Nonprofit business model may offer stability to local newsrooms

The year 2020, with the concurrence of the COVID-19 pandemic, a presidential election and racial justice protests, was arguably one of the most newsworthy years in recent history. Yet despite the apparent need for reliable information, newspapers were one of the hardest-hit industries in the U.S.

A report by UNC’s Hussman School of Journalism and Media reveals that 30 newspapers closed or merged in April and May 2020 alone, while dozens more switched to online-only delivery of news and thousands of journalists at legacy and digital news operations were furloughed or laid off. (Xpress felt the pain of the moment, having to lay off seven staffers from its 25-person workforce in March 2020.) 

The effects of the pandemic exacerbated an already full-blown trend of newsrooms closing and shrinking around the country. Since 2004, about 1,800 newspapers across the country have closed, leading to the proliferation of news deserts in hundreds of communities. And the implications are substantial: As newspapers downsize and disappear, communities are less informed and citizens less civically engaged, according to UNC’s report.

While that summation may be dim, 2020 also brought a glimmer of hope. The tumultuous year generated the fastest growth in the nonprofit news media sector, according to a report by the Institute for Nonprofit News, a consortium of journalism organizations. Today, more than 300 such entities exist across the country, with five based in North Carolina, and recent data suggests that the model may be expanding.  

Xpress sat down with the heads of two local nonprofit news organizations to learn how the business model compares to its for-profit cousin and whether the concept offers a sustainable solution to an industry struggling to hang on. 

Converging challenges

Newspapers have traditionally relied on advertising to sustain their operations, says Bob Gremillion, former executive vice president at Tribune Publishing Co. and publisher of nonprofit news outlet Asheville Watchdog. Typically, the amount of space available for news depends on the amount of advertising sold. But the rise of the internet, specifically the free classified ads website Craigslist in 1995 followed by Google and Facebook, began swallowing up both readers and advertisers, he says.  

“Classified ads have historically been the biggest revenue stream for print newspapers,” Gremillion explains. “And then Craigslist started giving [advertising] away. And not only that, but also making it searchable, so all of a sudden, you’re not sitting there with your paper and your coffee with a red pen.” 

Fewer businesses and individuals advertising in newspapers generally means less content that the newspaper can produce, which then leads to fewer subscribers. As the number of subscriptions falls, advertising in newspapers becomes less appealing, continuing the cycle.

As a result, Gremillion continues, small daily newspapers began merging and being purchased by hedge funds and corporations that sought to raise profits by cutting content and reducing staff. Locally, reporters and other staffers at the Asheville Citizen-Times have endured several rounds of layoffs since the company was purchased by the Gannett Co. in 1995.

Further adding to print media’s woes was the 2008 Great Recession, in which thousands of journalists across the country were laid off as newsrooms, like many businesses,  scrambled to stay open, says Angie Newsome, founder and executive director at Asheville-based nonprofit news organization Carolina Public Press.

“There was a big round of layoffs at that point, which, of course, might seem like ancient history considering what’s happened since then,” Newsome recalls. “But at that point there was a big group of journalists that were losing their jobs, and traditional for-profit newspapers began going on to form nonprofit outlets.”

Defining nonprofit news

The converging crisis led some within the news industry to start looking for ways to address some of the industry’s shortcomings. 

For her part, Newsome, who launched Carolina Public Press in her West Asheville kitchen in 2011, says that she wanted to address both the business side of media and its content. The online publication, which produces in-depth and investigative reporting across North Carolina, employs a multipronged approach to revenue that includes grant funding, sponsorships, and a 700-person strong membership program in which subscribers provide annual or monthly donations. 

“There’s no single source that sustains us completely. We need all of that,” Newsome says. “We need members, we need donors, we need foundation support, we need sponsors, all of that is really critical to our operations.”

As a result, Newsome says that when many news outlets were struggling during the early days of the pandemic, her newsroom remained largely uscathed. In fact, she estimates that the publication’s membership grew roughly 60% during the last two years, which she attributes to members of the public seeking a reliable news source during one of the most tumultuous periods in decades.

Meanwhile, Gremillion explains that Asheville Watchdog is led by a coalition of retired journalists who settled in Asheville from around the country, all of whom volunteer their time to the project. He says that the approach, while unique, allows its reporters to work on longer timelines and produce in-depth investigative stories. Since the media outlet’s launch in 2020, it has received national recognition for its reporting on fraud of Buncombe County homeowners, the fallout of the sale of Mission Health to HCA and false claims by Rep. Madison Cawthorn.

Those stories, says Gremillion, take months and even years to produce, and time is a commodity that many newsrooms charged with producing daily or weekly content find in short supply.

