Towards a new local news model

Traditional print news solves problems that evolved in the last 100 years. In the 20th century, newspapers helped people overcome the difficulty of finding information. But now the internet dramatically reduces that problem (Shirky, 2011). The media has also been a conduit for political figures and advertisers to reach the general public. But social media now allows politicians and companies to speak directly to millions of followers.

There are three ways to use new technology to help the media thrive in the next 100 years. First, publishers can use more efficient digital production and distribution methods. Second, publishers can offer more differentiated and personalized products. Finally, digital-first products can grow the audience and increase revenue.

Using the five economic Ws as guideposts (Hamilton, 2011), the purpose of this essay is to re-imagine what local news could look like based on new technologies and business models that meet the needs of today’s millennial consumers.

Who cares about this information?

Every community has a cohort of people who are very invested in it. This group includes elected officials and city staff, law enforcement, local business owners, real-estate developers, non-profit leaders, community organizers, long-time residents, educators, retired people and folks who just have a lot of time on their hands.

Local news publishers must serve the people who want local news badly enough to pay for it. Y Combinator’s Paul Graham says “there have to be at least some users who really need what they’re making — not just people who could see themselves using it one day, but who want it urgently.”

Local news is a differentiated product that serves the information needs of a specific audience — or, in news-speak, a “vertical.”

The Information and Recode are examples of successful online-only websites that serve the tech-industry vertical. Web sites also successfully serve political wonks (e.g. Politico) and sports fans (e.g. Fangraph, The Ringer).

There are four information needs: voter, entertainment, producer and consumer (Hamilton, 2003), and local news can meet all four. Local news holds the powerful accountable and enables the electorate to make informed voting decisions. Stories about local business help local consumers make more informed purchasing decisions. Information about the community helps businesses better serve their customers. Finally, there is an element of entertainment — people want to know what’s going on in their communities.

What are they willing to pay?

Right now, publishers are trying to drive traffic to free websites to sell digital ads. This model only operates at scale. Serving a single community, with a limited number of readers, doesn’t work.

The main revenue source for quality local news needs to be subscriptions. People are willing to pay for quality content. Apple Music, Patreon and theSkimm are all examples of companies leveraging subscriptions.

Republik, a journalism startup from Zurich, recently raised $2M in two weeks from crowdfunding to create an online magazine that will upload three stories a day, promising to deliver quality longform stories (Langley, 2017).

A new local news business model could rely on app subscriptions. New content would be available on the app right away, and push notifications would prompt the user to read the story.

Information doesn’t need to remain exclusive for this model to work. The idea is to use time to create a restricted good. Subscribers get content first. Then, after some amount of time (e.g. a month), anyone who downloads the app can access it. This ensures the whole community can still benefit from the reporting.

Members can also get additional benefits such as access to reporters or networks of other readers. This could be on a special Slack channel, which The Information does. Members can also receive invitations to exclusive events with newsmakers in their communities. Memberships create recurring revenue and, for news, realigns the relationship between the content producer and the content consumer.

Where can media outlets or advertisers reach these people?

Mobile apps are often second thoughts for small, cash-strapped newsrooms. But in the future, readers will primarily turn to their smartphones and tablets for news. Throughout the world, Telecom providers have accepted and embraced the mobile future and the ubiquity of the smartphone. News needs to do the same.

One reason publishers have been slow to migrate to mobile is that most newsrooms are resource constrained.The second reason is, culturally, journalists tend to be skeptical of new technology.

One data journalism professional recently told me, “A lot of reporters are just waiting for this internet thing to blow over.”

Both technology and the news are habit forming. People check their phones multiple times a day. Consumers read on the train or listen to their podcasts in the car on the way to work. Push notifications can drive readers back to existing apps. Mobile first products — apps and podcasts — leverage habit-driven consumer behavior. They meet readers where they are.

Native mobile apps also brand and control the user experience and capture user data. User data can then be used to enhance the user experience. Publishers can make improvements and personalized recommendations. Data can also inform the type of stories users most want to see and make good recommendations for stories from other communities.

When is it profitable to provide information?

