Di­ver­sify Fund­ing Sources

What goes around comes around

The Insider - - CONTENT -


About a year ago I wrote an ar­ti­cle ask­ing whether of­fer­ing prod­ucts and ser­vices be­yond just con­tent would save the mag­a­zine in­dus­try. Since then we’ve seen a lot of pub­lish­ers get­ting on the di­ver­si­fi­ca­tion band­wagon, reap­ing re­wards by ex­per­i­ment­ing out­side the fa­mil­iar pages of print and adding events, com­mu­ni­ties, ad­ver­tis­ing stu­dios, gam­ing and ecom­merce to their con­tent mix.

But apart from trans­form­ing the ex­ist­ing think­ing and mod­els dis­cussed in the three pil­lars of a suc­cess­ful mon­e­ti­za­tion strat­egy, there are other ar­eas in which pub­lish­ers need to make strate­gic changes be­yond the tra­di­tional norms of pub­lish­ing and dis­tri­bu­tion – one be­ing fund­ing source di­ver­si­fi­ca­tion.

Fund­ing has been re­ceiv­ing a lot of at­ten­tion these days as pub­lish­ers look to gov­ern­ments, non-prof­its, pub­lic and com­mer­cial in­ter­ests to help keep the key­boards click­ing in the news­rooms. But sub­si­diz­ing jour­nal­ism isn’t new; many pro­grams orig­i­nated in the 18th cen­tury and con­tinue to­day. Here are a few ex­am­ples…

Govern­ment- funded

Ac­cord­ing to Reuters, govern­ment sup­port for me­dia, par­tic­u­larly in Europe, is greater and more wide­spread than most peo­ple think. Print pub­lish­ers re­ceive large, and of­ten over­looked, in­di­rect sup­port in the form of postal sub­si­dies and VAT ex­emp­tions or re­duc­tions.

Un­for­tu­nately, that sup­port re­mains heav­ily weighted in fa­vor of legacy or­ga­ni­za­tions and in­dus­try in­cum­bents.

In the US, postal rate sub­si­dies go back as far as 1792 when the Post Of­fice De­part­ment was cre­ated in a post-revo­lu­tion­ary Amer­ica. In 1970, govern­ment sup­port for news­pa­pers and mag­a­zines reached US$4 bil­lion.

In Canada, print mag­a­zines, non-daily news­pa­pers and dig­i­tal pe­ri­od­i­cals can ap­ply to re­ceive an­nual grants from the Canada Pe­ri­od­i­cal Fund. Use of funds can vary from cre­ation of con­tent, through to mar­ket­ing and dis­tri­bu­tion, but there are rules of en­gage­ment and use that must be fol­lowed. To en­sure the in­tegrity of the pro­gram, the govern­ment-funded agency per­forms au­dits on ran­domly cho­sen re­cip­i­ents ev­ery year.

Cana­dian mag­a­zines and news­pa­pers re­ceive pro­vin­cial sales tax re­lief on printed edi­tions, but not on their dig­i­tal coun­ter­parts. This is sim­i­lar to most of the Euro­pean Union where mem­ber states can ap­ply for re­duced VAT rates on printed news­pa­pers and pe­ri­od­i­cals, but not on elec­tronic edi­tions.

Need­less to say, this ex­clu­sion of dig­i­tal prod­ucts has re­sulted in a sig­nif­i­cant amount of lob­by­ing from the Pro­fes­sional Pub­lish­ers As­so­ci­a­tion (PPA), the Euro­pean Mag­a­zine Me­dia As­so­ci­a­tion (EMMA) and oth­ers for over a decade.

Head­way was fi­nally made this year with the Euro­pean Com­mis­sion agree­ing to re­duce VAT rates on dig­i­tal mag­a­zines, news­pa­pers and books. No such plans are in place in the US or Canada for sim­i­lar sub­si­dies, but there have been ur­gent pleas by Canada’s largest pub­lisher for more direct govern­ment sup­port for tra­di­tional me­dia – some­thing most Cana­di­ans con­sider an es­sen­tial ser­vice and im­per­a­tive in a demo­cratic so­ci­ety, but still fear that govern­ment fund­ing may lead to ex­pec­ta­tions that what they pay for, they should own.