“We know that with regard to investigative and accountability stories, you need a lot of resources to do those. [Reporter] Sally [Kestin]’s ‘Equity Erased’ story took a year,” Gremillion says. 

Carolina Public Press, meanwhile, produces award-winning investigative journalism of its own, which Newsome attributes to not being obligated to sell advertising or increase website traffic.

“If you’re selling clicks to advertisers, you’re going to have to make some hard [editorial] choices,” she explains. “The reason I became a journalist was to tell stories that mattered, and really spend time investigating the actions and inactions of public agencies and elected officials, and to provide fact-based reporting that people can use in their own communities. And the nonprofit model really prioritizes mission.”

Yet for all of their advantages, nonprofit news organizations still have their limitations, says Newsome. Both news organizations are only available online, but they do encourage both print and online news outlets to publish their work at no cost. Western North Carolina is also home to dozens of nonprofits, and securing funding is never guaranteed.

“Things can change quickly for every news organization in the country, whether you’re for profit or nonprofit. We don’t bank on past success,” Newsome explains. “We really have to prove it every day that we’re a public service that people should support.”

Hybrid approaches 

Scott McLeod, publisher and co-founder of the Haywood County-based independent weekly Smoky Mountain News, says that while the business model of newsrooms has “changed completely in the last 20 years,” his publication is attempting to roll with the punches. A combination of digital and print advertising, along with publishing roughly 35 other publications per year, helps fund operations at the newspaper and keep the paper free both online and in print. 

“We do a lot of custom publishing for businesses and nonprofits,” McLeod explains. “Overall revenue from our other publications now surpasses the revenue of Smoky Mountain News, but our philosophy is to put those profits back into the journalism that we do here. It’s kind of a little bit of a buffer against some of the ups and downs that maybe some other news entities have.”

Smoky Mountain News, with a weekly circulation of 16,000, also has a membership program that allows readers to donate to the paper. “People are contributing to our newspaper, even though it’s not a nonprofit, just because they realize the value of local journalism,” he adds. 

Meanwhile, Xpress Publisher and Founder Jeff Fobes says that he has considered operating the independent weekly as a nonprofit at different points throughout its more than 25 years in business, but doing so would restrict the paper’s ability to carry advertising, which provides 95% of the publication’s revenue. Philanthropist Julian Price and others initially financed the publication, but it has sustained itself almost entirely through advertising since 2008, which Fobes attributes to Asheville’s broad network of local businesses.

But after being at the helm of the paper since its infancy, he is now trying to imagine how the publication may someday operate when he has passed the baton as publisher. 

“Xpress’ mission is to build community from the grassroots up, rather than to make money. I want to have a plan for it to continue without me,” Fobes says of potentially transitioning to a nonprofit. “Selling it as normal commercial business would likely result in its mission being lost, so I’ve been considering ways to help it continue and thrive as an Asheville institution.”

Still, he’s yet not entirely sold on the nonprofit model and plans to continue exploring ways to keep the lights on. In February 2020, Xpress also launched a membership program for its readers, which saw a boost of support from local readers during the pandemic. 

“When the COVID-19 lockdowns began, readers answered our call, so we saw a big spike in support,” says Xpress Operations Manager Able Allen. “By July 2020, we had 388 monthly contributors, 255 of whom continue to support us today.” 

Today, the newspaper has hired for almost half of the positions lost during the pandemic and maintains about 420 monthly supporters. “We are forever grateful to that extremely intelligent and charming group,” Allen adds. 

The news ecosystem

As both for-profit newsrooms continue to shrink and nonprofit news organizations continue to grow, more and more people are noting the importance of local news and the impact it has on communities, says Gremillion. 

“Even the hedge fund owners seem to be trying to walk the more careful line between stripping resources out of the newsroom, realizing that eventually people will give up if they don’t get some decent offering in print,” he says.

And despite the growth that nonprofit news organizations are experiencing, Newsome says that she doesn’t see the model replacing traditional newsrooms. Rather, she sees them as part of the larger news ecosystem.

“I definitely see [nonprofits] as a critical and growing piece of the pie, but I don’t ever think that a news organization like ours should be seen as something that replaces a strong statewide broadcast or newspaper entity,” Newsome says.

McLeod agrees, adding that both the in-depth reporting that nonprofits produce and day-to-day coverage of local events and politics play a crucial role in creating an informed citizenry. 

“In-depth stories are very important, but entities that still cover the town boards, the county commission, local recreation events, outdoors, the arts and entertainment — that stuff is very important to people’s daily lives, ” says McLeod. “What they do is important, what we do is important.

“It’s a changing market,” he continues. “It’s going to require all of us to adapt and embrace change. But as long as you’re producing good journalism, there’s a way to make that work.”