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Embarcadero Media, a 44-year-old Bay Area news publisher and the parent company of the Palo Alto Weekly and PaloAltoOnline.com, announced today that it will become a nonprofit organization at the start of 2024.
The decision to go nonprofit was made after a careful review of the company’s business model and financial outlook, the company stated in a press release. The boards of directors of the for-profit Embarcadero Media and the nonprofit Embarcadero Media Foundation on Nov. 14 approved an agreement for the company to donate the operation to the nonprofit.
Embarcadero Media CEO Adam Dawes explains why the news publisher is becoming a nonprofit.
In recent years, Embarcadero Media has faced significant challenges, including declining advertising revenue due to the local business closures from the pandemic and changing shopping patterns away from local retailers, the press release stated.
“Operating as a nonprofit will enable Embarcadero to continue to provide high-quality journalism to the community, become financially sustainable and expand its coverage to areas of public interest,” said Adam Dawes, CEO of the for-profit Embarcadero Media, who is slated to helm the Embarcadero Media Foundation in 2024.
In adopting a nonprofit model, Embarcadero Media is joining a host of other news organizations around the United States that have sought financial sustainability by forgoing their for-profit status. As a nonprofit, news groups can solicit and accept philanthropic donations to supplement revenue from advertising, memberships, sponsorship fees and events.
The embrace of a new business model is one of numerous ways that an anxious global media industry is trying to regain a solid financial footing after seeing revenues collapse over the past two decades.
The disruptors of the news media’s traditional business model, which once thrived on print advertising revenues, are many and oft-cited: a massive shift in readers’ habits to digital consumption, the rise of social media as a ubiquitous source of information, the monopolistic grip on digital advertising revenue by tech behemoths, and more.
“Advertising once accounted for 80% of newspapers’ revenue. In the past 20 years, that revenue stream has fallen by 80%. The economics that supported the news industry for most of the twentieth century are no longer viable,” reported the American Journalism Project, a venture philanthropy that is working to attract hundreds of millions of investment dollars to fund nonprofit newsrooms.
The United States has lost a quarter of its newspapers — some 2,500 — since 2005, leaving 6,380 newspapers as of last year, according to “ The State of Local News 2022,” a report from the Medill Local News Initiative at Northwestern University. Of the remaining papers, 1,230 were dailies and 5,150 were weeklies.
It’s a trend that continues unabated with the loss of about two per week, and newsrooms at all levels of the industry have been hit. Even major outlets are struggling to bring in the revenue to support their staffing, resulting in recent layoffs at the Washington Post and Gannett, among others, and the entire shutdowns of online sites like BuzzFeed News and Jezebel.
But local weekly newspapers have been the hardest hit, the State of Local News report found. Of the 360 newspapers that shuttered across the country between late 2019 and May 2022, nearly all were weeklies. Even affluent suburban communities are losing their newspapers and joining the one-fifth of the country without a local news source, the report stated.
About 60% of the nation’s newspaper journalists have lost their jobs since 2005, raising alarm over the ability of newsrooms to hold government officials accountable or to even bring readers essential information about their communities.
In response to the disappearance of newspapers, digital-only newsrooms have sprouted from coast to coast. The growth of digital-only sites is making up for, barely, the loss of papers, but in 2022, there were still only 545 such state and local sites, the State of Local News report said. Many of these are small outfits and not nearly able to replace the headcount of laid-off newspaper journalists.
Banding together
To counter the industry’s catastrophic revenue freefall, everyone from academics to C-suite executives have been urgently searching for ways to radically reinvent how the news is delivered and funded.
In 2009, journalists from 27 nonpartisan, nonprofit newsrooms banded together to form what is today called the Institute for Nonprofit News, a major player in the burgeoning nonprofit news sector.
The collective has since grown to include 425 member organizations that collaborate and produce public-service journalism. These news nonprofits employ some 4,000 people, including 2,700 journalists, and that figure is growing: The Institute for Nonprofit News reported in 2022 that staffing among its member newsrooms had grown 15% over the prior year.
Other initiatives have launched with ambitious aspirations to create entirely new streams of revenue by catalyzing philanthropic giving. The American Journalism Project was founded in 2018 by John Thornton — a venture capitalist and founder of the nonprofit Texas Tribune — and Elizabeth Green, founder of the nonprofit Chalkbeat, as a venture philanthropy.
To date, it has raised $168 million for local news from funders including the John S. and James L. Knight Foundation. American Journalism Project backs 41 nonprofit news organizations so far, according to its website.
