US ad spending in 2011 was 158,9 billion dollars according to eMarketer.com (eMarketer 2012) or 144 billion dollars, according to Kantar Media. The overall growth of ad spending seems to be slowing down (Kantar Media 2012).

FIGURE 2.2.1: Total advertising expenditures in US 2010-2011. Ad spending during the fourth quarter of 2011 dropped 1.0 percent versus the year ago period, the first quarterly decline since the end of 2009. Kantar Media.

Figure 2.2.1: Total advertising expenditures in US 2010-2011. Ad spending during the fourth quarter of 2011 dropped 1.0 percent versus the year ago period, the first quarterly decline since the end of 2009. Kantar Media.

The sufferers in this decline are network TV, magazines, local TV and newspapers. Winners are audio, cable TV and especially online, which grew aggressively, according to PEW 2012 State of the News Media Report (Mitchell & Rosenstiel 2012).

FIGURE 2.2.2: The year 2011 was a mixed one economically for the news media. Ad dollars followed the audiences to the web, and a stable business model helped cable television. But much of the legacy media suffered revenue declines. Source: Pew Research Center, 2012 State of the News Media

There’s a hopeful picture for advertising revenues online in the coming years. Online advertising was $32 billion in 2011, newspaper and magazines $36 billion. In 2012, online advertising is expected to go past print and the growth will continue for the next four years. In 2016 online ad revenues will be double compared to print.

FIGURE 2.2.3: In 2012 US online ad spending will exceed the total spent on print magazines and newspapers for the first time, at $39.5 billion vs. $33.8 billion. And as online shoots up, the print total will continue to inch downward. Source: emarketer.com

This move from print to online revenue has created a buzz in Internet publishing. There’s an abundance of independent, new publishers in the US. J-Lab, a funder for new approaches in journalism, has listed over 1,200 community news sites in its database (J-Lab). But according to J-Lab executive director Jan Schaffer, only half of them are active. Schaffer writes: “The appetite for starting up independent news and information websites seems to be as keen as ever and the ideas for new projects are quite creative… Most often, sites fold as a result of their founders’ life circumstances – new jobs, new responsibilities – rather than failed business plans.” (Shaffer 2012)

In J-Lab’s experience, sustainability is created with revenues between $100,000 and $200,000 a year, which is enough for a one- to three-person operation. Our study appears to correlate with this: most of the sites in the US we interviewed have one or two people creating content. Half of the sites have a full-time businessperson helping to create revenue. Usually the founder of the website seems to be in charge of business decisions as well.

Non-profit boom

Although the project’s focus was on for-profit websites, a few words should be said about the buoyant non-profit journalism sector in the US. For the past few years, many projects have received funding to create quality journalism in underserved markets or sectors of journalism. The results have varied. Some of the sites or projects, such as ProPublica or Texas Tribune, have been successful. But as Jon Funabiki, executive director at Renaissance Journalism Center, notes in his report, funding has become more and more difficult to get and the window for foundations’ interest in journalism might be closing. He writes about two findings in his study of 32 news entrepreneurs.

“First, two-thirds of the study respondents said they are at or approaching a crossroads where it is getting difficult to secure a second or third round of grants or financing. This means that when newspapers started to collapse or shrink, funders were quick to recognize that a civic crisis was in the making (…) the decline of independent journalism was a danger to the community (…) The second important finding is that these news outlets clearly realize that they need to gain more business expertise if they expect to survive (…) in order of needs came a long list of business-related skills and lessons: Information about innovative revenue streams; sharing of best practices; ongoing business planning and coaching; training in marketing and promotion; and so on.” (Funabiki 2012)

So, even with the non-profit side of news entrepreneurs, the biggest problem seems to be funding. Journalists enter their new path as publishers with a content-first strategy, because they are content professionals and able to create competent sites and stories: editorial is their trade of choice. But when it comes to creating revenue streams, making cold calls and creating a sustainable business, journalists tend to struggle. Developing business acumen is thwarting success and preventing profitability in many cases. It is this lack of economic know-how that is proving to be one of the greatest skill shortfalls.

