BUSINESS OF JOURNALISM GLOSSARY

BUSINESS & FINANCIAL TERMS

burn rate and runway: Burn rate refers to how fast a company spends its cash reserves. Typically, you’ll hear the burn rate expressed as dollars per month (e.g. $50,000 per month or higher). The term “runway” describes how long a company can operate before it runs out of cash at the current burn rate. Burn rate is primarily used when talking about companies that aren’t profitable. As you can imagine, if the burn rate is high, companies may seek to reduce it by cutting costs – and since salaries are among the highest fixed costs at any company, that may mean layoffs. (5, 6)

cash flow: The movement of money in and out of the business over a certain period of time. It can be positive (more coming in) or negative (more going out). Public companies are required to report their cash flows on their financial statements so investors and others know what they’re spending their money on. Another way to think of it: Businesses take in money from sales as revenue (inflow) and spend money on expenses (outflow). They may also get income from interest, investments, royalties and licensing agreements and sell products on credit rather than for immediate cash. Cash flow can also be different from net profit, which includes items like the cost of a computer, broken up over however long you expect to use it. (5, 6)

cost of goods sold (COGS): The direct costs of producing what a company sells. For a media company, those costs may include printing fees, online hosting costs and production costs, with production typically including salaries for content creators such as reporters, editors, photographers and videographers. Meanwhile, salaries for administrative or management staff are typically considered an operating expense. (5,6)

EBITDA: This is a measure of operating performance. It literally stands for “earnings before interest, taxes, depreciation and amortization.” That is a company’s earnings if you exclude those non-cash expenses (depreciation and amortization) and also don’t count financing costs like interest payments and taxes. For media companies, EBITDA, which provides a clear picture of the company’s profitability and how efficiently it makes money from its operations, is typically used to determine a company’s value, especially when it’s up for sale or acquisition. Banks/lenders also use EBITDA to assess a company’s ability to repay loans/its debt.  But don’t confuse EBITDA with cash flow. EBITDA alone can present a misleading picture if a company has high capital costs or needs to pay back a high debt. (5, 6)

forced arbitration: A forced arbitration clause in your employment agreement forces you into a secret chamber where a complaint against your employer will be heard, instead of allowing you to file a public lawsuit to bring the dispute before a jury of your peers, your Seventh Amendment right. Eighty-two percent of all American workers are bound by forced arbitration, with this clause typically buried in onboarding documents, workplace contracts or an employee handbook. But most workers have no idea what the clause means. Simply put: forced arbitration means that any workplace complaint you bring regarding discrimination, harassment, assault or any kind of bad behavior will be resolved in a private arbitration chamber, where your fate will likely be decided behind closed doors by a single arbiter, often chosen by your company. You will typically not have the right to appeal the arbiter’s decision, and you will not have the right to sue in open court, even if you have evidence of wrongdoing. The company has many arbitration claims per year, while this is your one shot at justice, so it is in the arbiter’s financial interest to rule on behalf of the company – as most arbiters do. Because the process is secret and no one will learn about the wrongdoing, the perpetrator of the bad behavior often remains on the job while you may lose yours for simply having the courage to come forward to say something isn’t right. In March 2022, former Fox News anchor/host Gretchen Carlson, through her non-profit Lift Our Voices, was instrumental in passing bipartisan federal legislature banning the use of forced arbitration for sexual assault and harassment complaints in the U.S. Called the "Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act," the law prevents employers from forcing employees to arbitrate claims of sexual assault or sexual harassment. (9)

for-profit vs nonprofit vs not-for-profit organizations: (6, 7)

• a for-profit organization is an organization that exists to earn a profit, which can be shared among owners, investors, shareholders and employees. For-profit media organizations include The Wall Street Journal, The New York Times, The Washington Post, CNN, Fox News and Reuters.

