This year looks bleak for the news.
Facing a series of harsh economic realities — resulting from a mix of news fatigue, a volatile advertising market and a sharp drop in traffic from the tech giants — many outlets have been forced to fold or make significant cuts in recent months.
But there are some signs of hope. A small group of for-profit digital media companies that have sprung up during the pandemic have succeeded — at least for now — by taking the opposite approach of many predecessors like BuzzFeed and Vice, which fatally relied on huge amounts of investor money to prioritize growth.
The new crop of news upstarts — Puck, Punchbowl News, The Ankler and Semafor are among the most prominent — continued to spend low and hire carefully. All focus on newsletters that cover specific niches with broad appeal. They have attracted top journalists by placing them at the heart of the business, sometimes as part owners of the companies.
“There was probably a mismatch 10 or 15 years ago between the funding structures and the media companies,” said Jon Kelly, the co-founder and editor-in-chief of Puck, whose 14 reporters cover topics such as politics, finance and media. “And I think the whole industry has learned from that.”
These startups exemplify a shift in conventional wisdom about how to make money in digital publishing. A decade or so ago, many venture capitalists and top media executives believed that the then-burgeoning class of digital startups could eventually dominate the industry. The large influx of money from investors was directed towards chasing the largest possible audience.
But traffic from social media giants like Facebook and Twitter declined, and digital ad financials didn’t add up. Predictions of replacing traditional TV networks or sprawling print empires never materialized. The latest outlet to try this book, The Messenger, launched in January, less than nine months after its release.
The formula adopted by new startups is instead sustainable growth based on a combination of revenue streams, including advertising, paid subscriptions and sponsored events. Instead of trying to reach everyone online, they have kept narrower lanes of coverage and targeted high-income readers, following a path more akin to 10-year-old tech site The Information or political outlet Politico.
“What they all have in common is this strong need to serve a specific audience rather than serve everyone,” said Jacob Cohen Donnelly, founder of A Media Operator, a media business newsletter.
Some of the other new companies finding early traction include publications on the Substack newsletter platform, such as The Free Press and The Bulwark, which have attracted tens of thousands of paid subscribers. Several worker-owned releases, such as Defector and Hell Gate, show promise. And some older digital outlets, like Vox Media, have survived by expanding into businesses like podcasting and cutting costs.
Punchbowl News, started in 2021 by three former Politico reporters, aggressively covers Congress and has become “the newspaper of the Capitol city in many ways,” said Anna Palmer, founder and CEO. Now with 30 employees, Punchbowl publishes three newsletters a day and has added coverage of the financial services industry. It seeks to expand into other policy areas.
“What we’ve really focused on is not that it’s something that people might find interesting, but that they should actually be able to do their job,” he said.
Punchbowl offers its morning newsletter for free, while a subscription to its other newsletters is $350 a year. Access to Punchbowl’s policy reports starts at $1,200 per year. The model is similar to Politico Pro (which starts in the low five figures annually), Axios Pro ($599 a year), and The Information Pro ($999 a year), the premium offerings from those sites.
Ms Palmer said Punchbowl had been profitable since its first year and would bring in $20 million in revenue by 2023, although she declined to discuss subscription figures. A person with knowledge of Punchbowl’s finances said that in the first two months of this year, the company had already booked 90 percent of its annual newsletter sponsorship target.
Ankler, a paid newsletter focused on Hollywood, is anchored by Richard Rushfield, an entertainment journalist who has emerged as Hollywood’s relentless fly-by-night, chronicling the industry’s endless chaos and skewering the actors, agents and executives who are responsible for its creation.
Ankler Media has raised $1.3 million at a $20 million valuation and has been profitable for more than a year, said Janice Min, the company’s chief executive and founder, who previously ran The Hollywood Reporter and Us Weekly. Ankler now has seven employees and publishes several newsletters, including Wake Up, a Hollywood news digest.
“If we want to make a Hollywood analogy, it’s like these growing franchises are multiverse,” Ms. Min said. “People like what we do and see our newsletters as an extension of the voice that may have attracted them to begin with.”
Semafor is the largest of the group, with around 75 employees and ambitions to provide global news. But the company is charting a cautious course, said Justin Smith, one of its founders and CEO.
Semafor launched in late 2022 with 30 to 40 percent fewer employees than its original business plan called for, Mr. Smith said. The company decided to start smaller as interest rates were rising and the economic outlook was bleak.
“The pandemic has really marked the transition from the social media age to what we call the post-social media age,” Mr Smith said, noting that outlets now need to focus on direct relationships with their audiences.
For Semafor, that meant committing to newsletters focused on a handful of topics, as well as the geographies of the United States and sub-Saharan Africa. Semafor now has more than 650,000 unpaid newsletter subscriptions, according to a spokeswoman. The outlet is hiring a Middle East editor and plans to add a newsletter focused on the region.
The company generates revenue from advertising and events and has a sponsorship deal with Microsoft for a global election watcher and an AI-powered news feed. Mr. Smith declined to share specific financials for the company, but said it had some profitable months in the last six months of 2023.
Of course, nothing in media lasts forever — especially in the fast-changing digital world. Therefore, there is no guarantee that the early success of these companies will translate into sustained growth.
Many of these startups are also taking a somewhat risky bet on talent.
At Puck, the start-up that covers topics like entertainment and finance, early hires like Matt Belloni, who is a definitive chronicler of modern Hollywood, and Julia Ioffe, who has established herself as a must-read in Russian politics, they are “founding partners”. In addition to a salary, they receive bonuses based on how many people sign up for their email newsletters and how many of them stick around. New employees also get a small ownership stake in the company.
Puck, which has about 40 employees, now has about 40,000 paying subscribers. Shortly after the company launched, Mr. Belloni accounted for about 30 percent of paid subscribers, according to a person familiar with the figures.
If one or more of the star reporters leave the publication, would Puck’s subscribers follow?
Mr Kelly said he did not want to “even think about a world” where one of Puck’s reporters had left.
“We made a promise to everyone: You’re going to do the best work of your career here, and we’re going to find a way to make sure you’re appreciated for it,” Mr. Kelly said. “And I really think our model is actually becoming one of the moats of our business.”
