Can you turn a profit in the new news landscape?

Revenue streams from engaging readers instead of advertisers

This article is republished with permission from Perpectives @ SMU, the online business journal of Singapore Management University, which owns the copyright to this content.

When Republik, a Swiss online journalism network, began in May 2017, it kicked off with a crowdfunding campaign to raise CHF750,000 (about A$1 million).

The idea was to convince 3000 people to pay CHF240 for a one-year subscription. Within two weeks it had raised CHF2.6 million and another CHF3.5 million from investors.

"We started last year in May with a crowdfunding effort that was a market test," says Richard Hoechner, co-founder and head of community development at Republik.

"We hadn't published yet. We just went public with our idea and proposition: 'We want a magazine that is ad-free and independent; we want to have sustainable resources to do good journalism; are you interested in that?'

"Right now we are at 22,000 paying members. In order to be sustainable in the long term we need about 25,000 members that will stay with us. We still have a way to go but our first year has made us very optimistic."

Hoechner shared his experience on a panel at the recent 2018 East-West Centre International Media Conference, hosted by Singapore Management University.

In a milieu where global newspaper revenues sank by 7.8% from 2011 to 2016, and print advertising plummeted 26.8% during the same period, digital advertising did at least grow 5% from 2015 to 2016 according to the World Association of Newspapers and News Publishers.

However, publishers continue to struggle to generate "not just more digital revenues but also new revenue streams to offset print losses".

'[Pierre Omidyar] was also driven by the lack of in-depth reporting, feeling that journalism can make the world a better place'

JIM SIMON

Improve the world

So why the decision to initiate a journalism start-up in such an environment?

"Our magazine is not designed to be mass media. We don't need hundreds of thousands of people to support us. We just need a loyal group of supporters who share our values and mission, and are interested in having good journalism," says Hoechner.

"What is also important is the relationship to our members. In legacy media, your business partners are your advertisers. You could argue that legacy media is not in business with the reader anymore – they are more interested in raking in the ad money, and the reader is just a product. That's not the case with us."

He adds: "It's our third attempt at starting a newspaper. The first two times failed because it was just a bunch of journalists trying to start a business. It was a key [lesson] that a business has to be sustainable and make money.

"We were lucky to find many other news outlets who have attempted similar things in other countries, and there are models to learn from. These helped us a lot but the question was: Will this work in my country?"

One of the news outlets Hoechner is referring to is Honolulu Civil Beat, whose managing editor Jim Simon was also on the panel. Unlike the reader-owned model that Republik operates on, Honolulu Civil Beat is a non-profit organisation with funding from billionaire eBay founder, Pierre Omidyar.

Whereas everything at Republik is behind a pay wall – "You have to be a member if you want to read our content, but if you are a member you can share our content freely with anyone else," says Hoechner – Honolulu Civil Beat took down its pay wall following its transition to a non-profit in 2016, six years after its creation.

"I don't think Pierre was looking to make money; he was looking to prove there was a model that was profitable in doing this," says Simon.

"But he was also driven by the lack of in-depth reporting, feeling that journalism can make the world a better place.

"Two years ago we switched to this non-profit model, and we focused on a membership model [which] really changed the relationship with our audience. I think it's forced us to prove our value to the community. It's about engaging the community in direct, sustained ways."

'What the legacy media has done is basically translate a newspaper to the internet, and they are failing because this model is broken'

RICHARD HOECHNER

Grassroots donors

In the first year of being a non-profit, Honolulu Civil Beat's revenue from membership and other outside funding was "significantly more than what we brought in from subscriptions and paywalls before", says Simon.

In 2017 and 2018 to date, grassroots donor numbers are up by about 26%, giving the eight-year-old entity 25,000 members who contribute at least $60 per year.

"The average donation is $11 a month. That seems small, but [not so] if you compare that with the $4.95 we were getting per month from subscribers when we had a paywall," says Simon.

"Our morning newsletter subscriptions, which we started about a year and a half ago, which is really our key strategy with regard to donations, dissemination and growing an audience, has gone from 4000 to 24,000 in less than two years.

"It's good for growth predicated on fundraising and foundation grants. Ultimately it's good for our journalism in terms of winning the support and trust of the community."

Demand for quality content, trust, and in-depth journalism were also key factors for the third member of the panel, Kim Yong Jin, editor-in-chief and CEO of Korea Centre for Investigative Journalism (KCIJ), the first non-profit online investigative reporting organisation in South Korea. 

Its website, Newstapa, gained prominence for exposing Samsung chairman Lee Kun-hee's alleged solicitation of prostitutes, which is illegal in Korea.

Being the first media organisation to adopt a donation-based membership model – Newstapa presently has 40,000 members paying $15 monthly; it recorded $5 million in revenues in 2017 – brought with it its own risks, but Kim says there is a market for investigative journalism in the country.

"We ask our members every year: 'Why do you support us?' The most popular response was that they were disappointed with mainstream media or corporate media. So they joined as members and donated," Kim says, pointing out that he quit Korea's biggest broadcaster, Korean Broadcasting System, when unflattering and potentially controversial reports by him and his colleagues at the investigative unit kept getting canned.

While admitting that KCIJ's "lifeblood is membership subscription", its journalists have also made a documentary that screened in theatres, generating additional cash.

Passionate mission

How, then, should journalism start-ups generate revenue in a post-legacy media era?

"We live in a world where Google and Facebook soak up 25% of global ad spend," says Hoechner.

"What the legacy media has done is basically translate a newspaper to the internet, and they are failing because this model is broken. We believe it has been broken for a while and will not be fixed magically. There will not be the appearance of ads out of nowhere.

"We have no ads, we don't sell anything. We have events. We haven't had events where we charge yet but we plan to potentially do that. It's not to make money but to cover costs."

He adds: "The climate that was present in Switzerland that made people unhappy with the media system, it's the same in Korea [where a small number of companies control most of the media].

"People are unhappy that the media quality is going down and they want to do something about it. That's why we organise a bit like a political movement in our campaign to raise money because people are passionate about this topic."

Simon echoes that sentiment: "The strategy for our membership model centres around repeatedly talking about our mission. It is to do in-depth reporting, watchdog reporting, pollution-oriented reporting.

"Our director of philanthropy said something that was interesting. He said we have people subscribing because they want access to content. It's not easy for a start-up. To get people to donate you have to get them to trust your content and share that sense of mission."