Introduction

Much has been written about the state of American journalism, and hundreds of millions of dollars have been granted to various entrepreneurial initiatives, from software development to investigative journalism. In 2011 alone, notable organizations including Pew Research Center and the Project for Excellence in Journalism, the Shorenstein Center on the Press, Politics and Public Policy at Harvard, The Knight Commission for Information Needs of Communities, the Tow Center at Columbia University, and the Federal Communications Commission have published important reports on today’s challenges. But the volume of the work alone can sometimes make it difficult to place these reports into context, extract best practices, and take direct action.

This report is directed at the Investigative News Network membership and its supporters. It is intended to provide explicit strategic and tactical advice for growing earned revenue streams from audience development and paid distribution for the purpose of diversifying funding. It will also explain how those activities contribute to the overall operating health and sustainability of nonprofit investigative news organizations.

This work should be iterative; consider it a 1.0 release. As the movement continues to mature, these basic frameworks and assumptions will continue to evolve and best practices, solid perfor- mance measures, and realistic operating assumptions will codify.

We hope that this research will have broader interest outside INN and the foundations that sup- port it, including members of the public and the growing diaspora of journalists leaving estab- lished news organizations that may be contemplating starting their own independent nonprofit news organizations.

Where Are We?

We started with a few simple assumptions: First, we know that INN members are top-tier journal- ists, master craftspeople who know good journalism and how to produce it. Second, we know that most of them didn’t become journalists to run a business; they enjoyed careers in news- rooms in an era of abundance, where adherence to a journalist’s code of ethics and winning ac- colades from colleagues and professional organizations were the trusted measures of success.

But the era of fat profit margins at newspapers has passed, and with this change comes new challenges. Investigative journalists can take comfort in knowing they are not the first to confront the economic realities of an upended business model. Other media and creative types — even nonprofits in other fields — have encountered similar challenges and their experiences and adap- tations provide many lessons. Penny Muse Abernathy, Knight Chair in Media Economics at UNC Chapel Hill notes, “Because newspaper people haven’t thought about it, it’s not that it hasn’t been thought about by others,” (interview, August 28, 2011). Some examples of creative solu- tions from other industries include:

• Magazines including National Journal, The Economist and The Nation have for decades of- fered events, cruises, membership and special reports to supplement their bottom line and fortify their relationships with readers.

• Documentary filmmakers that produce investigations have long had to fight for funding and dis- tribution, gracefully wearing sales and marketing hats side by side with their journalist’s fedora.

• Movie studios understand that using film release windows extracts the most value out of a single production by segmenting the distribution channels and giving each outlet a period of valuable temporal exclusivity.

• Performing arts companies, understanding that the going price of a ticket could not completely pay for elaborate productions, have sought support from foundations, corporations, and high net-worth individuals. ProPublica’s General Manager Dick Tofel notes, “when was the last time the price of a ballet ticket covered the cost of the production?” (interview, July 28, 2011).

Journalism in the public interest—that which provides checks and balances on government, cor- porations, and individuals who might take advantage of the public trust — holds a special place in our society. Unfortunately it has always had difficulty fitting into the rubric of market-based pric- ing. As a product it is expensive to produce, requiring time, experience, subject matter expertise, and dogged dedication to routing out the facts that can build into history-making stories. Impact can be perplexing to measure. And delivery alongside commodity content in daily news products (a news broadcast, website, newspaper, or magazine) makes it difficult to charge enough for the content to approach covering costs. Public broadcasting fills an important role, but it cannot fulfill completely the demand for content, particularly in politically and financially troubled times.

As a result, investigative reporting has always been subsidized. Subsidies have come in a variety of flavors, from foundations, underwriting and membership programs in public broadcasting, to advertising and subscription in commercial media, to resale of content through syndication, and to the journalists themselves, who have certainly worked for more modest salaries than their skills might command in commercial enterprises.

Investigative journalism organizations, even nonprofits, must grapple with the realities of running a sustainable operation, something with which journalists themselves may have had little to no experience or comfort. Oakland Local’s Editor and Publisher Susan Mernit has cautioned col- leagues to “not set something in motion you can’t support,” (interview, June 30, 2011).

By creating an organization instead of offering your experience and expertise for hire as a free- lancer, you are choosing to embark on a journey that may be more dominated by the challenges of running a business than by producing journalism.

It is challenging to build a brand, create content, find and engage an audience, and set the right price for your products. The Investigative News Network has begun the process by coalescing what has been a movement of a “thousand flowers blooming” into a network. Through efficien- cies of scale, this network can help reduce costs and complexity, and can provide centralized services, expertise, guidance, and product development support. Organizations like INN can make professional management affordable for dozens of large and small organizations ranging from grassroots and community sites to large-scale multimillion-dollar nonprofits.

Through extensive interviews with INN members, we found that even the most mature and sophis- ticated among them still consider sustainability their primary business challenge. Robert Rosen- thal, Executive Director of The Center for Investigative Reporting, a 30-year old organization that has substantially changed its model to multimedia production and strategic distribution over the past five years, said, “Our new model is successful and has stunned funders. However, it’s totally fragile. Since it is a complicated process, we can’t control our pipeline of revenue sources, and foundations change and evolve their interests and measures,” (interview, August 12, 2011).

Paths to Sustainability

The nonprofit investigative news ecosystem remains, as Rosenthal notes, fragile. At times during our research, we felt it resembled more of a multi-vehicle collision of various and at times con- flicting stakeholder goals and operating tactics than a well-orchestrated movement. However, out of this chaos the ingredients for a successful formula are starting to emerge.

