Crowdfunding for media – opportunities and challenges
Brit Stakston is a digital media strategist and founder and CEO of the Blank Spot Project. Member of the Swedish Press Subsidies Council. This was originally published at Nordicom.
Crowdfunding has become increasingly common in media ventures. But as a source of income it is nothing new. It is income that has long been classified as sales revenue. In both cases it is about readers wanting to pay for journalism. Crowdfunding offers both opportunities and challenges. Opportunities centring on a unique reader relationship and a new passion for the journalistic craft. On how innovative media ventures can be tested with the aid of new technology. The challenges centre on journalists’ ability to run a business and to work sustainably. The crisis comes when it is time to re-recruit contributors.
At a time when the media’s business models are coming under review, crowdfunding as an alternative to advertising revenue has become increasingly common in media ventures. But as a source of income it is nothing new. Basically, it may be equated with what has long been classified as sales revenue in the media houses’ budgets. In both cases it involves readers wanting to pay for journalism.
Crowdfunding offers both opportunities and challenges. Opportunities that arise out of a unique relationship with readers and a new passion for journalism as a craft, out of a desire to see how innovative media ventures can be tested with the aid of new technology. The challenges centre on the ability of journalists to run a business and to sustain their efforts. The crisis comes when it is time to re-recruit contributors.
Crowdfunding is a financing method whereby you address the target group directly with your editorial idea. Those who decide to support a crowdfunding initiative are contributors or backers. The amount they choose to contribute in a campaign may be large or small. Usually, the larger the sum donated, the more benefits are offered by whoever initiated the project. Such benefits vary but often comprise unique products or experiences, such as exclusive meetings with those behind the initiative.
Crowdfunding is often presented as citizen-funded or grassroots-funded. In the case of journalistic projects, reader-funded or public-funded is a common label. This does not exclude businesses, organisations or foundations from being contributors. Crowdfunding can be used both by new companies and established ones. Usually, funds are raised via an established platform on the net, which means a business idea can be rapidly spread. Using platforms built up by others to safely handle contributions from many different people saves time. Thanks to new technology, the time gap between the initial idea and its realisation is short. A further advantage is that these platforms are already part of the net’s ecosystem, with their own established target groups who visit these sites regularly. Some services require that the fundraising project achieves its target, otherwise the money is returned to the backers. This all-or-nothing component often acts as an incentive in getting people to contribute.
Nowadays, what is termed equity crowdfunding is becoming increasingly popular. It involves offering people the chance to become a partner in the company by acquiring stock and can be a way of bringing in many committed readers over the long term.
The hype that journalistic crowdfunding initiatives attract when they achieve their funding targets has not only to do with the fact that everyone is looking for the Holy Grail of a sustainable alternative to advertising revenue. The most interesting aspect is that people are so clearly demonstrating that they want to pay for journalism. This is important at a time when the prevailing view is that the press cannot charge money on the net.
In Europe, many successful media ventures have used crowdfunding. Among the best-known are the Spanish news outlet El Español, the Dutch De Correspondent and the German Krautreporter. All are worth studying more closely for their varied approaches if one wishes to understand crowdfunding. There are also a number of crowdfunding initiatives in the Nordic area. In Sweden, the foreign news reporting site we, Blank Spot Project, set a new Nordic crowdfunding record in March 2015 in terms of the number of backers. A total of 2,300 people invested between SEK 10 and 10,000. Over a three-week period, SEK 1.3 million was raised. A number of important lessons can be learned from this effort.
What crowdfunding offers
From idea to reality in no time at all
One of the strengths of crowdfunding is that a journalistic idea can be rapidly tested. Given a good analysis of the operating environment, your idea can meet other people’s needs. Generally speaking, people today are strongly values-driven. If an investment is to be made, they want to know who is behind it and why. Consequently, you should lay stress upon your own values. Look beyond the individual report as such and focus on the larger picture of what is to be achieved, the mission itself.
In Blank Spot’s case, it was a matter partly of focusing on the blank spots in media reporting and the role of journalism in democracies, and partly of proceeding from the assumption that people in today’s digital world are not at all uninterested in quality journalism, despite the fact that content such as cute kitten clips gets millions of shares. On the contrary, the net-savvy world citizen may appreciate trivial entertainment while at the same time appreciating other perspectives on what is going on in the world. Many of those who have supported Blank Spot do so because they believe that this kind of investigative and independent journalism is important. They may not read it all. But they see the value of journalism’s power to bring about change.
