The Texas Tribune, Example or Exception?: A Candid Talk with Evan Smith About Earned Income

Events, sponsorship-- and why one size doesn't fit all

Welcome to Second Rough Draft, a newsletter about journalism in our time, how it (often its business) is evolving, and the challenges it faces.

Evan Smith, founding CEO of the Texas Tribune from 2009-22, is a nonprofit pioneer, a brilliant editor and publisher and a friend and fellow Yankees fan. These days, he is a senior adviser at Laurene Powell Jobs’s Emerson Collective and a professor of practice at the LBJ School of Public Affairs at the University of Texas, Austin. Last week we talked about one of our favorite subjects. This conversation has been edited for length and clarity.

RT: We agree on a lot of things about nonprofit journalism and the financing of journalism generally. But I think one of the things that we don't entirely agree on, or at least have different perspectives on, is earned income. And that's what I wanted to talk to you about. I want to start by asking you to give a short version of the pitch you make to people about the accessibility or achievability of earned income.

ES: Well, let me back up and say that I think one of the things that we have to sort through here is the definition of earned income. There is no definition in the Gospel that we can all look to for guidance on earned income.

I don't think foundation grants are earned income. I don't think rich people supporting journalism is earned income. But I absolutely believe corporate support is, even though people are receiving a tax letter, as sponsors as opposed to advertisers. And I believe that revenue generated as a consequence of events is earned income.

I don't think membership is earned income, although I know that there are some people who see it more in the way that I, as a magazine guy once upon a time, and you, as a newspaper guy once upon a time, might have seen circulation as a form of earned income. You're getting something for giving something.

RT: I think your definitions make great sense. Let's go forward, assuming that corporate sponsorship and advertising, and events, are all earned income, and they're the principal sources of it. What’s the pitch to publishers?

ES: I remind people of the liturgy in this space, which is that if you've seen one nonprofit news organization, you've seen one nonprofit news organization. There is absolutely no way to put a one size fits all strategy in front of the sector.

What works in Texas works in Texas. There would be no value and no probability of success in exporting the model to other places — in scraping Texas off the nameplate and replacing it with Montana or Vermont or California or South Carolina — because what works in those places works in those places. The people from those places who see a problem that they want to solve are absolutely welcome to come to Texas. Spend time with me, spend time with our department heads, get to understand why we do what we do, how we do it, kick the tires.

Evan Smith

But then they're going to go back home and take the aspects of the model that will work for them and apply those. Maybe they'll be successful, maybe they won't. This is not something that — as “nonprofit journalism economics in a box”— can be purchased off the shelf and put in your checked baggage and taken home with you. You’ve got to figure it out on your own locally.

Where the revenue comes from

Let's now talk about sponsorship. Whether it's site sponsorship or sponsorship of events, there are businesses in your community that have one of several motivations to spend money with you. The most obvious of these is that there are businesses that have charitable dollars in their budget every year that support community organizations, public interest organizations, public goods.

I quickly came to understand that there was a second potential source of revenue from these companies, and that was the straightaway marketing and advertising budget. We built an audience at the Tribune that was well educated, that had a very high median household income, and a median home value that was very high. They indexed off the charts in the propensity to travel and to buy books and to eat out. This was an attractive audience in many ways. Demographically, it was an audience as attractive as what the New York Times or Vanity Fair or Texas Monthly was putting in front of these folks.

RT: Let me just stop you there for a second. That's great for the Texas Tribune, but the flip side of it is that if your audience, either intentionally or just as things develop, is actually people who have less money and less influence and are less well fixed, then that whole motivation goes away. Right?

ES: Well, in theory, of course it goes away. But we're still in a relatively early stage of the emergence of the nonprofit sector. Many of the organizations I'm working with, through my relationship with Emerson Collective and outside of Emerson, are still in their infancy, relatively speaking, and as a consequence of that they may not have the sophistication yet to even know who their audience is demographically.

RT: But even if you know what your audience is, if your audience is poor, or historically marginalized people, there may be a few brands that want to reach those people, but there are fewer, and they have less to spend, and they're more interested in spending it in mass media, and there are fewer opportunities, right?

ES: I can't argue with that, except my instinct is that there are in fact brands that see the value in a diverse society of being in front of diverse communities. I don't know that the dollars are at the same amount. But I'm not willing even remotely to foreclose on the possibility that the strategy for reaching those dollars exists.

You know, 60% of the population of Texas right now is people of color. Many of the people in the Tribune’s audience are from underserved communities.

When Walmart has spent significant money with the Texas Tribune as a supporter of our Festival, it was not surely to be in front of rich people, or to be in front of rich people alone.

