Josh McGhee was prepping at home for a story assignment back in November when he got a text from a fellow co-worker that he no longer had a job. McGhee, who had been working as a DNAinfo Chicago reporter since 2013, was one of several local journalists who were suddenly out of a job when DNA owner Joe Ricketts abruptly shut down the media company.
McGhee initially laughed at the text, thinking it had to be a joke. But then he checked the news outlet’s website and saw that it was no longer active.
“That’s when things got weird,” said McGhee, 26. “That’s when I got the email from Mr. Ricketts explaining everything. It was shocking. I realized that I didn’t have a job.”
The next day, Ricketts flew to Chicago to give DNA staffers an explanation in person, but McGhee didn’t attend.
“I wasn’t going to go to my own funeral,” he said.
It’s a well-known fact that digital media is a hard space to operate in as it becomes more difficult to find consistent and healthy revenue streams. But the death of DNA was still jarring to the city’s media landscape.
Originally launched in 2012, DNAinfo Chicago served as the free neighborhood news source, filling gaps that the Chicago Sun-Times and The Chicago Tribune didn’t. According to a statement from Ricketts, the DNAinfo and Gothamist brands, which operated in Chicago, New York, Los Angeles and other markets, weren’t bringing in the kind of revenue they needed to be sustainable.
Over the last decade, newspapers across the country have seen their staffs shrink or have shut down entirely as online advertising dollars keep going to social media sites. Facebook and Google commanded more than 63 percent of U.S. digital ad spending in 2017, according to eMarketer. Even though media has largely been supported through advertising dollars since the industry's inception, that model seems to be losing steam.
But in the wake of what seems to be the inevitable downsizing of the media industry, digital news startups have begun popping up in the last few years, especially in Chicago.
“There’s a long history [in Chicago] of digital media startups, and now there’s a new group,” said Rich Gordon, a professor and the director of digital innovation at Northwestern University’s Medill School of Journalism. “It’s very easy for someone or a group of people to start a new digital venture using the internet as a publishing platform. Therefore, people are constantly trying to do it.
"Thus far, there haven’t been many that have found a lasting role and a sustainable business model," he continued. "More than 90 percent of startups fail and there’s no reason to believe that’s going to be any different for digital publishing startups.”
Chicago has seen many media startups come and go, including the Chicago News Cooperative, Gapers Block and TouchVision. But Chicago’s new wave of media startups—ranging from Block Club Chicago, a venture from former DNAinfo editors that aims to cover neighborhood news, to The TRiiBE, a digital media site dedicated to covering black millennial culture in Chicago—are out to prove that local journalism upstarts can make it in Chicago.
And they are all exploring innovative funding models, whether it’s charging subscriptions, launching crowdfunding campaigns, exploring nonprofit designs or even high-tech platforms, like blockchain.
The thing they all have in common, though, is not trying to be the next major metro newspaper. That space is largely already filled by the city’s major dailies, which are having problems of their own. Tronc, the corporate media conglomerate that owns The Chicago Tribune, sold the Los Angeles Times and the San Diego Union-Tribune in February so that it had additional funds to repay outstanding debts.
Instead of trying to compete with Tronc and others like it, each of Chicago's new media startups is operating in their own, niche space, where they are hoping to ultimately prove their value to a loyal audience.
Chicago’s Blossoming Media Startups
One of the most notable new media organizations in Chicago is City Bureau, a local nonprofit civic journalism lab that connects reporters with the communities they cover. Founded in 2015 by Darryl Holliday, Andrea Hart, Bettina Chang and Harry Backlund, City Bureau offers weekly public newsroom events, where reporters and local community members are invited to share thoughts, concerns and story ideas. The organization also offers reporting fellowships and a documenters program.
“We’re really focused on how to support and create equitable reporting in the city,” said Holliday, who formerly worked at the Chicago Sun-Times and DNAinfo Chicago. “We’re very focused on how we help diversify newsrooms and how we learn how to create a sustainable model that can do those things on a daily basis.”
They are largely supported by donations and grants—City Bureau received a grant when they first launched from the McCormick Foundation, which provides about $1 million every year to new businesses that help sustain local journalism. But they are also funded through their membership program, which is available in different tiers. Membership fees range from $8-50 per month, and they currently have about 100 members.
“People become members usually because City Bureau occupies a unique position in Chicago,” Holliday said. “They support that mission [of] equitable coverage of Chicago communities, a stable business model, and supporting diversity in local newsrooms.”
City Bureau publishes their content on their website, but also partners with other local publications to give their coverage added exposure.
One Illinois, a statewide, nonprofit media organization that aims to “bring Illinoisans together and unite neighbors around our shared interesting aspirations,” launched a Kickstarter fundraiser in February with a $10,000 goal. It was founded by Chicago Alderman and former gubernatorial candidate Ameya Pawar.
In a similar funding route, The TRiiBE launched an Indiegogo campaign last month to raise $20,000. It was founded in 2017 by Morgan Johnson, creative director, and Tiffany Walden, editor-in-chief, who are both Chicagoland natives and Northwestern graduates. On average, they publish content twice a week, and currently have more than 60 stories on their site with over 130,000 page views.
“The Chicago that we know and grew up in is not reflected in the people who are running newsrooms,” Johnson said. “We needed to create something to unify people and just to help find our tribe.”
And similar to City Bureau, The TRiiBE works with other local organizations for publishing opportunities. In February, they published a piece in The Reader on local rapper and Chicago native Vic Mensa.
"We’re really focused on how to support and create equitable reporting in the city."
Other Chicago media startups include The Athletic, which offers 24/7 sports coverage, and Fooditor, which focuses on the city’s growing food scene.