And in September, a coalition of 22 donors, spearheaded by the MacArthur Foundation, announced a five-year, half-billion-dollar initiative “to strengthen communities and democracy by supporting local news and information.”
“We have a moment to support the reimagination, revitalization, and rapid development of local news,” the MacArthur Foundation stated in its announcement of the initiative, called Press Forward.
The Knight Foundation announced it’s contributing $150 million to the Press Forward cause.
“News is at the center of a healthy and engaged democracy. That is why a free press is protected in our constitution,” Knight Foundation president Alberto Ibargüen said in a press release. Since 2005, the Knight Foundation has invested more than $632 million to “enhance and support robust news ecosystems.”
Paths to nonprofit status
The paths that newsrooms have taken to nonprofit status are varied. Some are founded as nonprofits: the policy- and politics-oriented CalMatters and the south bay-based San Jose Spotlight are but a few.
Others converted from being for-profit businesses: The first legacy newspaper to transition to nonprofit was The Salt Lake Tribune, now viewed as the national standard bearer for nonprofit newspapers.
The Tribune made the switch in 2019 after a turbulent decade in which it won a Pulitzer Prize but had to contend with dropping advertising revenues and multiple rounds of staffing cuts.
In 2016, investor Paul Huntsman bought the paper from Digital First Media, a media conglomerate owned by the hedge fund Alden Global Capital. The change in ownership did not, however, reduce the financial challenges, and Huntsman announced in 2018 that 34 additional newsroom jobs would be cut from a staff of 90, according to The Tribune’s reporting from that time.
Unwilling to see that trend continue, the following year, Utah’s largest newspaper became the first legacy for-profit newspaper in the U.S. to transition to a 501(c)3 nonprofit.
This move, along with other initiatives (such as reducing print from seven days per week to twice per week), appears to be bearing results. In 2021, The Tribune’s Executive Editor Lauren Gustus announced to readers that the company was “healthy” and “sustainable” — with a newsroom 23% larger than the prior year — and had no plans to return to a “previously precarious position.”
Gustus worked at The Tribune from 2004 and 2007 before moving on to management and corporate roles in other newspapers, including ones owned by Gannett and McClatchy. In November 2020, she left her position as editor at Sacramento Bee to return to The Tribune.
Among the changes that nonprofit status has brought to The Tribune, Gustus said, is that the organization no longer has a single owner.
“It has fewer demands from an ownership entity with respect to return on investment, which means we can put our profits right back into our journalism,” Gustus said. “We’ve also got more financial flexibility in that we welcome subscribers and the support they give us in subscription revenues.”
Gustus said The Tribune’s donor base is broad and mostly local. Most have indicated that they are contributing because they are interested in seeing their communities be “stronger, more resilient and healthier.” No donor is large enough to influence its approach to journalism, she added.
“That’s because we are community-owned,” Gustus said. “We truly don’t answer to anyone.”
A more local example of a newsroom that’s pursued nonprofit status — and grown as a result — is in the East Bay: Berkeleyside.
Tracey Taylor, one of the three founding members of the digital-only Berkeleyside, said the formerly for-profit news organization started as a passion project between friends in 2009.
“We ran that as a for-profit for about 10 years, but I have to say it was a pretty unprofitable for-profit,” Taylor said.
Enter Cityside, a 501(c)3 nonprofit that the Berkeleyside founders launched in 2019 to serve as the parent organization for Berkeleyside. Soon after, in 2020, Cityside also launched Oaklandside, a similar online publication covering the city of Oakland, and earlier this month announced plans to launch yet another publication, this one for the city of Richmond.
The switch to the nonprofit model has only resulted in positive growth for Cityside, both in terms of engagement from the community and its readers and also in terms of the size of the team working at Cityside across its various publications.
Berkeleyside’s newsroom had a total of five staff members before switching to the nonprofit model in 2019, and today the whole Cityside operation employs 29 staff across its publications.
Despite launching around the time of the COVID-19 pandemic, Taylor said Cityside thrived in the midst of the chaos.
“It was good for local news outlets like ourselves,” she said. “Something that people liked and supported and read was suddenly really almost indispensable because we were providing really, really essential vital information about COVID, about vaccinations when they came along, where people could get vaccinated.”
She also said the move to the nonprofit model allowed them to expand the sources of funding they could tap into, with their new eligibility for grants intended for nonprofit newsrooms, and with individual donors now able to make tax-deductible donations.