RT: Do you think it was to reach people of average means, average Walmart customers as the largest retailer in the country, or do you think it was to reach the people of above average influence who come to the Festival?

ES: My answer to that question is yes. I think it's both. Look, there's a third door that I didn't mention, and it was as significant as the first two. It’s legislative messaging. Your audience is the people who set policy, pass laws, make significant decisions that ultimately affect the way business is done in Texas.

In the same way that I saw Archer Daniels Midland and GE advertising every week on Meet the Press as I was growing up — not because it was the largest audience, but because they knew who was on and who watched that show every week. It was a rifle shot and not machine gun spray in terms of wanting to get in front of people.

RT: That was my point, but I think you will agree: ADM was not advertising on Meet the Press to reach farmers.

ES: No, absolutely not.

RT: The next broad subject I think is events. My perspective on this is that the Texas Tribune has been uniquely successful. The other successes that I know of in the event space are The Atlantic, The New Yorker, Semafor, maybe some other newer players, but no nonprofits at meaningful economic scale. I don't know of any. Am I wrong?

ES: I'm not aware of any, but I don't foreclose the possibility that there's something neither of us old guys are thinking of at the moment.

This is the thing I'm proudest of being involved with, as an innovation in this space. We did something that people actively told us was a mistake, that was not worth doing, was not going to work.

photo: Jane Burcham/Austin Chronicle

I think risk aversion is the thing that's killing our business right now, as much as or more than anything. Because the cost of failure is so high. If you try something that is not almost certain to succeed, you're supposedly making a mistake. I believed coming in the door, before day one, that an editorial events strategy was the right thing for the Tribune, that it would generate revenue, it would build audience, and it was journalism.

RT: I would never dispute that. But what I want to focus on here is not events for the sake of journalism, which I think have great value, maybe in a lot of places, but events to generate net revenue. If neither of us can think of anybody else who is producing material net revenue from events, then doesn't it maybe follow, insofar as the Texas Tribune has produced net revenue from events, that it's sui generis?

ES: I'm not prepared to accept that as an answer. It may ultimately be an answer one day, but I'm a mile from accepting even the possibility of that. First of all, it's only the second inning of the game; there’s a lot of game left to play here on events. There are organizations that are just now getting out of the gate attempting to do this.

Questions of scale— and net vs. gross

There are also organizations for whom the definition of meaningful revenue is different than the definition of meaningful revenue at the Texas Tribune. We had an annual budget of about $13 million the last couple of years. For an organization that has a budget of $2 million, you do a couple of events over the course of the year and you bring in $40,000 or $50,000 in sponsorship, that is meaningful.

RT: The relevant revenue figure is net revenue, right? Because events cost money. So if you bring in $40,000 or $50,000 and you spend $30,000 or $40,000 to produce it, both in sales costs and in mounting the event, then you have $10,000 to $20,000. Even on a $2 million budget, that is not a huge swing.

ES: Except for the Texas Tribune Festival, which has a ticket price by necessity because the cost of putting on that event was so high that it became necessary for us to ask people to pay a little bit to attend, every other event that the Texas Tribune has ever done, has been free to attend, supported only by sponsorship, and we have been as cheap as you could possibly be.

We view trading for things as entirely legitimate as a way to produce an event. So if we go to a college campus, we might actually trade for advertising on site or sponsorship on site in exchange for little or no venue cost. For many years we had a series of events in our own event space at our office, where you had 100 to 150 people come in the morning for a conversation with a member of Congress or a state representative or a statewide elected official, and we would have a breakfast taco sponsor, Taco Deli. And so we would trade for breakfast tacos, and the breakfast taco sponsor would get acknowledgment on our site, acknowledgement at the event. Coffee, same thing.

photo: Azul Sordo/Texas Tribune

I was the cheapest man in America over the years that I ran the Tribune. Because I really did believe that, as our friend Jim Brady said recently at the Knight Media Forum, there are two paths forward for sustainability in journalism. One is bringing in more revenue and the other is reducing your expenses. I actually think there's a strategy for putting on events at a relatively low cost. And I preach this all over the country.

RT: But why has no one else been able to produce meaningful net revenue?

ES: The first reason, as I said, is that it's early. The second reason is that there are some who have chosen not to go down this path – but more are, every time you turn around. CalMatters is about two months away from doing their first annual festival. I was able to broker a partnership last year to do a standalone festival put on by Mississippi Today and The Atlantic in Jackson. It was successful in all the ways you judge something to be successful.

