How The Discourse scaled its business model to 34 local news sites
The media startup developed a membership model that involves asking the audience what news should be covered.
|Simon Owens||May 24|
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When Jacqueline Ronson started her job at Canadian media startup The Discourse in 2018, she went in with all sorts of assumptions about what she’d cover. She was hired for an initial six-month pilot program that required her to report on the Cowichan Valley, a region in British Columbia with about 83,000 residents, and though she wasn’t new to journalism — she had a graduate degree and had worked at several different news jobs — she’d only moved there a few years prior and still considered herself new to the area. “I had these ideas that I was going to write about environmental issues and talk about drought and salmon and water and all these things,” she told me. “And I got to The Discourse and they were like, ‘well, how do you know this is what your community wants you to report on?’”
Ronson’s colleagues had a different idea. “They suggested I just do some engagement work and talk to different people in the community about what stories need to be told, which is what I did.” Through her discussions with local residents, one topic kept resurfacing over and over again: a motorsport race track that had been built without any consultation with the surrounding neighborhoods. “The neighbors nearby suddenly woke up to this quite noisy development that was interfering with their lifestyle,” she said.
The residents Ronson spoke to also made another shocking accusation: the local print newspaper, which was owned by a large chain called Black Press, was intentionally ignoring the controversy in order to appease its car dealership advertisers.
So Ronson got to work by interviewing dozens of sources and combing through reams of public records and documents. A few months later, in July 2018, she published her first blockbuster report: “Trust in local news shaken over racetrack controversy in B.C.’s Cowichan Valley.”
Not only did it contain some of the most comprehensive reporting on the issue to date, but it also provided fairly compelling evidence that Black Press had barred its editorial team from covering the race track. Ronson established a pretty strong correlation between car dealership ads being pulled from the newspaper and a sudden pause in coverage. Black Press executives denied the accusations, but many within the community considered it a smoking gun.
Ironically, the story also encapsulated why The Discourse has seen so much success in scaling its local news model — a model that depends largely on paid memberships from the communities being covered — in areas where legacy newspapers have either shrunk or closed down entirely. Since Ronson’s initial investigation, the company has expanded its presence to six Canadian regions. It also launched a subsidiary that licenses its software to other local news startups. All together, the company powers 34 publications that serve 12 million people.
I wanted to get a better sense of how the company developed this model, so I spoke to its founder and two of its editors.
A rocky start
The Discourse didn’t start out with a focus on local news. In fact, it didn’t even publish its own content.
It was founded in 2014 by Erin Millar, a journalist who had written for various outlets since 2003. While working at the Globe and Mail, she grew frustrated by the economics of the digital media business. “I felt like I was under this pressure to just crank out a ton of content that was of no value to my audience, all to grab whatever shrinking piece of the digital advertising pie we could get,” she told me. Not only was the work becoming less rewarding, but she and her colleagues lived in constant fear of layoffs.
The initial version of Discourse Media started as a loose collection of journalists who would partner with larger media companies on ambitious reporting projects. Because this type of reporting was expensive, Discourse would start by seeking outside funders who would shoulder some of the costs. This sounded to me like the model for investigative nonprofits like the Marshall Project and ProPublica, but Millar told me that Canadian regulations make it difficult to operate a news org as a nonprofit. “A lot of organizations in Canada that act like nonprofits are, in fact, for-profits,” she said. This obviously complicated the fundraising process, since Discourse couldn’t apply for many major grants.
The publication process was fairly convoluted, and Millar freely acknowledges now that it was like herding cats. A journalist would need to come up with an idea, find funders for it, and then cobble together a mix of regional and national outlets to publish it. “The project management of these collaborations was, by far, the most time consuming part of it,” she said. “It got really complicated.” Despite these hurdles, Discourse was able to publish some high-impact journalism; one of its most ambitious projects was distributed across 18 publishers, including The New York Times and a mix of Canadian and African news outlets.
Eventually, Millar and her colleagues recognized that scraping together financing on a project-by-project basis did not make for a sustainable business, and that they needed to switch to a membership model that would provide more consistent revenue. That meant launching a more robust website where their work could be published. In 2017, Millar ended up raising over $1 million that would be used to build the platform and pay journalists. “About $350,000 came from small shareholders,” she said. “I have 320 shareholders in my company, and on average, they invested about $1,000 each.” The rest came from impact investment funds and family offices.
This new version of The Discourse launched in 2018, but it struggled to find its niche. Millar told me that they couldn’t quite settle on the website’s editorial focus and whether it would tackle local or national stories. For a while, it experimented with running verticals that were built around undercovered topics, but the work didn’t convert readers into members at a high enough rate.
Next they experimented with local news, launching short pilot programs in seven communities. By 2019, though, The Discourse was running short on cash, and Millar faced a tough decision; she could shut the company down completely, or she could embark on one final experiment. “Ultimately we saw the most promise with the Cowichan site, and at that point we were already running out of capital,” she said. “And so we pulled back on all of our other verticals and threw everything at this one geographic community.”
