Grant funding has provided key support for digital native media outlets in Latin America, Africa and Southeast Asia during the pandemic, a new report by SembraMedia suggests.
Funding from grants represented almost 31% of revenue on average among the newsrooms surveyed about their finances in the Inflection Point International report. This relatively high percentage — nearly a third of newsroom revenue — comes with a warning, however: being too dependent on grant funding can make it difficult for organizations to build sustainable business models. To that, SembraMedia has a recommendation: “Apply for grants, but don’t become overly reliant on donor support.”
Produced in partnership with the global philanthropic organization Luminate, with additional support from the Center for International Media Assistance, Inflection Point International aims to help digital media entrepreneurs navigate today’s news industry. Its authors believe that traditional media leaders may also benefit from the report's insights, since digital innovation “continues to erode traditional media business models.”
The report adds: “[Inflection Point International] represents the deepest and broadest research ever done into the state of digital native media in Latin America, Southeast Asia and Africa.”
As a non-profit focused on supporting entrepreneurial journalists in Latin America, SembraMedia has seen first hand the challenges that large grants to small media organizations can present. For one, they can compel newsrooms to grow their staff — with no guarantee of being able to sustain the larger team past the grant’s end date. “This can lead to layoffs and, in some cases, media closures when grant programs end abruptly — especially when they come with no business support, or they include restrictions that the funds can only be spent on reporting projects,” the report explains.
SembraMedia offers a recommendation to mitigate this issue: “When you develop proposed budgets for grants, make sure to include at least 10% for overhead and business expenses. And whenever possible, use grant funding to strengthen your organization and develop new revenue sources, as well as produce great journalism.”
The report’s findings build on those of the first Inflection Point study released in 2017, which focused only on Latin America, explained Janine Warner, the co-founder of SembraMedia, and an ICFJ Knight Fellow. “While there are differences across the three regions, what struck us most as we reviewed the data were the similarities that emerged among these news organizations as they strive to cover their communities and build sustainable business models,” she said.
At a recent webinar during which SembraMedia presented the new report, Warner stressed that it is critical for media leaders to be trained in management and business, and that they understand all key working parts of an organization. If they focus just on journalism, they miss other important things, she said.
SembraMedia interviewed 201 media leaders in total across the three regions for the report. Twenty-four declined to provide confidential financial information. Another 36 were unable to answer all financial questions posed. The report’s findings are ultimately based on information that researchers collected from 141 media organizations that were willing and able to answer detailed questions about their revenue, expenses and investments.
“Although there is no single recipe for success, we did find trends across all 12 countries that provide insights into the most promising sources of revenue at each of these stages of growth,” the report says. Across all media in 2019 and 2020, the top revenue categories included grants, advertising, consulting services, content services and reader revenue, in that order.
Grants accounted for 28% of funding for media outlets in 2019. This increased slightly to over 30% in 2020, during the pandemic — almost double what it was just five years ago, according to the report. It was even higher in Latin America, where it rose from 29% to 37% in just one year.
The most commonly reported sources of grant funding are foundations and philanthropic organizations, followed by private corporations like Google and Facebook, foreign governments, and domestic government organizations.
Grant funding played an especially critical role in supporting digital native media during the pandemic, according to the report. They didn’t suffer the large-scale financial losses that many traditional outlets experienced last year. The report authors suggest that this could be primarily because they aren’t overly dependent on advertising, and because grant funding for media increased last year.
“In private conversations, we’ve heard donors and foundations increasingly worry that independent media are becoming over-reliant on grant funding, and we share those concerns,” the report explains. “However, there is reason to believe that increased donor support and philanthropic investment is part of what helped these digital entrepreneurs weather the storm during the ‘pandemic crash’.”
During the recent webinar, SembraMedia co-founder Mijal Iastrebner urged media leaders to remain “vigilant and set goals to reduce the level of dependence on these funds.” Notably, the research shows that most of these media organizations are already earning more than 70% of their revenue from other sources. The SembraMedia team is encouraged by this finding. “Even those who receive grants are working toward building diverse business models,” the report says.
This is key for newsrooms to have editorial independence and financial success. Importantly, too, outlets should keep in mind that more isn’t necessarily better. “For the digital native media organizations we spoke with, having less than three revenue sources was likely to put them in the bottom third of income earners, but having more than six income sources did not consistently increase revenue when compared with other similar-sized media organizations,” the report says.
The ideal number, according to Inflection Point International, is between two and six different sources of revenue. Media outlets should strive to diversify, but attempting to manage too many projects at the same time could also hurt a newsroom’s sustainability plans. “Our core message has always been to diversify. We encourage it, but we found that there’s a balance they have to reach,” said Iastrebner.
Main image courtesy of SembraMedia.