Pew Research Study of the Economics of Nonprofit News Outlets Reveals a Growing but Fragile Part of the Media Landscape

June 10, 2013 – As the business model for commercial journalism has been upended and newsrooms have shrunk, a comprehensive new Pew Research Center study finds that nonprofit news outlets represent a growing new source of information – but one facing substantial challenges to its long-term financial sustainability.

The new study identifies and audits 172 active nonprofit news sites launched from 1987 to 2012 and funded by a variety of sponsors, including charitable foundations, individuals and ideological groups. While some nonprofit news operations have achieved national recognition, the study – which did not measure editorial quality – found that that most are small, with minimal staffs and modest budgets. And, a majority of nonprofit news site operators are concerned about a lack of sufficient business skills and resources.

In a survey completed by 93 of the nonprofit outlets, more than half (54%) identified business, marketing and fundraising as the area of greatest staffing need – compared with 39% who named editorial needs. Nearly two-thirds (62%) cited “finding the time to focus on the business side of the operation” as a major challenge, even more than the 55% who named “increasing competition for grant money.”

A number of nonprofit experts and nonprofit news leaders say that improving business side operations is a key to diversifying revenue streams going forward. Indeed, almost two-thirds began with a startup grant that accounted for at least a third of their original funding, and foundation funding remains the predominant source of revenue for nonprofits.

Despite these concerns, nonprofit news site operators express optimism about their future, and most see themselves filling gaps left by shrinking commercial news media outlets. Fully 81% of the organizations surveyed said they were “very” or “somewhat confident” they’d be financially solvent in five years. And 4-in-10 predict they will hire new staff in the coming year, compared with just 1-in-10 that said they will reduce staff.

“These nonprofit outlets are a growing and potentially important source of news, but just like commercial journalism, they face financial challenges,” said Amy Mitchell, a co-author of the study and acting director of Pew Research Center’s Project for Excellence in Journalism. “One clear takeaway from our new survey is that many of those running nonprofit news outlets do not feel sufficiently equipped to manage long-term business needs.”

“Our research shows that large seed grants often help nonprofit sites to get started, but after the grants expire, many sites lack the expertise and resources to tackle the business challenges and broaden their funding base,” said Mark Jurkowitz, a co-author and associate director of Pew Research Center’s Project for Excellence in Journalism

The new study, by the Pew Research Center’s Project for Excellence in Journalism, is based on an audit of 172 active nonprofit digital news outlets launched since 1987; a survey about structure, staffing and financial health completed by 93 of the outlets; and in-depth interviews with industry analysts. An interactive component that includes a map of nonprofit news site locations and a sortable database accompanies the report.

Among the key findings:

The majority of U.S. states have at least one nonprofit news outlet; most work in specialized journalism niches. The study identified nonprofit news outlets in all but nine U.S. states. Fully 21% of those outlets focus on producing investigative reporting, while another 17% concentrate specifically on government. Other areas of focus include public and foreign affairs (13%), the environment (4%), health (3%) and arts and culture (3%). And the geographic orientation tends to be either state (38%) or metro level (29%).
The scale of many nonprofit news organizations is modest. More than three-quarters of the survey respondents (78%) report having five or fewer full-time paid staffers-including 26% with none. On the revenue side, 21% of the outlets say they generated $50,000 or less in 2011, and another 26% generated between $50,001 and $250,000.
Many nonprofits initially rely on big grants, but that funding source may not provide long-term sustainability. Nearly two-thirds of the survey respondents (61%) began with a startup grant that accounted for at least one-third of their original funding-and a majority of those grants were for $100,000 or more. But at time of this report, only 28% of those organizations reported that the funder had agreed to renew that grant to any degree.
Finding staff time to develop new revenue streams is a challenge. While 80% of the outlets say that business, advertising and marketing work consumes some staff time, nearly one third of them said that kind of work consumed less than 10% of their staff time and more than half said that business-side tasks accounted for between 10% and 24% of staff hours. In contrast, 85% of the outlets say that editorial tasks consumed at least half their overall staff time.
Cash reserves reported by nonprofit news organizations vary. One-third of the organizations (32%) reported having less than six months’ worth of cash on hand; another 31% reported having between six months and a year and another 33% said they have enough cash on hand to operate for a year or more without additional income. While those numbers might sound worrisome, analysts say that they seem pretty robust for the nonprofit sector.
About two-thirds of the 172 nonprofit news outlets studied are sponsored or published by another organization; just one third are independent. In the survey responses, independent 501(c)(3) outlets stood out as being less reliant on major seed grants. Fewer than half (15 of 32) of the independent outlets in the survey started with a major seed grant as opposed to more than two-thirds (42 of 61) of outlets sponsored by another nonprofit think tank, news organization, or university. More than three-quarters (25 of 32) of the independent outlets reported having at least three different revenue streams, far more than the sponsored nonprofits.

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Pew Research Center is a nonpartisan source of data and analysis, and takes no advocacy positions. Its Project for Excellence in Journalism tracks the transformation of journalism in a changing information landscape through its annual State of the News Media report and other special reports.