Common denominators

The average age of the nine US case study startups included in this study is around eight years. The oldest publications involved are ArsTechnica and Artsjournal, with more than a decade behind them: they survived the dot-com bubble and bust of 2001. All but one of the sites in the database – ArsTechnica – are still independent and have survived independently without been acquired by bigger companies.

The staff size in the publications seems to remain small, no matter what age they are. Many of them are publishing with a bootstrapping attitude: the same one or two people are responsible for both content creation and the business side of things. The most extreme example is Bargain Babe, where the founder Julia Scott creates most of the content and runs the business side as well. She notes that if she can spend half of her time writing that is a success. TechnicallyPhilly has four people working for the site, all of them working on both business and the creative side of things. Patient Power has the largest newsroom, consisting of four full-time reporters and seven half-time or freelancer positions. Half of the sites have a dedicated businessperson to take care of advertising and marketing. The rest of them have other sorts of arrangements through revenue-share or half-time positions.

Even though newsrooms are small, the biggest cost for all these organizations is the staff. The costs of technology, such as hosting, are kept low and the biggest investments are usually in hiring new people, especially writers. All of the websites are planning to invest their future profits in growth, hiring new talent or expanding their publishing network.

The most common revenue stream among the sites is display advertising, with additional, smaller revenue streams. The health publications Patient Power and MedCityMedia have created their business around providing specialized health content, funded by medical centers or customizing content to external partners. TechnicallyPhilly makes most of their money from consulting and events. This means that the web publication is mostly forwarding traffic to their main business.

Startup overview

There has been notable success in finding niche sites around topics as well as hyperlocal sites, capable of filling a void left behind by mainstream media. It may be possible for news startups to compete with legacy media as their products are of poor or declining quality (Compaine & Hoag 2012, Bruno & Nielsen 2012). With the increasing financial pressure on news organisations in the 21st century, more and more towns and cities in the developed world have no local news outlet, it having been closed down or merged with a larger news outlet: hyperlocal sites are arising to fill this gap. (Kurpius et al. 2010) Hyperlocal news sites are small news organisations, whether commercial, amateur or a mix of both, which represent a community and its interests. First presented by John Pavlik in Journalism and New Media (Pavlik 2001), hyperlocal sites offer potential as an alternative to the increasing corporatisation of news outlets within the western world, and the ensuing news void for citizens of smaller communities and towns. These sites can imitate the norms of commercial news producers and offer the strongest evidence of new forms of journalism, certainly in their reporting if not their business model.

DavidsonNews.net was founded in 2006. The site is growing and expanding to another city. It’s a news site focusing on helping people to feel like a community at Davidson. It employs the editor and founder David Boraks in Davidson and another writer in Cornelius. They have four paid freelancers and five to six community contributors. On the business side, they have one full-time employee, four commission-only sales people and a marketing intern. The site is profitable with a revenue of more than $100.000. Around 75% of the money comes from display advertising on monthly rates.

TheBatavian.com was founded in 2008 and offers news and information about Genesee County. It employs founder, publisher Howard Owens and his wife, editor Billie Owens. They also have two freelancers writing stories. They make “enough” money and are ready to hire some people. All the money comes through ads, either priced on a monthly or daily basis. Similarly WestSeattleBlog, founded in 2006, offers continuous and original reporting with the help of the community. It employs Tracy Record, the editor, and her husband Patrick Sands, business manager. They don’t disclose revenue numbers, but are profitable and making a living. They sell monthly flat rate advertising and expect to launch a classifieds service soon.

Ars Technica was established in 1998 and is one of several niche sites included in the study. Ars Technica is a publication that is devoted to telling the story of the interaction of IT and culture. It employed two full-time employees and five freelancers for the first few years. Conde Nast acquired it in 2008. It was included in our database under the time from 1998 to 2008, although we also included some recent business ideas from Ars Technica. They have always relied on advertising networks but are selling memberships and single articles as ebooks as well.