While a reporter or two serving a single small town is not building a scalable product, combining a number of communities on a single platform is. In much the same way as services like Lyft or Uber provide local services to many cities and centralize the technology, marketing, customer service and other business overhead costs in a single headquarter, a news company could serve a number of smaller cities and regions.

Patch.com tried to do something similar by hosting news websites for small communities. But then AOL bought it as a way to generate advertising revenue (Grueskin, Seave, & Graves). Now the Patch user experience isn’t great. The web design is dated, and readers are served stories that aren’t personalized or relevant. In order to keep engagement high, readers are served stories from neighboring communities and there isn’t any quality control for the content. In contrast, changing the revenue structure incentivizes reporters to provide quality content at a slower pace.

Many local newsrooms serve up national stories from the local wires. This type of information has become a cheap commodity. In order to create a quality, differentiated product, local publishers need to avoid anything that is already covered on local news TV stations or readily available for free online, e.g. weather, sports and national news.

Streamline the news team and work remotely

The “newsroom” of the future is a distributed team. One or two reporters who live in the community they report on can produce features, investigative pieces, profiles and long-form journalism. They could, for example, do one quality post per week and a podcast.

Ten reporters can be supported by an editor based in the region who also works from home. Editors, in turn, can be supported by a central corporate office.

It’s essentially a wheel and spokes model with a network of reporters and editors spread out in small towns across the US.

Back of the napkin calculations

1,000 people paying $10 a month for a membership to the local news app

120,000 a year (before taxes)

$90,000 after taxes

$70,000 a year for the journalist

$20,000 back to the company for overhead

Why is this profitable?

By reducing cost and increasing efficiency, quality news can be less expensive to produce. Publishers can take advantage of mobile technology to reduce the cost of distributing the news. And it’s practical for journalists, as this innovative structure makes technology easier for reporters to use.

This model also redistributes resources back to the content creators, setting up financial incentives to produce quality content that people will want to buy.

Develop secondary revenue sources

Other revenue sources could include a side business that sells the app as a white-label product to other, larger newsrooms. The business could also create and sell podcast software that makes it easy for reporters to record and publish podcasts.

Eventually, data collected in the app could be sold to create meaningful sponsorships or brand ambassadors, and the company could explore a revenue share with the reporter.

This company will get control of the data by owning a network of apps and centralized technology. It will get the product off the platforms. It offers a quality mobile experience that operates well on 2g technology.

In 1981 when Howard Schultz first walked into a Starbucks, coffee was a commodity good sold in bottomless cups at diners and rest stops. Starbucks found a scalable way to deliver a high-quality cup of coffee to cities and towns across America, which created a market for specialty roasts and superior brews. Like Starbucks, media entrepreneurs can create a similar appetite for quality stories.

Bibliography

Batsell, J. (2015) Engaged Journalism: Connecting with Digitally Empowered News Audience. Columbia University Press.

Frommer, Dan. “The Future of Mobile is the Future of Everything.” businessinsider.com, June 2011. http://www.businessinsider.com/future-of-mobile-experts-2011-6.

Graham, Paul. “How to Get Startup Ideas.” paulgraham.com, Nov. 2012, http://paulgraham.com/startupideas.html.

Grueskin, B., Seave, A. & Graves, L. (2011) The Story So Far: What We Know About the Business of Digital Journalism. Columbia Journalism Review Books.

Hamilton, James. All the News That’s Fit to Sell: How the Market Transforms Information into News. Princeton: Princeton University Press. 2003

Hamilton, James. “What’s the incentive to save journalism?” Will the Last Reporter Please Turn out the Lights: The Collapse of Journalism and What Can Be Done To Fix It. Eds Robert W. McChesney, Victor Pickard. New York: The New Press. 2011.

Langley, Alison. “Startup that promises ‘no-bullshit journalism’ nets serious cash“ cir.org, May 2017, https://www.cjr.org/innovations/news-startup-crowdfunding-switzerland.php.

Shirky, Clay. “Newspapers and Thinking the Unthinkable.” Will the Last Reporter Please Turn out the Lights: The Collapse of Journalism and What Can Be Done To Fix It. Eds Robert W. McChesney, Victor Pickard. New York: The New Press. 2011.

Image By N. Orr (History of the Processes of Manufacture 1864) [Public domain], via Wikimedia Commons