What’s Happened to the Business of Local News?
Traditionally, all commercial news organizations have relied heavily on advertising to finance their operations. Although most local newspapers also sell subscriptions, most of their revenue still comes from print advertising, including classified ads, display ads, government public notices, and obituaries. Television stations also have historically subsidized local newsrooms through advertising, with windfalls coming during political campaign seasons.
Since the rise of technology companies such as Craigslist, eBay, Facebook, and Google in the early 2000s, print and eventually broadcast advertising has steadily migrated online. While most newspapers now offer both print and digital ads and subscriptions, most have not been able to transform their operations in ways that compete with Big Tech, both to replace the loss of advertising revenue and to engage customers online. As a result, most local Colorado newspapers have shed staff, and many have either been closed or gobbled up by national conglomerates seeking economies of scale and access to adequate technology and new product development.
The total amount of U.S. digital advertising is projected to reach more than $129 billion in 2019, the first year that analysts expect advertisers will spend more on digital than traditional media. An accelerated decline in traditional media advertising, particularly TV, has led digital to overtake traditional even earlier than previously predicted.
Today in Colorado, there are about 10 public relations professionals for every one professional journalist.
Many Coloradans now receive their local news through Google, Facebook, and other platforms, but most local newsrooms don’t benefit financially from the use of their content. The decline in news production has begun to affect platform functionality. When Facebook recently launched a new “Today In” section to surface and spotlight local news, the company noted that the selection of stories is slim to none in many towns and regions. In a news release announcing a series of corporate grants to research and address the issue, Facebook stated: “About one in three users in the U.S. live in places where we cannot find enough local news on Facebook to launch Today In. What does that mean exactly? In the last 28 days, there has not been a single day where we’ve been able to find five or more recent news articles directly related to these towns. This does not vary much by region: 35 percent of users in the Midwest, Northeast, and South — and 26 percent in the West — live in places where we can’t find much local news on Facebook.”
In the “attention economy,” local news also is competing against every other form of entertainment, education, and distraction now available to modern Americans. Since 2000, time spent online each week has risen from 9.4 hours to 23.6 hours. Over 82% of Americans can now access the Internet from their mobile devices, and nearly half of all time spent online is via mobile device. Streaming services such as Netflix and Hulu are also winning the battle for Americans’ limited time.
Meanwhile, most local news outlets do not have user-friendly, mobile-first access points to attract and retain local users. The realities of the market have led some to conclude that an appropriately staffed local newsroom cannot be profitable in most communities in today’s environment. In 2018, the Colorado Media Project partnered with the Boston Consulting Group to seek out commercially viable business models for local accountability journalism that could be sustained primarily through advertising and subscriptions. While two potential sustainable business models were identified, both relied heavily on aggregation or analysis of existing local content produced elsewhere or community-generated information rather than original content reported or produced by professional journalists. Ultimately, “Project leaders determined that (these models) did not address the significant gap in news gathering capacity that currently defines the Colorado news landscape.”
National consolidation of local newspapers and television stations has become the primary strategy for commercial media’s survival. This trend reached a new milestone in 2019, with the proposed merger of GateHouse and Gannett, the two largest national newspaper conglomerates.
The combined portfolio would include 260 daily newspapers and more than 300 weeklies, including two dailies in Colorado: the Pueblo Chieftain, which was locally owned for 150 years until its sale to GateHouse in 2018, and the Fort Collins Coloradoan, which has been recognized nationally as a leader in the conversion to digital markets. According to the joint statement announcing the merger, the companies intend to cut costs by $275 million to $300 million annually as a result of the merger.
The business decisions of Alden Global Capital — the hedge fund that controls MediaNews Group (formerly Digital First Media), which owns The Denver Post and 16 other Colorado daily and weekly newspapers — have inspired a national headline-grabbing rebellion from its own newsrooms in April 2018. A Washington Post investigation concluded: “Alden’s decision to cut costs at its papers is not uncommon in the newspaper industry, which lost 45% of newsroom positions between 2008 and 2017, but researchers found that Digital First cut staff at more than twice the rate of competitors.” Meanwhile, “even as newspapers’ circulation and revenue have declined across the country, in 2018, the company’s operating profit margins were 16.2 percent — 5 percentage points higher than Gannett’s, according to securities filings and Digital First’s letter.”
for an interview with “Birdy” magazine cofounders. (Rocky Mountain PBS)
Between the impending Gannett-GateHouse merger and the Alden portfolio, investment firms are set to own 24 Colorado properties representing 28% of the state’s total newspaper circulation by the end of 2019. On the other end of the spectrum, Colorado small business owners retain control of 93 papers reaching 51% of the state’s total newspaper circulation.
Family-owned newspapers are struggling with the same harsh realities as the national giants. In addition to reducing staff, a growing trend among local newspapers seeking to cut costs is to reduce their days of print publication. For example, in March 2017, the Durango Herald reduced its print publication from seven to four days per week, and down again to three days per week in October 2019. In June 2019 publisher Richard Ballantine announced a four-page trim to the paper’s Friday and Saturday printed editions, with less space devoted to wire service stories in the Travel, Food, and Opinion pages. “While the Herald’s combined online and print readership is at an all-time high and rising, digital revenue has not yet replaced print revenue,” Ballantine told readers. “What is important is that locally written content about Durango and La Plata County and the Southwest, which is most important to Herald readers, will continue at full strength.”
On the Western Slope, Grand Junction Sentinel publisher Jay Seaton is a fourth-generation family newspaper publisher with a reputation for investing in local news. In August 2018, Seaton opted to stop publishing the Monday and Tuesday editions instead of laying off staff or raising prices for subscribers. “I love the idea of rethinking the newsgathering model, but I haven’t found a way to do so without engaged, hungry reporters,” Seaton said in an interview with the Colorado Press Association. “Business innovation is something this industry sorely needs.” To this end, the Sentinel recently purchased four local FM radio stations — including the only Spanish-language station in the Grand Valley — with a goal to infuse more local news reported by the Sentinel into the local stations’ broadcasts. As the newspaper reported: “The deal became possible in November 2017 when the FCC eliminated a ban on cross-ownership between media entities. It also made it easier for companies to buy additional radio stations in some markets and to jointly sell advertising time or space.”
As the industry seeks new, sustainable models for the future, communities must come to terms with the question of how to pay for local news if they want the industry to continue to perform its democratic function.