BargainBabe.com was founded in 2009. It shares strategy, coupons, and inspiration to help people save money. It is sustainable and the editor is making more money than she did whilst working as a newspaper reporter. BargainBabe’s yearly revenue is close to $100,000. BargainBabe.com employs only one person, the founder Julia Scott. She has two freelancers working for her. They are paid per story. She has also hired an accountant to do taxes and buys some development work from an outside party. Revenue streams are diverse: affiliate programs, display advertising, selling and syndicating content, public speaking and blog consulting. Technically Philly was founded in 2009, to cover the community of people who use technology in Philadelphia, including venture capital companies, startups, tech policy and social organizations. Their revenue comes mostly through consulting from the background company, Technically Media. Only a fraction of their revenue comes from sponsorship advertising.

ArtsJournal.com was established in 1999 and is an aggregator of cultural news and a host for 66 arts bloggers. It employs its founder, Douglas McLennan, and an assistant. They have 66 bloggers in their network and a full-time business manager. Revenue is more than six figures. Half of the money comes through advertising, the other half through speaking engagements. Artsjournal.com has become McLennan’s calling card: he did more than 60 talks in 2010.

PatientPower.info has produced audio and video interview programs on serious medical topics since 2005. It has two major revenue sources: major medical centres through limited advertising and unrestricted educational grants from pharmaceutical and biotechnology companies. It employs four full-time content creators and seven half-time or freelancers.

MedCityNews.com aims to be the TechCrunch of life sciences in B2B-field. The goal is to become profitable this year (2012). Founded in 2008, it employs five full-time writers and over 50 freelancers. Revenue is aimed to be seven figures in 2012 by selling ads to the main site, selling content via syndication or customizing it to the needs of customers. Revenue is more than $800,000.

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References

Barkai, M. (2011) The economic recession in Europe rampages the newsroom. EJC Magazine 30.03.2011. http://www.ejc.net/magazine/article/the_economic_
recession_in_europe_rampages_the_newsroom/

Bruno, N. & Nielsen, R. K. (2012). Survival is Success. Oxford: Reuters Institute for the Study of Journalism.

Compaine, B. & Hoag, A. (2012) Factors Supporting and Hindering New Entry in Media Markets: A Study of Media Entrepreneurs. International Journal on Media Management 14, 27–49.

Funabiki, J. (2012) Online Journalism Enterprises: From Startup to Sustainability. Media Impact Funders. http://gfem.org/node/8747

eMarketer (2012) US Online Advertising Spending to Surpass Print in 2012. Press Release 19.01.2012. http://www.emarketer.com/PressRelease.aspx?R=1008788

Kantar Media (2012) Kantar Media reports U.S. advertising expenditures increased 0.8 percent in 2011. Press release 12.03.2012. http://www.kantarmedia.com/sites/default/files/press/Kantar_Media_2011__Q4_US_Ad_Spend.pdf

J-Lab KCNN Directory of Community News Sites. J Lab Knight Community News Network. http://www.kcnn.org/citmedia_sites/

Kurpius, D. D., Metzgar, E.T. & Rowley, K.M. (2010) Sustaining Hyperlocal Media. Journalism Studies, 11, pp.359–376.

Mitchell, A. & Rosenstiel, T. (2012) Key Findings. The State of the News Media. The Pew Research Center’s Project for Excellence in Journalism http://stateofthemedia.org/2012/overview-4/key-findings/#economics

Paper Cuts (2012) Erica Smith’s site to track U.S. newspaper layoffs and buyouts. http://newspaperlayoffs.com/

Pavlik, J. (2001) Journalism and new media, New York: Columbia University Press.

Shaffer, J. (2012) Independent New Sites: The Pendulum is Swinging Both Ways. J-Lab 15.02.2012. http://www.j-lab.org/ideas/category/blogically-thinking/
the-pendulum-is-swinging-both-ways/

Shaw, L. (2011) L.A. Times Rocked by More Turmoil: Top Editor Quits With Cuts Looming. The WRAP 13.12. 2011 http://www.thewrap.com/media/
column-post/russ-stanton-out-la-times-editor-33567

Tenore, M. J. (2011) Angier: Newspaper Science Reporting Is ‘Basically Going out of Existence. Poynter. org 10.12.2009. http://www.poynter.org/
latest-news/top-stories/99822/angier-newspaper-science-reporting-is-
basically-going-out-of-existence/

The NYT (2011) Last Stop for The Local. The NYTimes.com 30.06.2010. http://maplewood.blogs.nytimes.com/2010/06/30/last-stop-for-the-local/

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