Before becoming a nonprofit, Berkeleyside was largely getting funding from advertisers and individual members who paid roughly $100 per year to support their work, Taylor said. Today, Cityside’s revenue sources are much more varied. This year, 18% of Cityside’s funding came from sponsorships and advertising, 21% from its members, 23% from major donors, and 36% from foundations, she said.
“As soon as we became a nonprofit, it just opened so many doors,” she said.
Challenges ahead
Despite the momentum building around the nonprofit news model, changing to nonprofit status doesn’t make a publication immune to the broader challenges that newsrooms across the country are facing today, according to newsroom leaders.
In August, the nonprofit Texas Tribune laid off 11 staff for the first time in its 14-year history.
“The strength of our revenue model has propelled us through the past 14 years, fueling the Tribune’s steady growth and the enterprising work and engaging storytelling of our newsroom,” Sonal Shah, CEO, said in announcing the layoffs. “In spite of this year’s budget difficulties, we believe the business is sound and will continue to thrive.”
Journalism remains a challenging business for any organization, regardless of for-profit or nonprofit status, The Salt Lake Tribune’s Gustus said.
Across the industry, news organizations have to contend with factors beyond their control, like recent changes on major social media platforms that have caused referrals to news articles to plummet, she noted.
“I think we need a lot of experimentation,” Gustus said. “We’ll continue to see significant change and disruption, and I think we need smart people in local newsrooms making bold decisions that will lead to better outcomes.”
And despite big initiatives like Press Forward, there exist deeply embedded challenges on the funding side to surmount.
According to Harvard’s Shorenstein Center on Media, Politics and Public Policy, foundations are often structured to tackle specific and time-limited projects.
“For most foundations, their grant-making process is … defined around specific social issues or problems, making it more difficult to provide general operating support to a news nonprofit and for prospective grantees to define their fit,” the center’s 2018 report, “ Funding the News: Foundations and nonprofit media,” stated.
But Gustus said that opportunity also accompanies nonprofit status. While continuing its traditional role as a newspaper that holds power to account and that points out areas where Utah can do better, The Tribune as a nonprofit now does more listening “on the front end” of reporting, she said.
This means gauging readers’ interest through annual surveys, regular crowdsourcing and listening sessions in the community to determine what issues are most important to them. (Accountability journalism is the top request, she said.)
Every story, she said, begins with the question: Why does the story deserve to be here? And the follow-up is: Who is this story for?
The nonprofit model means that The Tribune is increasingly taking a role as “helpers and conveners” in finding solutions, she said. It also means moving from competition with other media partners to collaboration.
Taylor said that the financial stability that came with the nonprofit model has allowed Cityside to be more intentional when it came to developing Oaklandside and Richmondside.
She said staff conducted several interviews and surveys with members of the community in both cities, and they used that data to drive their decision-making around which beats to cover in which cities, and what types of stories community members wanted to see more or less of.
The switch also encouraged them to think more about how their work aligns with their overarching mission –– something they had thought about prior to the switch but consider more seriously today.
Embarcadero Media’s Dawes agrees that greater community input seems to go hand-in-hand with the switch to nonprofit for many newsrooms, and he expects the same to be true for Embarcadero.
“We know there are great beats that can make a big public impact, like expanding coverage of education, homelessness and housing, immigrants, health, transportation and the environment,” he wrote in a letter to readers announcing the conversion from for-profit. “Being a nonprofit enables us to develop partnerships with other foundations and accept major contributions from individuals who have a passion to shed more light on a particular issue.
“We are thinking more ambitiously as well, like starting new online publications to provide news for chronically underserved communities,” Dawes wrote.
But those plans, he acknowledged, rest in large part upon the response of the communities that Embarcadero Media serves, which include Redwood City, Menlo Park, Atherton, Portola Valley, Woodside, Palo Alto and Mountain View on the Peninsula and Pleasanton, Danville, San Ramon and Livermore in the East Bay.
In the coming year, Embarcadero Media Foundation, which will have a budget of $5 million, aims to raise $1 million from philanthropic giving. Dawes reported that pledges of about $200,000 from donors have already been made.
“Local journalism has the ability to make our communities stronger by shining a light on local institutions and helping people to feel connected to their neighbors,” Dawes said in the announcement. “But we can’t do that alone. We need the support of our community to ensure that publications can continue to thrive for years to come.”
• Read the letter from Embarcadero Media CEO Adam Dawes announcing the nonprofit transition.