Pub­lic- sec­tor funded

Bri­tish Broad­cast­ing Cor­po­ra­tion (BBC) is the poster child for pub­lic-sec­tor funded jour­nal­ism through a manda­tory li­cense fee. But it also has a com­mer­cial arm - BBC World­wide – a whol­ly­owned sub­sidiary of the BBC that in­cludes a num­ber of brands and prod­ucts, in­clud­ing mag­a­zines pub­lished through Im­me­di­ate Me­dia, such as BBC Good Food and BBCTop Gear.

As a govern­ment-owned en­tity, it’s no sur­prise that the BBC has been crit­i­cized for decades for its al­leged po­lit­i­cal and so­cial lean­ings. More re­cently its fo­cus on grow­ing BBC On­line has cre­ated an up­roar with com­mer­cial pub­lish­ers who say that it is over­step­ping its bounds by ex­pand­ing into lo­cal me­dia and blur­ring the lines be­tween its pub­lic ser­vice and com­mer­cial in­ter­ests.


Although crowd­fund­ing of jour­nal­ism is just a drop in the bucket com­pared to other fi­nan­cial sources, its pop­u­lar­ity is grow­ing with me­dia or­ga­ni­za­tions, pro­duc­ing roughly a quar­ter of jour­nal­ism projects on Kick­starter with mag­a­zines lead­ing the way.

But Kick­starter isn’t the only source crowd­fund­ing for jour­nal­ism. De Cor­re­spon­dent, Krautre­porter, and El Es­pañol to­gether re­ceived more than US$1 mil­lion over a three-year pe­riod work­ing out­side of world’s largest fund­ing plat­form.

Non-profit funded

of When one thinks about non-profit jour­nal­ism, some or­ga­ni­za­tions im­me­di­ately come to mind, in­clud­ing Huff­in­g­ton Post, ProP­ub­lica and the In­ter­na­tional Con­sor­tium of In­ves­tiga­tive Jour­nal­ists which backed the much her­alded Panama Pa­pers in­ves­ti­ga­tion.

Non-prof­its’ role in jour­nal­ism con­tin­ues to grow, but with it come con­cerns over the lack of guide­lines around eth­i­cal is­sues in­clud­ing trans­parency, dis­clo­sures, jour­nal­is­tic fire­walls and dark money.

Ex­clud­ing a cou­ple of ex­cep­tions such as The Guardian (op­er­ates un­der a pub­lic trust) and

Tam­paBay Times (a tax­able sub­sidiary of the Poyn­ter In­sti­tute), it’s not of­ten we see tra­di­tional me­dia op­er­ate un­der a non-profit struc­ture. But with de­clin­ing cir­cu­la­tion, plum­met­ing ad rev­enues and will­ing­ness to pay for news trend­ing down­ward, non-profit busi­ness mod­els are be­com­ing more pop­u­lar with es­tab­lished brands.

Early this year the Philadel­phia

Inquirer, the Philadel­phia Daily News and Philly.com were do­nated to The Philadel­phia Foun­da­tion and housed un­der a new non-profit – the

In­sti­tute for Jour­nal­ism in New Me­dia. It re­mains to be seen if this new move by the Philadel­phia Me­dia Net­work will re­sult in re­turns those be­fore them were un­able to re­al­ize.

Poyn­ter didn’t see suc­cess when the highly prof­itable Tampa news­pa­per do­nated shares to fund Poyn­ter’s op­er­a­tions in 1978; it lost mil­lions of dol­lars in 2013 and 2014. The Guardian has also been bleed­ing ink and is now forced to cut ex­penses by 20% over the next three years.

De­spite these fail­ures, non-profit fund­ing should not be fin­gered as the founder of mis­for­tune. Suc­cess de­pends on the abil­ity to man­age the flow of cash in and out of a busi­ness – some­thing many for-profit pub­lish­ers still haven’t fig­ured out how to do in this dig­i­tal age.

In Oc­to­ber 2015, Euro­pean pub­lish­ers’ favourite fren­emy, Google, launched its Dig­i­tal News Ini­tia­tive In­no­va­tion Fund to “spark new think­ing” in dig­i­tal news me­dia. The tech­nol­ogy be­he­moth al­lo­cated €150 mil­lion over three years in the form of a “no-strings-at­tached” fund­ing pro­gram for pub­lish­ers.

