Side-Bet Businesses Can Add Up to Extra Revenue for News Organizations

“If you’re going to be in the news business, you need to be in another business, too,” Dan Okrent told me in a conversation late last year.

The former public editor of The New York Times was serving at the time as the fall 2009 Visiting Murrow Lecturer on the Practice of Press and Public Policy at the Shorenstein Center. Okrent has worked in books, magazines and new media in addition to his stint at The Times, and understands that paying for news is not always a linear process.

There’s a long tradition of journalists needing other sources of income to support their publishing.

“In colonial America, printers were businessmen first, not journalists,” media scholar Michael Schudson reports in his 2003 book, “The Sociology of News.”

There’s probably no better example of side‐bet funding than the Washington Post Company’s ownership of the Kaplan Inc. education business. “They pretty much invented the newspaper as they went along, amid efforts to make money selling stationery, printing wedding announcements, running the post office, or even selling chocolate, tea, snuff, rum, beaver hats, patent medicines and musical instruments from their print shops. Their newspapers were four-page weekly journals initially designed to advertise their printing businesses.”

These days, established and start-up news organizations are developing new lines of business that add revenue in good times as well as bad.

In retrospect, there’s probably no better example of side-bet funding than The Washington Post Company’s ownership of the Kaplan Inc. education business.

In the third quarter of 2009, the company’s newspaper division lost $23.6 million. Overall, though, the company earned $17.1 million on revenues of $1.14 billion. It did so by virtue of $685 million from Kaplan, which amounted to 60 percent of Post company revenues.

It’s interesting that the Post structured its Kaplan operation in a very entrepreneurial style, so much so that when its 43-year-old CEO, Jonathan Grayer, left Kaplan in 2008 after 17 years, he stood to collect more than $75 million in stock options and other fees by November 2011.

What to consider in a new venture

Three considerations stand out in evaluating whether a potential new venture might make sense:

  1. consistency with the organization’s values,
  2. sufficient return on investment and
  3. relevance to the organization’s mission.

The Post’s acquisition of Kaplan provides an example of fit much closer on the first two criteria than the third. Especially in tough economic times, compromising number 3 can be appropriate as long as there’s a match on numbers 1 and 2.

Lessons from side businesses in Alaska, Indiana, Iowa, New York

Many new ventures have quite modest beginnings within news organizations, ranging from a few thousand dollars for the sale of photographs at small papers to six figure deals for book and speaker programs at larger operations.

In 2008, The Pocono Record generated about $3,200 from reprints of its photos, probably a bit less in 2009. Still, according to editor Bill Watson: “That’s a big deal for a little paper.”

“Our librarian took it on as an in-house entrepreneurial project,” Watson told me by e-mail in December. “We even have our photographers shoot people in the crowd at public stuff like festivals and football games, then post them online as photo galleries. In addition to drawing lots of hits online, we get some reprint traffic off them.”

The Telegraph Herald in Dubuque, Iowa, has taken the idea of repurposing photos one step further, into book publishing, and has generated six figures in dollar sales with one of its books and at least $50,000 with five others, executive editor Brian Cooper said in an e-mail.

Todd Schurz, CEO of Schurz Communications, links new ventures to user interests. At The South Bend Tribune, that means Notre Dame football. At the company’s Alaska TV station, it means tourism and a new site called GoToAk.com, which sells day flights, fishing trips and other services.

“Looking at their numbers,” Schurz says of his Alaska station, “they’re my shining star for the year.”

Small papers & large organizations are generating extra revenue with side businesses.News start-ups are including the sort of side ventures that have been common in professional information businesses and trade publications for decades: in-depth research and customized reports.

GlobalPost, for example, has created a service that collects several thousand dollars from clients with deep and specific interest in regions where GlobalPost is positioned to do research, as well as  journalism. This is another area where clear ethics guidelines are essential.

In a November 2009 story about GlobalPost, NPR media correspondent David Folkenflick described the site’s guidelines for its research service.

“First, they do not tell the reporters the identity of the client. Second, the pieces are intended to report, not advocate. Third, while clients have exclusive rights for several weeks, GlobalPost ultimately retains the right to publish any material it uncovers. And fourth, under the terms of the contract, it can always return the money and publish immediately if the news is hot enough,” Folkenflick reported.

Pittsburgh Post-Gazette executive editor David Shribman says newspapers need to take on the role of “impresario” in developing events for their communities. His paper is finding sponsorships generating significant revenue for a series of community meetings on such topics as Obama’s election, health care reform — four of these in 2008, eight in 2009, each drawing more than 600 people and sponsored by PNC Bank.

The paper is also thinking of creating Post-Gazette University (PGU), with the paper’s outdoors writer teaching fly-casting and the garden writer on roses.

As interesting as such ventures may be, many of them have a kind of small potatoes feel.

“They are small potatoes,” Shribman said by phone. “But when you don’t have many potatoes to go around, any spud looks good.”

This piece is adapted from my paper titled “Clues in the Rubble: A User-First Framework for Sustaining Local News,” which I developed as a Sagan fellow at the Joan Shorenstein Center on the Press, Politics and Public Policy.

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