September 12, 2023

Nonprofit Is Not a Business Model

I am cautiously optimistic that the heat is finally behind us. Being able to walk outside without needing to immediately change my shirt is going to be a real treat this Fall.

Speaking of this Fall… Tickets are still available for the AMO Summit being held here in NYC on October 26th. The agenda is completely done and I am really excited about who is taking the stage. If you want to be there (and don’t want to pay the increased ticket price after September 26th), buy your ticket today.

There is only one way to survive in any business and that’s to have more money coming in than going out. And yet, so many media companies have struggled to make this a reality. 

There are a number of reasons for that from an inability to sell ads to poor conversion rates on your subscriptions. Whatever that may be, it’s paramount that you fix it. 

Omeda has a great guide that digs into reasons your publication might not be making enough money and four ways that you can fix it so that you can get back to sustainability. 

Download the guide today.

$500 million for local news

There is no denying that local news has been decimated over the last 20 years. Between a very expensive business model, a reallocation of ad dollars toward platforms with better tracking capabilities, and slower growth in subscriptions, it’s not been a good time to be in local news. However, Press Forward, an organization led by the MacArthur Foundation is hoping to give the industry a much needed boost.

According to The New York Times:

On Thursday, more than 20 nonprofit organizations announced plans to invest a total of $500 million over the next five years in local media organizations, one of the biggest efforts yet to address the crisis in local news.

Press Forward will use the $500 million to fund grants for existing local for-profit and nonprofit newsrooms, help build shared tools, provide resources to diverse outlets and those in historically underserved areas, and invest in nonpartisan public policy development that advances access to news and information.

There’s a lot to like about this, but also, a lot that leaves me uninspired. $500 million being pumped into local news could be unbelievable. It could give many of these existing and soon-to-launch outlets a much needed lifeline.

However, I have a hard time with phrases like “nonpartisan public policy development that advances access to news and information.” It’s true that there are many people that lack access to good news. But pumping money into public policy development isn’t going to change that. Ask Canadians how they feel about the “public policy development” that went into Facebook ripping news off its platform.

I tend to agree with Rafat Ali’s points in this tweet, a couple that I’ll include here:

1) How have last 25 years of investments by these foundations turned out & is media landscape better for it? Would venture to say…no. Are the same people who didn’t have an impact these last 25 years in charge of these funds? How do you hope to have different results?

2) Will all of this money go directly to those doing reporting/journalism? I hope not to consultants, random newsrooms that don’t need it but have connections, and to build a large support staff with big salaries.

Ultimately, the devil is in the details. I am hopeful that this $500 million—and maybe $1 billion if the team hits its goals—could be just what the local news industry needs to thrive once more. But history isn’t on our side with this sort of stuff.

All of this said, it brings to the surface an inherent frustration I have with nonprofit media at large. I find that there is this assumption amongst the nonprofit crowd that the for-profit local news is not possible. More specifically, that the reason local news has struggled is because of the desire for profit. And when those profits dry up, teams get cut, and we’re left with the news deserts we have today.

And I agree with some of that. But this attitude makes it out like nonprofit is the savior to all of this. I think this is a mistake. As CalMatters CEO Neil Chase said in this piece, “Nonprofit is a tax status, not a business model, and nothing about being a nonprofit insulates us from the pressures of business cycles.”

Frankly, I think there’s a failure in understanding how businesses work that drives this excitement in nonprofits. A nonprofit has to make money—otherwise known as revenue—so that it can pay its people. That’s the same for a for-profit. Therefore, both types of organizations are always having to find revenue. Whether you’re for-profit or nonprofit, you’re always selling. And if revenue drops and you’re making less than you’re spending, there is no choice but to make cuts.

I also think that there is a sense of safety that some feel in the world of nonprofit, like philanthropic grants will ensure that you can continue to operate. And that can come back to bite you. When I launched A Media Operator, one of the first pieces I wrote was about Pacific Standard shutting down.