• a not-for-profit organization, according to the US Chamber of Commerce, serves members and includes organizations like hobby clubs, parent-teacher associations, homeowners associations, and social organizations like college sororities and fraternities.
• a nonprofit is a mission-driven organization, with a legally approved purpose or social cause beyond generating profits. Its income isn’t dispersed to any shareholders but is instead invested back into the organization. Since nonprofits generally are IRS tax-exempt organizations, they must serve the public good in some way. Note: ProPublica has created Nonprofit Explorer, a free tool that lets you browse through millions of returns that are filed by tax-exempt organizations each year. Examples of nonprofit media organizations include NPR, The Associated Press, The Texas Tribune and ProPublica.

gross profit/gross income vs. net profit/net income: Gross profit is revenue minus cost of goods sold (COGS, see definition above), which shows how much money was made before counting operating expenses. Net profit refers to revenue minus all expenses, including operating costs, interest and taxes. Gross profit shows how efficiently a company manages its production and labor costs. Net profit — or the bottom line — shows the overall profitability of the entire business after all costs are accounted for. Investopedia offers a more detailed explanation, including how gross profit and net income are calculated. (3,5,6)

monetize: A term, often considered jargon by journalists, that refers to turning content or a service into revenue. Examples you may hear: “Can we monetize our summer movie reviews?” or “Can we monetize our coverage of that event?” (3,6)

net profit/net income: See gross profit.

non-disclosure agreement (NDA): (Also known as a non-disparagement agreement or confidentiality clause) This is a legally-binding agreement between two or more parties that prevents information from being shared with others. When you sign an NDA, you may think you are only agreeing to protect trade secrets at your company – like the secret formula to a company product — but over the last few decades, NDAs have become much more expansive. You may often also be signing away your right to say anything about workplace culture or your experiences while working there, according to Lift Our Voices. NDAs now may include taking away your right to speak about anything that happens to you related to your employment, including human rights violations. One-third of all American workers sign these clauses on their first day of work, but NDAs can present themselves at any time during your employment: when you interview for a job, on your first day of work, in exchange for a raise and/or in exchange for severance or a letter of recommendation. (9)

operating expenses (OPEX): Day-to-day costs including management and administrative salaries, rent, software and marketing. (5, 6)

operating income: Profit after subtracting operating expenses from gross profit. (5)

operating margin: Operating income divided by revenue, showing how efficiently a company runs. A typical operating margin for a media company is difficult to pinpoint due to industry variations, but some experts suggest that a healthy range is generally between 10% and 20%, with anything above 20% being excellent. Operating margin matters because there are several key factors that affect margins, so when a business wants to make more money or is losing money, it will consider these factors as it refines/resets its strategy. Here are the key factors affecting margins: (3,5)

• business model: Companies with high scalability and low variable costs (like certain digital software or information services) can achieve much higher margins than those with high content production or manufacturing costs.
• content costs: The cost of producing or acquiring premium content, especially for streaming platforms, is a major expense that significantly impacts operating margins. For most media companies, their highest content cost is the salaries paid to editorial staff.
• competition: The highly competitive media landscape can drive down margins as companies spend heavily on marketing and content to attract and retain audiences/subscribers.
• revenue diversification: Companies with diversified revenue streams, like those combining their content business with advertising, events, e-commerce and subscriptions, do so to improve their overall margin profiles.
• efficiency and scale: Larger, more established companies or those with efficient operations often maintain healthier margins by amortizing costs over a larger user or subscriber base.

revenue (also known as “sales”): The total money a company tallies from sales or services before expenses are deducted. The most common revenue sources in media include advertising and sponsorships, subscription and membership fees, event and conference fees, affiliate sales and e-commerce sales. (3, 6)

ROI (Return on Investment): Profit earned compared with the money spent. Key factors influencing ROI include the initial investment amount, ongoing maintenance costs and the cash flow generated by the investment. To calculate ROI, divide the return of an investment by the cost of the investment. The result is expressed as a percentage or a ratio. (5, 6) The term is also used as a shorthand for, “Was the effort to do something worth the resources and time we spent?”

valuation: The estimated worth of a company, often used for investment or acquisition purposes. For a media company, its valuation —or monetary worth — takes into account its financial performance (revenue, operating costs, audience metrics, intellectual property and assets). The concept of intrinsic value refers to the perceived value of a company based on future earnings or some other company attribute (like the value of its brand name).  Analysts do a valuation to determine whether a company or asset is overvalued or undervalued by the market. (5, 6)