I can’t help but find this rather ironic given the very rocky and of­ten liti­gious re­la­tion­ship so many pub­lish­ers, both in­di­vid­u­ally and at the na­tional level, have had with the big­gest source of traf­fic to their web­sites – traf­fic that drove both sub­scrip­tion and ad rev­enue.

Non- govern­ment funded

In­stead of sit­ting down at the same ta­ble and talk­ing about how to foster a win-win re­la­tion­ship, pub­lish­ers lit­er­ally ig­nored the ben­e­fits Google had to of­fer, choos­ing in­stead to go to war with the ti­tan of tech, even at the ex­pense of their own rev­enues and traf­fic. Let’s be hon­est; this new “peace of­fer­ing” is just a mod­ern form of ex­tor­tion, but Google is happy to pay it in or­der to calm the stormy seas. It’s no sur­prise that pub­lish­ers didn’t think twice be­fore flock­ing to take ad­van­tage of Google’s good graces; as of Fe­bru­ary 2016, 128 of them were ap­proved.

An­other in­ter­est­ing turn of events over the past decade is the in­ter­est bullish ven­ture

cap­i­tal­ists have shown in me­dia in­vest­ments, see­ing con­tent (not nec­es­sar­ily mag­a­zines and news­pa­pers) as a growth busi­ness. From Vice to Buz­zFeed to Re­fin­ery29, hun­dreds of mil­lions of dol­lars have been in­jected into dig­i­tal me­dia that tar­gets a new gen­er­a­tion of read­ers.

In the US, 1,000+ foun­da­tions awarded over 12,000 me­dia-re­lated grants to­tal­ing US$1.86 bil­lion over a three-year pe­riod – 28% of which were fo­cused on jour­nal­ism, news, and in­for­ma­tion. Since then the phi­lan­thropy gravy train has con­tin­ued to pick up speed with foun­da­tions and in­di­vid­ual donors in­vest­ing bil­lions of dol­lars in jour­nal­ism and me­dia. But as in all things that look too good to be true, some do­na­tions come with bag­gage that can take the shine off the purse that is pulling me­dia’s strings. Buyer be­ware!

Pub­lic funded

This isn’t some­thing we see much in the mag­a­zine and news­pa­per in­dus­tries, but it does work ex­tremely well in Pub­lic Broad­cast Sys­tems (PBS) and Na­tional Pub­lic Ra­dio (NPR). Although these or­ga­ni­za­tions ac­cept con­tri­bu­tions from cor­po­ra­tions, f oun­da­tions, non-prof­its, uni­ver­si­ties and gov­ern­ments, their pri­mary fund­ing comes from con­sumers. This not only makes them ac­count­able to their au­di­ences, it also gives view­ers and lis­ten­ers a sense of own­er­ship and com­mit­ment and thus en­cour­ag­ing pub­lic par­tic­i­pa­tion in pro­gram­ming.

While some pub­lish­ers like The

Guardian look to fund jour­nal­ism through mem­ber­ship pro­grams that in­clude ex­clu­sive events, dis­counts and gifts, PBS in the US has added fundrais­ing to the mix which builds a sense of re­spon­si­bil­ity with mem­bers, lead­ing them to be­lieve they are con­tribut­ing to a good cause. It cre­ates com­mu­nity and dia­logue be­tween PBS and their au­di­ences as op­posed to the walled mono­logue gar­den many tra­di­tional pub­lish­ers of­fer their read­ers.

In­ter­nal sub­si­dies

It may not seem ob­vi­ous, but cir­cu­la­tion has been an in­ter­nal sub­si­diza­tion model for pub­lish­ing for years. In­vented decades ago to bring trans­parency be­tween pub­lish­ers and advertisers, let’s be hon­est, cir­cu­la­tion ended up driv­ing pub­lish­ers to print more copies than would ever get read in or­der to in­flate ad­ver­tis­ing rates. Cir­cu­la­tion rev­enues could never cover the costs of pro­duc­ing, print­ing and dis­tribut­ing con­tent, so in­stead they were used to fuel ad­ver­tis­ing pric­ing based on to­tal num­bers. Cir­cu­la­tion be­came pub­lish­ing’s magic lit­tle pill.

In light of mas­sive dig­i­tal con­tent con­sump­tion, these cir­cu­la­tion mod­els have to change. But, I’ll save that con­struc­tive rant for an­other ar­ti­cle.

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