Local news business models: What we learned in 2019

By Michael Shapiro

One of the big news stories of 2019 has been news itself, specifically local news. Consolidation, budget cuts, takeovers, mergers, and the resulting shrinking headcounts in newsrooms defined the year for many legacy print outlets. Indeed, some digital-first outlets struggled too. Despite the churn, there were also bright spots. 2019 provided no shortage of opportunities to take a hard look at what is working, what isn’t and what might define the future of local news. Here are some observations and predictions about local news business models heading into 2020 and what we’ve learned in continuing to grow TAPinto this year.

Consolidation Among Legacy Outlets

2019 played host to more consolidation among local and regional news giants. Perhaps the biggest story this year followed the fate of Gannett. The Gannett saga was illustrative of one of the fundamental ongoing conflicts in the business of big local news — meeting shareholder expectations while still providing a product that both informs and keeps readers engaged. While both of these objectives are not entirely mutually exclusive, 2019 showed that they are now more in conflict than ever before.

Indeed, there were two distinct, but related strains of this conflict in the Gannett story. Earlier in 2019, the media giant faced a hostile takeover from a hedge fund, Digital First Media, which it successfully fended off. Digital First represents the first strain — buy it up, strip it down and squeeze as much profit out of legacy outlets as possible. Reporting the news ends up being secondary.

The second strain came later in the year when Gannett merged with GateHouse Media, becoming the largest newspaper publisher in the country. The idea is to cut costs and reduce inefficiencies, deliver bigger profit margins for investors, and, yes, preserve news coverage. It remains to be seen whether the latter pans out. What also remains an open question is whether the merger (or any merger of this sort) will restore coverage that had been previously lost.

All of this has led to a conundrum for legacy publishers that need to keep readers engaged while also cutting costs. The effect has been a product that misses the mark at times on providing high-quality local news.

Bright Spots

Despite all of the talk of doom and gloom, there were several bright spots to point to in 2019, particularly among more nimble digital outlets. To be sure, there were struggles, but the trajectory is more promising.

In 2019, efforts by big tech to support local journalism began to develop, realizing that their platforms had pulled advertising dollars away from news outlets. This is only a part of the story, however. Digital outlets have had to figure out how to make their way in an increasingly fragmented media landscapeMany outlets have transitioned to a nonprofit structure to bring in new revenue streams and take the pressure off of profits. Other outlets have had success in raising capital and revenue in the form of memberships, subscriptions, or ownership.

Figuring out what business models are working has taken place against the backdrop of a reckoning of identity about what qualifies as a proper vehicle for reporting news. 2019 showed that we are on our way to permitting ourselves to think outside of the box as long as the product we are delivering is objective news. All of these developments are a net positive not only for the media industry but also for our civic lives.

Business Model Takeaways from Our Experience

As we’ve built TAPinto from one site to over 81 independently-owned local news sites covering 100 towns and cities, we’ve learned several lessons that I believe fit within the broader context of what is working in local news.

The first big lesson is news is the product. There is a demand for local news — emphasis on local. As I’ve noted, one of the problems legacy local news outlets face is that their coverage has become less local and less focused. This has the effect of reducing readership and revenues. Local news outlets need to build relationships and trust in the communities they serve. This is something we invested in when we decided to build our model around local, franchised ownership of each of our sites.

The second lesson is that scale matters but in very specific ways. As noted above, when news organizations have to subsidize non-journalism parts of their operations like office space, back-office expenses, and administrative costs, and in some cases larger than necessary profit margins, they are forced to cut back on reporting. The more money put behind actual journalism, the better the experience is for the reader, which contributes to sustainability.

We’re doing this by lowering the cost for our local franchisee-publishers by providing them with all of the technology they need while keeping costs down for individual sites. Additionally, because we have a network of 81 sites, we’ve been able to accumulate a vast knowledge base, from generating revenue to best journalism practices.

Another aspect of our model is the critical mass we’re achieving in some areas to provide more in-depth coverage through collaboration across clusters of sites in specific geographic regions. The extra investment required in providing this additional reporting is minimal while providing a significant upside.

In short, because our local sites are truly hyperlocal, the revenue requirements are much lower while providing our franchisee-publishers with the resources of a much larger organization.

As I look to 2020, I am optimistic that we’ll continue to see innovation in developing new business models and tweaking ones that work in the service of bringing local news back to our communities. It won’t always be neat and tidy, but expanding local news coverage is a fight worth fighting.

Michael Shapiro is CEO and publisher of TAPinto.net, a network of more than 80 independently owned and operated local news websites in New Jersey, New York, Pennsylvania and Florida. This post originally appeared on Medium at https://link.medium.com/qm7Cg0XBF2, and is re-posted here with the permission of the author. 


Categories: Jandoli Institute, Media

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