June 16, 2020

Originally published by Knight Foundation

The coronavirus pandemic has sent an ailing local news industry into free fall across the United States. But in dozens of communities, nonprofit organizations that cover local news are a promising bright spot.

These outlets tend to be small operations, most with staffs of three or fewer, and modest audience reach and revenue. They are operating with lean budgets, tight margins and high dependence on charitable funding. But their numbers are growing.

Today, the Institute for Nonprofit News released its 2020 INN Index, the most comprehensive annual study of the state of nonprofit news organizations. As part of this year’s report, INN counted 78 local news organizations, nearly one-third of its approximately 250 members that are news publishers, up from 68 a year earlier. Knight Foundation, which believes informed communities strengthen democracy, is a major supporter of INN.

“Local news nonprofits can be expected to keep growing in terms of numbers of outlets, many of them small,” we concluded in the report. “Competition for donations is likely to intensify but also could broaden the public understanding and support for community-based journalism.”

This growth may occur despite the coronavirus pandemic. We see promising signals in the fact that INN members were able to raise more than $1 million in donations during the pandemic-prompted “GivingNewsday” in early May this year. This speaks to the potential resiliency of business models rooted in community philanthropic support.

Of the local outlets, some cover a major metropolitan area, such as Voice of San Diego, and others cover smaller communities, like Foothills Forum in Rappahannock County, Virginia. Local outlets in general are working to fill community news gaps, and most cover community news rather than pure-play investigative or explanatory reporting that is a hallmark of their national and global counterparts. A few local outlets do specialize: inewsource, also in San Diego, focuses on watchdog journalism, for example, while Philadelphia Public School Notebook covers education.

Local nonprofit outlets are more likely than their traditional news media counterparts to bake community engagement into their mission. Most sponsored events or meetings with people in their communities and used crowdsourcing or interactive tools such as Hearken to actively engage with their communities.

A growing group of local outlets serve communities of color, covering issues that sometimes don’t attract other media attention at the local level. These include Flint Beat, MLK50, Outlier Media and City Bureau.

Since 2018, INN has been tracking the progress of the emerging field of nonprofit news with INN Index, the most comprehensive database of nonprofit news available. Here are key takeaways about local nonprofit news outlets from INN Index 2020, a survey of 109 INN member outlets that included financial and operational data for 36 local organizations:

• Revenue: Median annual revenue was $287,000 with a range of $9,000 to $2.3 million. Nearly half (47%) of the local nonprofits generated less than $250,000 in 2019; 1 in 5 reported more than $1 million in yearly revenue.
• Lean operations: The median margin between what they make and what they spend was 7%. While the local nonprofits make up more than one-third of nonprofit news outlets, they account for only one-tenth (12%) of total revenue for the nonprofit news field.
• Charitable revenue: Like the entire nonprofit news field, the local publications rely heavily on philanthropic support: Foundations accounted for one-third of their funding (33%) and individual giving adds another 40% to the total revenue pot for local nonprofits.
• Earned revenue: These sources account for 24% of total revenue. They include advertising; 50% of outlets generate at least some revenue from ads. Events are also a source of income for 36% of local nonprofits, as is sponsorship or underwriting (28%). These sources typically do not make up the majority of any individual outlet’s overall revenue; in many cases, the percentage of their total revenue is in single digits.
• Membership: Many have established membership programs that generate small recurring monthly contributions. More than one-third (36%) have a membership program. The median number of members per outlet was 300.
• Spending: On average, they spend most of their budgets (61%) on editorial personnel and activities, 18% on revenue generation and the rest on administrative and tech expenses.
  Staffing: Median staff Fulltime Equivalent (FTE) count is three. When significant contractors are included, the median is five, compared with 6.25 total FTE for the nonprofit news field at large.
• Distribution: Their web audiences are small with an average of 92,000 unique visitors per month. Eight in 10 local publishers say they reach their audiences primarily through their own websites and other direct means such as newsletters, podcasts or events. However, seven in 10 reach at least a portion of their audience by allowing their work to be published by third-party publications, such as daily newspapers or broadcast outlets. Nearly all have one or more email newsletters, reaching an average of 5,800 per outlet.
• Coverage focus: Local outlets are more likely than their state and national peers to cover general news across a range of topics: More than two in five (44%) do so, with the rest covering a group of related topics (44%), typically through the lens of government coverage, or a single topic (11%). Investigative reporting is part of the broader news mix. More than eight in 10 (83%) employed at least one investigative journalist, according to 2018 data.

The growth in nonprofit news organizations serving local communities is no accident. The 2008 recession crippled local newspapers, forcing layoffs and severe cutbacks. News deserts are emerging in large pockets around the country, and the pace of newspaper cutbacks and closures has picked up as the coronavirus pandemic pummels the economy.

The crisis is taking its toll on journalists who report news in local communities where traditional news sources rely heavily on advertising revenue. While hard figures are not available, The New York Times on April 10 estimated that 36,000 employees of U.S. news companies had been laid off, furloughed or had their pay cut since the arrival of the pandemic.

The situation is sure to worsen but that is where any certainty ends.

While the nonprofit model was taking hold at the community level at the end of 2019, local outlets face financial challenges, including competition for foundation dollars and needing a runway to raise significant money from readers and donors. Many are more reliant than the field at large on earned revenue sources such as advertising and events – sources that are being hit hard as the economy struggles.

Still, in a field where legacy publications rely heavily on advertising, the emerging nonprofit revenue models which are more closely tied to community engagement and impact hold promise, provided they can generate community support.