Additionally, there's Dose (formerly known as Spartz), an online content platform that creates and distributes custom content, and BuiltIn Chicago, a tech and startup news and job organization, both of which have acquired venture capital investments, an uncommon funding model for new media companies in Chicago.
Crowdfunding was especially valuable to Block Club Chicago, founded by former DNAinfo Chicago Editors Shamus Toomey, Jen Sabella and Stephanie Lulay, to fill the neighborhood news coverage gap left by the demise of DNA.
After initially blowing past their Kickstarter campaign goal of $25,000 in 24 hours, they raised more than $183,000 by the end of the campaign, becoming the most funded local journalism Kickstarter in U.S. history.
Thanks to YOU, Chicago, @BlockClubCHI is the most funded local journalism @kickstarter in U.S. HISTORY!!! ($175K) Yes, I am crying. ?
When critics say "People won't pay for the news," show them this. pic.twitter.com/3r5zaPJdVT
— Stephanie Lulay (@slulay2) March 7, 2018“We saw such a burst of enthusiasm right out of the gate and we just want to keep that going,” Toomey said. “Our plan is to keep the topics, tone and coverage as similar as possible to DNAinfo. We’ve heard from our readers in the months since we’ve closed that we really connected with them.”
The crowdfunding campaign will help Block Club get off the ground and prepare for their launch in April, but they’ll also be charging $5 monthly subscriptions instead of running ads. According to Toomey, there won’t be a single ad on the site and they already have more than 2,000 subscribers.
But Block Club is also betting on a third component to the organization’s revenue model—blockchain technology.
How Can Tech Help Pay for Journalism?
Civil, a New York-based startup, founded in 2017, has created a journalism publishing platform built on blockchain technology.
The platform, which goes live this spring, will allow readers to pay for content using cash, but also with Ethereum and CVL, a utility token with monetary value that Civil is developing. CVL will serve as the software that connects Civil's platform to the Ethereum blockchain, said Matt Coolidge, co-founder and communications lead at Civil.
“Blockchain has emerged as a really compelling, enabling solution to introduce a new funding model that we think can really drive a new shift,” Coolidge said. “We’re incredibly passionate about trying to introduce a new model that really focuses on support between journalists and readers that takes advertisers and other third parties out of the equation. We think this can work if we build up a marketplace of like-minded newsrooms and we just essentially stay out of their way.”
The other benefit of Civil: It permanently archives all content on the blockchain, meaning it cannot be deleted by any one entity, a concern had by DNA reporters when the site was first shut down and one of the reasons Block Club decided to partner with them.
“We share a similar vision about news,” Toomey said. “It was a great pairing because they needed people like us, and frankly, we needed someone like them that could help us with the technology side. They’re building the platform. They’re building out our site. And they’re providing us with top notch business modeling.”
Civil was founded by former journalists from outlets like DNAinfo New York, Google News and ABC. It raised $5 million from blockchain venture studio ConsenSys in October, and about $1 million has been divided into grants for the first set of newsrooms they are working with. Besides Block Club, Civil is collaborating with seven other newsrooms, including Popula, an alternative news and politics outlet, and Sludge, an investigative outlet that aims to reveal how “special interests have captured America’s political system.”
Can News Media Ever Be Profitable?
When it comes to startups, venture capital funding usually has a place in the discussion. For many companies, funding is necessary to grow and to fully realize their potential. For some perspective, more than $1.8 billion was raised among Illinois tech companies in 2017. But when it comes to media companies, there is much less money funneling through.
Many of the companies in this story said they weren’t searching for VC funding for a variety of reasons. It could be a waste of time. Who is going to invest in media if no one thinks it’s profitable?
One billionaire who thinks his time and money could be worth a media venture, though, is Elon Musk, the founder of SpaceX and Tesla. News broke just this week that he has recruited two senior staffers from the Chicago-based satirical publication The Onion to launch a secretive new comedy media startup.
“At a large enough scale, there have been venture capitalists that have invested in content publishing ventures,” Gordon said. “But if you read some of the stuff that’s been written recently about BuzzFeed, what you’re seeing is that investors are disappointed. Media, in general, is never going to be as good a venture capital investment as tech.”
Founded in 2006, BuzzFeed has been largely supported by VC investments, similar to some other media companies like Vice Media, Contently, NowThis News and Upworthy. BuzzFeed has gone through seven funding rounds and has raised more than $495 million from investors like NBC Universal, Andreessen Horowitz and RRE Ventures, according to Crunchbase.
They draw in revenue through digital ads, and keep readers coming back to their content by offering fun quizzes and other pop culture news. But BuzzFeed has had problems remaining profitable as of late. Declining revenue caused the media company to lay off about 100 employees in November as it reorganized its advertising sales and business operations in an effort to move away from native advertising models.
The changing industry has forced them to explore additional revenue streams, like digital video licensing, e-commerce and more. But the one thing that BuzzFeed hasn’t explored yet is a paywall, which according to Gordon, is an approach that more and more media companies are adopting.
“Looking across the whole nation, there seems to be a new consensus developing that there’s more promise in paid subscription-based sites than advertising,” he said. “That could just be a moment in time, but that certainly seems to be the current conventional wisdom.”
People were able to get their neighborhood news from DNAinfo Chicago for free, part of why it shut down and left so many journalists out of work. So what makes Block Club's founders think people will pay for it now?
“We think the pendulum has swung to some degree about people taking on subscriptions for different services that they find value in,” Toomey said. “We offer something that is exclusive. It’s not like people can just find this stuff anywhere.”
