The Local News Business Model

It’s hardly controversial to note that the traditional business model for most publishers, particularly newspapers, is obsolete. Absent the geographic monopolies formerly imposed by owning distribution, newspapers have nothing to offer advertisers: the sort of advertising that was formerly done in newspapers, both classified and display, is better done online. And, contra this rather fanciful suggestion by New York Times media columnist Jim Rutenberg that advertisers prop up newspapers for the good of democracy, nothing is going to change that.

I already explained the problems with Rutenberg’s idea in yesterday’s Daily Update: advertisers are (rightly) motivated by what is best for their business, plus there is a collective action problem. I added, though, mostly in passing, that the future of “local news” would almost certainly be subscription, not advertising-based.

I think it’s worth expounding on that point. What most, including Rutenberg, fail to understand about newspapers is that it is not simply the business model that is obsolete: rather, everything is obsolete. Most local newspapers are simply not worth saving, not because local news isn’t valuable, but rather because everything else in your typical local newspaper is worthless (from a business perspective). That is why I was careful in my wording: subscriptions will not save newspapers, but they just might save local news, and the sooner that distinction is made the better.

The Unnecessary Newspaper

To be clear, I agree with Rutenberg when he states that “A vibrant free press…keeps government honest and voters informed.” Local government needs oversight, which is another way of saying local news is necessary for a well-functioning democracy. The problem is that assuming oversight must be provided by a newspaper is akin to suggesting that a tank be used to kill a fly: sure, it may get the job done, but there is a lot of equipment, ordnance, and personnel that is really not necessary when a flyswatter would not only be sufficient, but actually more effective.

For newspapers, the analogies to equipment, ordnance, and personnel are physical infrastructure, business operations, and editorial staff; just about none of them (yes, including most of the editorial staff) are actually necessary for covering local news.

Infrastructure

Printing presses are obviously obsolete: while some newspapers have finally closed them down, others hold on because there is still a modicum of print advertising to be earned. It’s the most prominent example of how newspapers are fundamentally incapable of evolving. Naturally, this extends to distribution centers, delivery trucks, newsstands, and all of the administrative infrastructure that goes into moving around pieces of paper that have zero connection to the actual distribution of local news.

The infrastructure overhead, though, does not stop there: without a print edition there is no need for layout, for high-end photography, or a centralized office space to assemble everything on deadline. There is also a drastically reduced need for editors: when text was printed copy was permanent, raising the cost of a mistake high enough to justify editing workforces nearly as numerous as journalistic ones. Digital stories, though, can be updated after-the-fact. Moreover, digital stories are interactive: readers can submit feedback instantly, and as I noted while writing about Wikitribune, the collective knowledge of readers will always be greater than the most seasoned set of editors.

Moreover, given that local news requires little more than text and images and perhaps some video, there is no need for expensive digital infrastructure either; a basic WordPress site is more than sufficient. In short, the entire infrastructure category, which makes up probably 60%~70% of a newspaper’s cost structure (possibly more if you include the editors), has nothing to do with sustainable local news.

Business Operations

Monetizing via print advertisements requires a lot of staff: salespeople to sell the ad, graphic artists to lay it out, account managers to collect the money, plus all the management required to make it work. For large national newspapers like The New York Times, this may all still be necessary, thanks to the ability to sell premium advertising online. However, all of this can be eliminated for most digital-only operations: simply use an ad network. Of course, those come with their own problems: ad networks make web pages suck, and just as importantly, most consumption is shifting to mobile where ad network monetization is particularly ineffective; to the extent advertising is part of the business model relying on Facebook is (still) probably the best option. Or better yet, don’t have any ads at all.

A purely subscription-based business model not only drastically cuts costs, it also makes for a better user experience, a particularly attractive point given that users are the paying customers. Even better, thanks to services like Stripe, digital subscriptions not only cost far less to administer than traditional newspaper subscriptions, but are far more user-friendly as well.

The reality is that for local news this entire category probably only needs to be one person: handle customer service for self-service subscriptions, do the books, and that’s about it. The 15~20% of revenue newspapers are paying for business operations has nothing to do with local news.

Editorial

This is the biggest blindspot for those lamenting the travails of local newspapers: it may be obvious that printing presses don’t make much sense with the Internet, and most websites have moved to ad networks for the obvious reasons; in fact, though, nearly all of the content in most newspapers is not just unnecessary but in fact actively harmful to building a sustainable future for local news.

Start with the front page (of a physical newspaper, natch): most newspapers have given up on having international, national, or even regional reporters, instead relying on wire services. Even that, though, is a waste: those wire services have their own websites, and international publications are only a click away. Maintaining the veneer of comprehensive coverage is simply clutter, and a cost to boot.

The same thing applies to the opinion section: any column or editorial that is concerned with non-local affairs is competing with the entire Internet (including social media). It’s the same thing with non-local business coverage. Moreover, the cost is more than clutter and dollars: almost by definition the content is inferior to what is available elsewhere, which reduces the willingness to pay.

It’s the same story in what were traditionally the most valuable parts of newspapers:1 sports and the (variously named) lifestyle sections. There are multiple national entities dedicated to covering sports all the way down to the university level, augmented by a still-thriving sports blogosphere. Granted, there may still be a market for local sports coverage, but that is a different market than local news: there is no reason it has to be bundled together.