The pivot to local
Cowichan Valley, you’ll remember, is where Jacqueline Ronson published her big story about the controversial motorsport race track. By the summer of 2019, she was one of only a handful of employees left at The Discourse; the rest had been laid off. “We said that if we can’t get it to a cash flow positive position by the end of the year, we’ll call it quits,” said Millar.
The gambit paid off. Between June and December of 2019, The Discourse grew its membership revenue by 500%. Through trial and error, they had discovered strategies that were incredibly effective at converting readers into paying members. The relationship typically starts with an email signup, and through the publication’s newsletters it will poll readers on which investigative story topics to pursue. Then, once the community has chosen a topic, The Discourse hits them with messages that ask for money. “The publishers that are most successful with the membership models are the ones that talk about their business models,” said Millar. “You don’t want to bore people, but if you can educate them on how we do the work and why it’s valuable, then we can convert when we do that big fundraising drive twice a year.”
In the early days of The Discourse Cowichan, Ronson was pretty much responsible for all of the reporting, but now she has a staff reporter and a few freelancers to call on. These days, most of her work week is devoted to editing, membership development, and community engagement. Even with the extra editorial support, the site doesn’t publish at a particularly high volume. In the month of April, for instance, it only published nine articles, five of which consisted of its weekly newsletter.
By early 2020, Millar was finally confident that her team had landed on a model that actually works. So The Discourse began to expand into new communities, launching in four additional regions. It also spun off a sibling brand, called IndigiNews, that covers indigneous populations. The company now employs 20 journalists.
Expanding beyond The Discourse
In growing The Discourse, Millar and her colleagues had essentially built a collection of products and workflows that could be applied to virtually any local news operation. It slowly dawned on them that they could scale these products beyond their own newsrooms.
In the summer of 2020, Millar and her sister Caitlin Havlak launched Indiegraf, a subsidiary company with the tagline that it “makes launching digital news outlets easy.” “What we did was we took the technology, the marketing team, the membership team, and put them all into this separate company that could share resources among multiple publishers,” said Millar. “It's allowed us to pool the resources and use them to implement pretty sophisticated technologies and digital marketing.”
Millar compared Indiegraf to Substack; the only difference is that her team is much more hands-on in working with the content creator. Because of this, Indiegraf needs to be selective in choosing news outlets to partner with. “We’ve got a program where a laid-off journalist can be up and running within nine weeks,” she said. It monetizes through both a small upfront payment from the publisher and then an ongoing revenue share. Because of a seed funding round she raised from Google and Facebook, she’s been able to waive the upfront fee with the company’s initial publishing partners.
To get a sense of how these partnerships work, I spoke to Will Pearson, the co-founder of a publication called Peterborough Currents, which operates out of a small city in Ontario. Peterborough Currents initially began as an irregularly-produced documentary podcast. “About a year ago, we did a relaunch where we got more serious about growing its audience and trying to monetize it,” said Pearson.
That “relaunch” was in partnership with Indiegraf. In 2020, Peterborough Currents rolled out a newsletter, which quickly grew to about 1,700 signups. A few months later it raised about $20,000 from what it called Founding Members, and in October it debuted a full-scale website. “It really was at no risk to us because our participation was basically free for the first few months,” said Pearson.
By the time I spoke to Pearson in February, Peterborough Currents had established a pretty consistent publishing schedule. “We're really committed to the one newsletter every week,” he said. “I like that we have a weekly touch point with our audience.” It also publishes regular longform features; he pointed me to an 1,800 word article about homeless shelter bans that he was particularly proud of. “I did a freedom of information request to the city's homelessness database to figure out how many people are getting banned, and then I published the numbers,” he said. “I think that's a good example of the kind of coverage that you don’t see from other media outlets here.”
Currently, Pearson and his co-founder only have the funding to work for Peterborough Currents in a part time capacity. “I'm not entirely sure that we'll ever get to a point where we can both be full-time,” he said. But he hopes to grow it to a point where they can hire freelancers who can help diversify the issues and locations they cover.
The future of local news?
During our conversation in February, Millar repeatedly mentioned the abysmal state of legacy newspapers. “We lost 50 community newspapers in Canada in the first six weeks of Covid,” she said. She believes inefficiencies in legacy news production are a leading cause for newspaper closures and often cites figures provided by media analyst Ken Doctor to prove her point. “Here’s the bottom line,” she wrote in May 2020. “In the traditional model, taking Doctor’s numbers, every dollar spent on producing journalism costs an extra $5 to $8.33 in infrastructure costs to get it to readers. In our model, every dollar spent on journalism costs only 33 cents on other stuff.”
In other words, the local news outlets of the future will be lean, with most of their funding going toward actual journalism. They also won’t be weighed down by the bureaucratic inertia of large newspaper chains. “There's just a lot of movement in the space right now, and I hope that we look back 10 years from now and say, ‘Hey, remember that time when people thought that independent journalism was somehow inferior?’” In her vision, these indie outlets won’t rely on fickle advertising, but instead will be funded primarily through memberships. “Ultimately that means the accountability is to those communities, because these publications are community assets,” she said. “I think there's a lot of power in that from an incentive perspective.”
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