Learning from doing

I am proselytizing and evangelizing around the country, to organizations big and small: You can do a version of this. It will be a learning experience. It will give you the muscle that you could potentially use in the next year, and the year after that, to figure out whether there is an opportunity here. In many cases, sponsors need to see the thing before they actually will sign on. Some of them are going to do it on faith, but some of them are going to need the proof of concept.

Mission Local is one of Emerson's grantees. It is a small organization, a staff of fewer than a dozen. I was just with the leadership of this organization last week in San Francisco. They cover the Mission District of San Francisco. This is literally the definition of hyperlocal. And I encouraged them to do community events at a small venue where they host a city council member or some community leader who is working actively on an issue.

Joe Eskenazi, who is the editorial lead of the organization, is a well-known commodity. He's been a very visible and respected journalist in the community for many years, and he is an interviewer with chops. Joe Eskenazi is leading conversations with these folks. They've put on a number of these events over the last year that have been successful.

They figured out on a hyperlocal scale that they can do a version of what the Tribune was able to succeed at on a grand scale. It's lead gen for audience. It's lead gen for sponsorship. It's lead gen for membership.

RT:  You said about Joe Eskenazi that he is a really well-known journalist in the community. And so were you in Texas even before the Tribune started. You were 18 years at the Texas Monthly, you had wide acquaintance in the legislature. You had a TV show that's been on for 20 years where you interview people.

ES: Yes, right. Exactly.

RT: The vast majority of news organizations do not employ anyone who has that kind of profile in their own community. A few do, but very few. Is that an essential component of success? Of events that are successful in terms of net revenue?

ES: Look, you have to have people who are comfortable on stage in front of an audience, asking hard questions of the powerful and influential. That is not a skill everybody has.

RT: Yes, but putting aside that skill — because a lot of people have that skill, not most, but a large number — is that really more important than having a known quantity in the chair?

ES: I think it is, because known quantities were not always known quantities. At some point you have to drive off the cliff like Thelma and Louise, not knowing whether there's something down below to catch you. You never know whether you could be Joe Eskenazi unless you try. And it takes time for Joe Eskenazi to become Joe Eskenazi. The body of work precedes the moment in which he arrives on stage to interview a public official.

And let me add this: April Hinkle [the Tribune’s chief revenue officer] and I worked together for 31 years minus 10 months. When I got to Texas Monthly, she was there already. She a was an advertising salesperson. She rose through the ranks on the business side of Texas Monthly to be retail ad manager and she was then responsible for statewide advertising sales, and she became associate publisher. And then when Mike Levy retired, and I became the president of the company, I made April only the second publisher in the history of the magazine.

April, as the saying goes, could sell water to a drowning man. I have never known anyone who was as good at selling — who understood how to sell statewide media and was totally comfortable with selling this kind of work. You say this worked because there's only one me? I would say this worked because there's only one her. People don't need to find their me. They need to find their her.

Should earned income be required?

RT: If you were an institutional funder or a professional funder, would you be inclined to require in some way that a nonprofit news organization have a certain amount of earned revenue, as we have defined it?

ES: It’s a trick question, whether you intended it to be or not, because no one in the position of funding journalism should require anything. The responsibility of funders is to provide support and let organizations figure out what the right model is for them.

RT: Fair enough. Would you privilege people who have achieved a certain level of earned income?

ES: Should funders be saying I will only support, or I would prefer to support, organizations that are attempting to diversify revenues? Here’s my response to that. We need innovation and risk-taking in our sector from a revenue standpoint. If we simply are going back to the well every time, to the same funders or the same kinds of funders, then there will not be a sustainable path forward for the news industry. We need to be looking for new sources of revenue that do not come close to compromising the independence of the journalism.

RT: But if you're doing that, if you're trying, if you're being creative and you're working at it, and on a net basis, you're not getting very far, as a funder, would that lead you to shy away?

ES: It would not, because I'd be encouraging them to keep trying. This is a marathon and not a sprint. You don't build earned income as a revenue stream overnight. You don't go from zero to 20% or 40% of your revenue overnight. Sometimes it takes a while to figure out what works.

RT: Any last thoughts?

ES: If you don't have dreams, you have nightmares. My view is in this business, we need more dreamers. We need more people who see the potential for this. If we say this is hard, we can't do it, the nonprofit news sector will never go anywhere. What's that Woody Allen line in Annie Hall, about how a relationship is like a shark? You know, if it doesn't keep moving forward, it dies. “What we have on our hands is a dead shark.” I don't want dead sharks in the news business. I want sharks that are continuing to move forward. And so, in my own small way, I'm going to try to help with this.

RT: Thanks so much for doing that— and this.