Emerging Revenue Models

Regardless of making running a lean-and-mean organization, media outlets still need to find new ways to generate revenue. Philanthropy has been the most prevalent model for many independent media organizations, although this source of revenue alone is often insufficient. Other possible models include creating additional channels of distribution, combining free and premium content, tapping user subsidies, utilizing news as a “loss leader” to generate funds and sharing revenue with content producers. Increasingly, for-profit and non-profit publishers alike will grow strongest with a greater mix of these revenue streams.

Non-profit, Philanthropy Model

For many years, non-profit publishers, such as many of those in TMC, have generated 50 to 75% of their revenue from philanthropy in order to meet the high costs of their editorial missions. While a dependence on philanthropy could be seen as a market failure just a year ago, it is now viewed as a potential advantage in diversifying revenue. Although many people have called for philanthropy to make up the difference between the cost of journalism and what the market can bear, many in the non-profit world say that there is not enough philanthropic funding available to sustain independent media as it is.

It is often difficult to measure the ultimate impact of media production beyond number of viewers, which has discouraged some funders from investing in media. In fact, donors have become increasingly concerned with measuring the social impact of all types of nonprofits. Investors with sufficient resources and inclination often want to ensure that their investments leverage the greatest possible impact, and they have pushed social enterprises to measure results more rigorously.

The problem is that different types of organizations often require different types of metrics to demonstrate their impact. Within a group of similar organizations, such as independent media, proactively standardizing measures could help increase
the pool of philanthropy.

Adding Distribution Channels and Sub-brands

By creating sub-brands, media companies could reach new market segments and influence the public dialogue new ways, all with the same content. This strategy has been successful in other industries. For example, Black & Decker bought a small tools manufacturer called “DeWalt” and decided to maintain it as a sub-brand, rather than folding it in to the overall company brand. The DeWalt colors (yellow) spoke to a professional market segment, while the Black & Decker’s red & black were considered to be for consumers. They reached two markets, cut costs with consolidated manufacturing. Similarly, Google took this strategy after acquiring YouTube. They decided to keep their existing Google Video as a separate brand, as they believed it would reach an older segment and ultimately expanded their reach.

Although the book-publishing industry is waning, some online news publishers have found an additional distribution channel creates social-impact value. A book can support the personal motivations of writers and editors, raise their credibility in leading thought circles, and catapult them into mainstream media and policy discussions. Books also have the added benefit of providing content for websites, building relationships with grassroots groups and advancing social missions.

Free and Premium Content

Many publications have experimented with using free content to sell premium content and services through subscription or single-pay models.

• Wall Street Journal mixes free content with access to premium content at $1.99 per week. This works because financial news is a type of information that users are more likely to hoard than share.

• Cook’s Illustrated attracts 260,000 digital subscribers to pay $35 a year to access their complete database of recipes.

• Consumer Reports users pay a fee for full access to reviews that are free of ads. Consumers view the potential editorial influence of advertising as something worth paying to avoid.

• Berrett-Koehler (TMC member) is experimenting with offering free portions of books, which include the introduction plus one chapter, as a way to sell a full book. They have also begun to break their books into lower-priced, article-length sizes that users can find through a graphic navigator on their website. They designed this tool to search more intuitively by business challenge and potential solution in addition to a more conventional general-topic structure.

Despite popular myth, consumers do not expect all content for free. In the future, publishers will find the right mix of free plus premium content. In fact, demand for quality investigative reporting could renew if it becomes scarcer.

This blog is an excerpt from The Big Thaw, a guide to the evolution of independent media, written by Tony Deifell of Q Media Labs and produced by The Media Consortium, a network of leading independent media outlets. Learn how your organization can use this report. For more information and recommendations from the study, click here.