A new reader relationship
Crowdfunding opens up new opportunities for working close to your readers. It is the backers who have enabled you to bring your idea to fruition, so bring them along every step of the way. Today, co-creation is of key importance to all audience interaction and reader dialogue. Media consumers expect it. And for journalism, co-creation is a major asset. By bringing in your readers, you widen your range of expertise. A journalistic idea that enables the reader to be both consumer and co-creator also establishes considerable reader loyalty. You should offer your readers many different ways of becoming involved.
Blank Spot views each backer as a sort of ‘member’ and the journalist becomes as much a discussion leader as a reporter in relation to them. Reports often evolve through the readers’ knowledge and commitment. This kind of close relationship develops both through physical meetings and through digital forums such as closed Facebook groups for members only. Whatever the forum, readers get to follow the work going on behind the scenes.
Rekindling love of the job
The powerful commitment to an idea of one’s own and the new reader relationship together represent an enormous boost for a hard-pressed professional body. Having for many years felt challenged and potentially replaceable by every smartphone owner, journalists can use crowdfunding as a means of rekindling their professional enthusiasm. Here, they can give passionate expression to their most cherished journalistic ambitions. Crowdfunding provides scope for innovative journalism. It can put an end to all the endless talk about failing business models where the journalist is seen more as a burden than an asset. Now at last journalism as a craft can once again take centre stage. The passion that underlies this must be allowed to shine through as soon as the opportunity arises.
Educating people about journalism
Crowdfunded media projects are important for reminding people about the role of journalism and demonstrating how quality journalism is put together. In a close relationship with the readers, the building blocks that make up journalism can be shown in a clear and simple manner. Basic elements such as rules and regulations, press freedoms and freedom of expression can be explained in dialogue with the readers.
As part of its work, Blank Spot is specifically trying to build up a popular movement for journalism, as an antidote to the deeply anti-democratic tendencies currently in evidence. In the members-only groups, the journalists in their role as discussion leaders have raised numerous topics, including ethical dilemmas and the difference between research interviews and interviews requiring accountability. Also, each report details the cost of producing it, in order to show how much journalism actually costs.
Crowdfunding naturally requires committed backers. From the outset, they represent an extensive potential distribution channel. They are free to pass the story on and share the content produced, especially if it was produced in a co-creative way and there are relevant digital social objects to distribute.
The Dutch journalism platform De Correspondent has an interesting solution whereby content that normally lies behind a pay wall can be shared with others by paying members in its network. The content then spread via that user is clearly marked as having been co-financed by the person spreading it.
Blank Spot for its part has held that information should be free but is considering other ways to get users to spread its content further. Its crowdfunding campaign used 15 different channels through which to make the event known. It is important to keep abreast of digital advances and to have a clear strategy as to what channels to use to ensure that people stay committed.
Challenges with crowdfunding
There are of course concerns that crowdfunding journalism might easily find itself in an ethical dilemma. The code of rules on press ethics must of course be observed and all financing must be transparent. But the matter of financing is often problematised. Naturally enough, questions arise when Person X contributes a sizeable sum of money. Can that person actually influence the content? Here, a high degree of editorial integrity is essential – just as it already is in the relationship between editorial staff and media owners. One way of securing compliance with press ethics is to ensure both that the financing is transparent and that the publisher is a part of the independent editorial set-up, and also that the readers/citizens are taught the ethical rules so as to become source-critical in their own media consumption.
The traditional media owners’ often vague and scarcely transparent attitude towards new phenomena such as native advertising, branding comment and content marketing already leaves much to be desired in this respect. Add to this branded journalism, where companies have their own media channels into the media mix, and it becomes clear that the media industry needs to take responsibility for making the rules on press ethics clearly visible to the general public. All media need to show how they comply with these rules.
Then, of course, it is abundantly clear that the technology in itself makes it possible for any number of journalistic ideas well outside the system of ethical rules to emerge. That phenomenon is very different, however, from the complement to traditional media financing that crowdfunding represents and that is discussed in this article.
The journalist as entrepreneur
There are many challenges facing a journalist who wishes to become an entrepreneur. To succeed, you have to feel as comfortable in that role as in your role as a journalist. While many have had their own companies as freelance journalists, the expertise thus acquired is not always enough to run a sustainable media company. The division of roles within the team must be clear, as must expectations concerning how to proceed once the funding targets have been met. Business plans and budget forecasts need to be drawn up, and you have to be as keen to develop your business model as you are to pursue your journalistic practice. If the financial know-how is lacking, you need to invest in expert guidance to ensure that everything is done correctly at every stage.