The time seems right to help members better understand the levers that can be pulled to efficiently impact their organizations’ sustainability. We have tried to bring to the surface three key operating frameworks that members must understand, exploit, and eventually master to manage their outcomes: Audience/Community Development, Content Distribution, and Maturity Models for revenue diversity over time.

Management doesn’t have to be a dirty word, since its most basic definition is quite useful to INN members: Motivating people to accomplish set goals and effectively and efficiently using resources. As Dick Tofel of ProPublica suggests, “you have to be hard-headed about business since the numbers need to add up, and you can’t confuse the top with the bottom line,” (inter- view, July 29, 2011). He is, of course, talking about confusing revenue with profits or sustainability.

In keeping with the founding mission of INN and the Pocantico Declaration, we hope that this report contributes to the body of work that will forward INN’s ambitious mission:

“…to aid and abet, in every conceivable way, individually and collectively, the work and public reach of its member news organizations, including, to the full- est extent possible, their administrative, editorial and financial wellbeing. And, more broadly, to foster the highest quality investigative journalism, and to hold those in power accountable, at the local, national and international levels.”

Our Approach

The authors hope to provide a pantry of ingredients, along with some recipes in the form of frameworks that INN members can reference in achieving their operating goals. For INN as a whole, this report begins to define a shared approach to how members think and benchmark their paths to sustainability.

This report was researched over the summer and fall of 2011. We conducted over 50 interviews with INN members, industry leaders, and academics.

Nearly half of our interviews were with what we call the “demand side” of potential customers and distribution outlets for the journalism produced by INN members. We gathered an extensive list of “value drivers,” or, as we came to call them, “distribution partnership offerings.” We also inventoried how INN members have been compensated for their content. We hope that these approaches will help INN members mature their business development processes and align their journalistic offerings with market needs.

We did not interview all INN members, but rather gained insights from a representative cross- section of the membership. From these interviews we sought to codify archetypes of member organizations; the archetypes allow us to map our findings into categories that we hope will be more useful than attempting a one-size-fits-all approach.

There is an abundance of information and opinions from associations, bloggers and other institu- tions around topics related to journalism sustainability, nonprofit media, and the like. We have tried to reference the resources that are most directly applicable to INN members for answer- ing the most basic blocking and tackling questions such as “Who is out there?” and “How do I achieve this result?”

We conducted a rigorous literature review to draw on the more objective fields of economics and management. To that end you will find an extensive list of papers, conference findings, and books in the appendix of this document.

Finally, we are also drawing on our own experience as editors, producers, media executives, and consultants working for The Osder Group, on journalism, operations, and business develop- ment for clients on both the creation and distribution side of the equation. These clients include ProPublica, AOL, The Daily Beast, Public Affairs Television, The Nation, HBO, Participant Media, The Wrap, Reynolds Center, and Paid Content, as well as principal author Elizabeth Osder’s di- rect experience serving on boards, including the Online News Association (founder), the Colum- bia Missourian, the American Cancer Society and the Florence Fund.

In the most basic terms, we aim to provide INN members with knowledge they can tap to move their organizations forward on a path to sustainability.

What Will You Find?

• The Landscape: An overview of market conditions that catapulted the nonprofit investigative news movement into existence. Many of these trends suggest a great deal of opportunity for nimble investigative journalism shops; however, the challenges of building economies of scale and managing multiple, fragile distribution channels and funding sources remain persistent.

• Planning a Nonprofit News Organization: What are your mission, strategy and organizational archetypes? What kinds of journalism will you do and what impact do you want to have? How does your mission shape your product, distribution, and organizational and operating strategies (products, people and technology)? What will it take? Is it feasible?

• Engaging Your Audience/Community: What is your target audience? Where will you reach it and how will you prove your impact? This paper will take a deep dive for INN membership on the fundamental questions regarding:
• Audience Development: How should INN members go about conceiving and develop- ing their own audience or strategy for having a site based on traffic vs. impact, etc.?
• Distribution: How should INN members think about distribution? What does a partner- ship look like, and how should you negotiate one? How can you be compensated? Who are the best partners based on your goals?

• Paths to Sustainability: What does success look like? How does your organization stay nimble and entrepreneurial, while at the same time maturing its operations? How will you grow earned revenues, chart a course to sustainability, and lessen your dependence on philanthropic support over time?

• Conclusions: What does the future hold for nonprofit investigative journalism? We offer some suggestions and thoughts on the road ahead.

• Appendix, Bibliography, Figures and Resources: Background material on this report, inter- views, reference materials and the authors.

Acknowledgments

We would like to thank the members of INN and other media and content business profession- als that made their valuable time available for this report. There is a complete list of interviewees and references in the appendix. A special thanks to Kevin Davis, CEO and Executive Director of INN, Brant Houston, Chair of the Board of INN and the INN team including Evelyn Larrubia, who provided invaluable editing, and Rich Robinson and Shelby Ilan for helping us coordinate a long list of meetings. Thanks also to Michaela Grey for copyediting and style guide, and to Aehrich O’Dubhchon for graphics and layout.

Legal Notice

The information provided in this paper is for educational purposes only. The extent to which
an organization may engage in a particular income-generating activity will often depend on the organization’s tax-exempt status, its agreements with other entities, and potentially other legal or practical considerations. We recommend that you consult with qualified legal counsel prior to launching any such activity or, if possible, during the planning stage, as seeking legal advice early in the process can sometimes help to avoid costly errors.