As for the lifestyle section, it is everywhere. BuzzFeed has set its sight on cooking, crafts, and the horoscope;2 there are all kinds of sites covering gossip and advice; meanwhile, not only are there web comics, but social media provides far more humor than the funny pages ever did. What’s left, bridge? Why not simply play online?

A lot of this content has long since been standardized across newspapers, but the broader point remains the same: absolutely none of it has anything to do with local news, and it should not exist in the local news publication of the future.

Bundles and Business Models

What is critical to understand is that everything in the preceding section is interconnected: by owning printing presses and delivery trucks (and thanks to the low marginal cost of printing extra pages), newspapers were the primary outlet for advertising that didn’t work (or couldn’t afford) TV or radio — and there was a lot of it. Maximizing advertising, though, meant maximizing the potential audience, which meant offering all kinds of different types of content in volume: thus the mashup of wildly disparate content listed above, all focused on quantity over quality. And then, having achieved the most readership and the ability to expand to fit it all, the biggest newspaper could squeeze out its competitors.

In short, the business model drove the content, just as it drove every other piece of the business. It follows, though, that if the content bundle no longer makes sense — which it doesn’t in the slightest — that the business model probably doesn’t make sense either. This is the problem with newspapers: every aspect of their operations, from costs to content, is optimized for a business model that is obsolete. To put it another way, an obsolete business model means an obsolete business. There is nothing to be saved.

The Subscription Business Model

I’ve already hinted at the general outline of a sustainable local news publication, but the critical point is the one I just made: everything must start with the business model, of which there is only one choice — subscriptions.

It is very important to clearly define what a subscriptions means. First, it’s not a donation: it is asking a customer to pay money for a product. What, then, is the product? It is not, in fact, any one article (a point that is missed by the misguided focus on micro-transactions). Rather, a subscriber is paying for the regular delivery of well-defined value.

Each of those words is meaningful:

  • Paying: A subscription is an ongoing commitment to the production of content, not a one-off payment for one piece of content that catches the eye.
  • Regular Delivery: A subscriber does not need to depend on the random discovery of content; said content can be delivered to to the subscriber directly, whether that be email, a bookmark, or an app.
  • Well-defined Value: A subscriber needs to know what they are paying for, and it needs to be worth it.

This last point is at the crux of why many ad-based newspapers will find it all but impossible to switch to a real subscription business model. When asking people to pay, quality matters far more than quantity, and the ratio matters: a publication with 1 valuable article a day about a well-defined topic will more easily earn subscriptions than one with 3 valuable articles and 20 worthless ones covering a variety of subjects. Yet all too many local newspapers, built for an ad-based business model that calls for daily content to wrap around ads, spend their limited resources churning out daily filler even though those ads no longer exist.

A sustainable local news publication will be fundamentally different: a minimal rundown of the news of the day, with a small number of in-depth articles a week featuring real in-depth reporting, with the occasional feature or investigative report. After all, it’s not like it is hard to find content to read on the Internet: what people will pay for is quality content about things they care about (and the fact that people care about their cities will be these publications’ greatest advantage).

It’s also worth noting what a subscription business model does not — must not — include:

  • Content that is widely available elsewhere. That means no national or international news (except what has a local impact, and even that is questionable), no non-local business content, no lifestyle section.
  • Non-journalistic costs centers. As I noted above, a publication might need one business operations person, and maybe a copy editor; they can probably be the same person. Nearly everything else, including subscription management, hosting, payments, etc. can leverage widely available online services (and you can include social networks: treating all content the same hurts big media companies, but it’s a big opportunity for small ones).
  • Any sort of wall between business and editorial. This is perhaps the easiest change to make, and the hardest for newspaper advocates to accept. A subscription business is just that: a business that must, through its content, earn ongoing revenue from customers. That means understanding what those customers want, and what they don’t. It means focusing on the user experience, and the content mix. And it means selling by every member of the organization.

Notice how different this looks from a newspaper, as it must. After all, the business model is different.


I strongly believe the market for this sort of publication is there. My hometown city of Madison, WI has around 250,000 people (500,000 in Dane County), primarily served by The Wisconsin State Journal. To the paper’s credit the website is almost all local news; unfortunately, most of it is uninteresting filler. Worse, to produce this filler took a staff of 52 people, of which only 10 by my count are local reporters (supported by at least 8 editors).

Were a new publication to come along, offering a five minute summary of Madison’s local news of the day, plus an actually relevant story or two a week with the occasional feature or investigative report,3 I’d gladly pay, and I don’t even live there anymore. What I won’t do, though, is bother visiting the Wisconsin State Journal because there simply is too much dreck to wade through, created at ridiculous cost in service of an obsolete business model.4

Indeed, the real problem with local newspapers is more obvious than folks like Rutenberg wish to admit: no one — advertisers nor subscribers — wants to pay for them because they’re not worth paying for. If newspapers were actually holding local government accountable I don’t think they would have any problem earning money; that they aren’t is a function of wasting time and money on the past instead of the future.

  1. Other than the classifieds, that is []
  2. “Choose these foods and we will tell you your ideal mate!” []
  3. With typos []
  4. This is where news foundations and benefactors can actually make a difference: stop supporting local newspapers and instead fund new startups until they build a critical mass of subscribers []