It is vital that you feel secure in your role as an independent journalist despite the proximity of those who have financed your journalism.
The journalist as a salesman and marketer
The ability to sell, to manage PR and to market your idea is also important. Unfortunately, this is often far from what the journalist wants to be involved in. Without marketing, however, the fledgling entrepreneur cannot succeed. Selling and marketing yourself involves getting others to invest in your dream. In the absence of that narrative, genuinely describe by the project founders, no-one will want to invest. Considerable digital skill is also required.
Member management takes time
In reaching your target, you will have acquired many backers who need to be managed in an efficient customer system. The time and energy this takes should not be underestimated, particularly when member and customer relations are as crucial as they are in collaborative journalistic initiatives of this kind. Transferring data from the platform receiving the contributions to your own system involves a lot of administrative work. It also means ensuring that no customers are left in systems where they are automatically debited once a year has elapsed. In many cases, therefore, the work needs to be restarted the following year.
Partially unclear tax rules
The capital you bring into your company via crowdfunding may take the form of shares, loans, gifts, awards, advance sales or sponsorship. The tax consequences differ, depending on which type of fundraising is involved. You need to take this into consideration and make sure you have the skills at your disposal to deal with different scenarios.
Crowdfunding’s Achilles heel is the re-recruitment phase. The difficulty of re-engaging those who supported you before is well known. Recently, the American crowdfunded storytelling platform Latterly closed down. After a successful campaign on Kickstarter, they managed neither to recruit new subscribers, develop their product or market themselves. A classic example of how difficult it is to be an entrepreneur. Today, the German crowdfunding site Krautreporter is facing precisely the same problem and is trying to keep going by introducing cooperative part-ownership. In Sweden, journalist Eric Schüldt and idea historian Per Johansson successfully financed a series of radio podcasts but failed with their next programme project. That is the case for many crowdfunded media initiatives. You have to plan for this. A key component in any bid to succeed beyond the re-recruitment phase is transparency and a clear account of what you have done for the money raised.
Tips for anyone wishing to use crowdfunding
- Clear idea. A clear idea and a shrewd business plan are required. Show what the company’s vision is and what values inform the work.
- Realistic and visionary. The targets should be reasonable and you need to explain how you calculated them, but you must also dare to be a visionary. This helps the backers feel that they are involved in something big and are part of a movement.
- Build relationships. It’s easy to concentrate on the money you want to raise, to the exclusion of all else. But sustainability is all about the commitment you manage to establish among those who have chosen to back the project.
- Strong team. Confidence in the project founders and their idea determines whether or not people contribute. Running a company together is a major commitment. Choose the right people and keep the number down to a minimum when starting the company. Make sure you have marketing, web development and financial skills at your disposal.
- Timing. Dare to take the plunge when the time is right. Not everything has to be fully planned. Be aware of how people elsewhere discuss similar ideas.
- Singularity. What distinguishes this initiative from others? Make clear what this particular project can bring to the target groups’ media mix.
- Journalism as a USP. Go back to journalism’s roots and show what the journalist’s craft involves. This is journalism’s unique selling point, to use a classic marketing concept.
- Solve other people’s problems. Show how your idea solves a problem for the presumptive target group.
- Three qualities needed: stamina, persistence and flexibility. It takes time to build a brand despite the ease of creating an initial commitment thanks to crowdfunding. You need to prepare for the long haul once the hype is over and the funding target has been reached. Keep your gaze fixed on your vision, but the path may change along the way. Learn from the collaborative process that journalism is built out of.
- A magic movement. The Nordic perspective, with its closely related languages and strong tradition of grassroots organisation, offers a unique opportunity to combine new technology with people’s desire to do something about the world. Use that power. Know what is required to generate commitment.
References and inspiration:
5 lessons in start-up journalism from De Correspondent
10 Crowdfunding Lessons From The Radiotopia Kickstarter Campaign.
From crowd to community: Krautreporter’s road to sustainability.
Crowdfundingens största utmaning – återvärvning Blank Spot Project
Alternativ finansiering av journalistiken, Journalistförbundet 2013, Sweden.
Journalistikens förutsättningar i en digital värld, Journalistförbundet 2013, Sweden.