There’s so much to unpack in those two paragraphs. But what sadly jumps out to me is that Ms. Miller McCune promised the team a specific amount of support that, when the going got tough, she could no longer offer. The New York Times even says “she [Miller McCune] founded Pacific Standard in the middle of the recession but stepped away from it after it had burned through millions of dollars.”

Benefactors are great when they are giving you money, but the whims of people can change. And when that happens, it can be rather abrupt. I should caveat with one point: if you have a benefactor, that isn’t a bad thing. And none of this is a lesson in not having a benefactor.

Instead, this is a lesson in something far more paramount to media: diversification.

No amount of grants can overcome the need to be diversified. You need subscriptions, advertising, events, and a multitude of revenue streams to ensure that the business can weather storms. And when you look the organizations that support you, it’s important to understand a percentage breakdown of the grants. If 50% of your money is coming from one source, you have a problem waiting to appear. Revenue concentration is risky.

Something else to consider is that grant money is not without rules. Typically, a grant comes with a stipulation that it be spent on something specific. According to CalMatters’ CEO:

Growing too fast is a danger, but so is standing still. People (readers, members, foundations, sources, peers, everyone) expect innovation and growth. If we get a grant to do something new, that’s not money we chose to spend on a new project. We were given money only because we proposed and wanted to do that new project. So it’s wrong to say that investing in Thing B and then having to cut Thing A was a bad decision; that money would not have been available for Thing A. Protecting Thing A is why it’s essential to keep a healthy amount of money in reserve. It doesn’t guarantee nothing ever changes; it just gives us months or years, instead of weeks, to gradually adjust and find new revenue if something does.

No strings attached money is great, but it sadly doesn’t exist. And that means that even when you’re raising money, you’ve still got limitations.

The moral of the story here is that media is hard. Whether it’s for-profit or nonprofit, it’s very hard to build a sustainable publication. Being nonprofit doesn’t change the fact that you must be diversified.

One of the things I respect about Semafor’s Ben Smith is he is unabashedly addicted to finding that next scoop. We all knew something was off about Ozy, but it was his reporting that finally popped that bubble. He often knows something before anyone else in the space.

That’s why I always look forward to receiving his and Max Tani’s newsletter every Sunday night. I get perspective on areas of media that I simply have little experience in and a view on what’s going on globally in the media industry. It’s a must read for the ambitious media professional.

Subscribe to Semafor Media here.

Live by the platform; die by the platform

If your publication is dependent on platforms for, well, anything, you’re going to be in for a real world of hurt. According to Semafor:

Since late July, engagement on X posts linking to the New York Times has dropped dramatically. The drop in shares and other engagement on tweets with Times links is abrupt, and is not reflected in links to similar news organizations including CNN, the Washington Post, and the BBC, according to NewsWhip’s data on 300,000 influential users of X.

The drop in engagement in Times posts seems isolated to X: NewsWhip data showed that engagement with Times links shared on Facebook remained consistent relative to other outlets.

For whatever reason, X has decided that it wants to throttle distribution of NYT stories. The same thing happened when people were talking about Threads. It also happened when people were linking to Substack newsletters.

This is why I grow alarmed anytime I hear someone talk about building on one of these platforms. They’re incredible dopamine machines for making you feel like you’re building a great audience. But they can pull the rug out from underneath you at any point. Building a business on rented land is a dangerous game.

In the case of The New York Times, it’ll be fine. It can handle the drop in traffic from X. But for other publications that rely exclusively on social media distribution for their revenue, this sort of move could be gutting. If you don’t have an owned media strategy today, on September 12th, 2023, you’re behind the eight ball.

My philosophy on platforms is this: rely on them for traffic to your site only if you have a mechanism to convert those people into an audience where you own the means of communication. There’s a reason I remain so bullish on newsletters. It’s the only thing you truly control.

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Get your ticket today for the AMO Summit being held here in NYC on October 26th. I am increasing prices on September 26th, so register now. Have a great week!