This past summer, the team at Public Media Company (PMC), had the opportunity to bring our expertise to an exciting initiative led by the Colorado Media Project (CMP), a collaborative of key stakeholders working to build a robust local news ecosystem for all Coloradans.
For over two decades, PMC has worked with hundreds of nonprofit media outlets on sustainability and growth, including the development of multi-year business models and strategies that provide a roadmap for increased capacity and enhanced public service. Our business models help organizations translate their vision and aspirations into realistic strategies, identify obstacles and opportunities, demonstrate growth potential, and achieve their goals.
Using this experience, the team at CMP asked us to develop a 5-year model to help illuminate potential pathways to protect and grow the $650M local news provider ecosystem in Colorado. For us this was a first: We had never before applied our expertise to an entire state-wide ecosystem, and we were eager to help and to learn along the way.
COLORADO NEWS PROVIDER ECOSYSTEM 2024 DISTRIBUTION OF REVENUES ESTIMATED TOTAL: $650M
The model was a collaborative effort, building on a five-year vision developed by over 130 civic leaders in journalism, higher education, nonprofit service, business, philanthropy, and public policy from across Colorado. To build it, we analyzed trends using multiple sources and available data sets, we created newsroom archetypes, and we met with a team of Colorado news leaders and CMP staff for three months to inform the development, to test our assumptions, and provide guidance and refinements.
The model was built around three scenarios over the next five years (2024-2029):
- If the ecosystem follows the “Business as Usual” path, total revenues would be flat with the loss of legacy revenues being compensated by the increase in digital revenues, individual and institutional giving, and other earned income sources. However, the cost of running the operations continues to go up, reducing reserves and the capacity to invest in journalism.
- The Conservative Case or “Increasing Headwinds” projects a decline, where revenues shrink by $47M by 2029, insufficient investment in digital infrastructure, loss of outlets, and the loss of journalists and journalism.
- The Growth or “Aspirational Case,” projects an additional $50M in revenue, increased levels of coordination among public service media organizations, and growth in journalistic capacity.
What we learned:
We wanted to learn from this work, and we did. In the end, the model demonstrated that media and consumption habits, along with sources of revenues, are changing rapidly in Colorado, and there is urgency to create sustainable business models in local news media organizations. Most Coloradoans access local news online, and Colorado newsrooms face varying degrees of audience and user migration to digital platforms. This is consistent with national trends, though unique in many ways to the local news ecosystems within the state.
The model also demonstrated that affiliation and closer coordination between different types of newsrooms will be critical in:
- Better serving the needs of all Coloradans, particularly those in underserved communities,
- Preserving the vibrancy and independence of local news in Colorado,
- Maintaining and growing scale, and
- Increasing the visibility of Colorado’s local news ecosystem for potential investments from public and private philanthropic sources.
The model also confirmed that organizations that grow their digital presence and have trusted brands, and those who benefit from economies of scale, will have a sustainability advantage. The larger, legacy organizations could learn from digital natives and independent news outlets; while independent, stand-alone newsrooms could benefit from working more closely with their ecosystem partners to build organizational capacity and increase sustainability.
Key takeaway:
Business as Usual is not enough to meet the news and information needs of all Coloradans, and the current trajectory will result in the contraction of the local news ecosystem rather than its growth across a number of key metrics, including ecosystem-wide financial capacity (the ability to allocate more resources to journalism), the number of news outlets, and editorial capacity -or- the number of people contributing the development of news at media outlets.
When considering financial capacity across Colorado, the Business as Usual scenario projects some excess revenues in the first few years, but as the expenses grow faster than revenues, this results in deficits in the later years and a need to dip into reserves and cut back on core services. Overall, this scenario offers zero return in fundraising investment (each dollar spent goes into supporting existing financial and journalistic capacity without any growth). Increasing Headwinds projects losses early on, resulting in diminishing reserves, more radical cuts in core services, and the closing of outlets. Overall, this scenario shows negative return in fundraising investment. The Aspirational Case shows growing reserves, capacity to invest in core services, and an expansion of the ecosystem. The ecosystem grows its excess capacity/ reserves by $0.15 for every dollar spent (15%/year return on investment) – a $91million increase in financial capacity over the next five years.
As for the number of news organizations, Business as Usual shows a contraction or loss of 67 news outlets (a 14% decline, excluding commercial radio and TV) over the next five years across the Colorado ecosystem. The impact on the organizations will vary based on their reliance on legacy revenues, how well they adapt to the changing needs of the local news consumers, and how effectively they use their resources. Increasing Headwinds projects an even more dramatic loss of 177 outlets (a 36% decline) as revenues decline rapidly, leaving no choice but to shut down the operations of many news sources. Conversely, Aspirational Case shows the addition of 30 new outlets (a 6% increase) as the news outlets grow their capacity, find opportunities to launch news services, find and invest in an adaptive workforce, and strengthen their relationship with local communities.
When considering the number of journalists in the Colorado local news ecosystem, and assuming a fixed average cost per editorial FTE, Business as Usual projects a loss of 52 FTEs (a 5% decline), the Increasing Headwinds projects a loss of 356 FTEs (a 36% decline), and the Aspirational Case projects 198 new FTEs (a 20% increase).
While it is important to acknowledge that business modeling isn’t a precise science, and a number of factors could impact the next five years, the findings are nevertheless sobering and informative.
Bottom line:
The model demonstrates that significant increases in investment are needed to move the ecosystem to the Aspirational or the Growth State. There is no single source of current revenue that can cover the $50M gap between the Business as Usual and the Aspirational Case. Colorado will need to see increases in all categories of revenue (and potential new sources, like public funding), as well as cost savings through collaboration, controlling and reallocating expenses, operational efficiencies, and technology innovations. If that happens, the ecosystem can create capacity to invest in its core services and achieve its 5-year vision that:
- Strengthens strong, local newsrooms that have the trust of their communities
- Closes longstanding gaps in journalism coverage
- Scales the infrastructure and shared services that the sector needs to thrive; and
- Advances public policy that expands access to trusted local news
We had an opportunity to present the model and findings at the Colorado Local News Summit in August, where it prompted further discussions about how synergies, economies of scale, and the Colorado news ecosystem’s unique value-add can help create sustainable business models moving forward. We are also pleased to see that the model is contributing to further coalition building and informing efforts for innovation support from both philanthropy and public sources.
We are grateful to the team at Colorado Media Project – Melissa Davis (now with Press Forward) and Sam Moody – for entrusting PMC with this model and working so closely with us in its development. Thank you also to the many local news leaders who contributed to this initiative both directly and indirectly. It was an honor to learn alongside you and support your work. We are inspired by your service, and we are grateful for your dedication to local communities throughout the state.
To find our more, visit https://coloradomediaproject.com/
