Below, we have provided the full transcript of our panel discussion The Future of Innovation in News Production: Models for Sustainability. Read below to see the timely discussion where a panel of experts discussed the pressing issues for the industry and possible paths forward for both platforms and publishers.
Good morning, everyone. And welcome to The Future of Innovation in News Production: Models for Sustainability, a panel brought to you by CPI and CCIA. That is Competition Policy Institute and Computer and Communications Industry Association. My name is Rob Pegoraro, I’m a freelance journalist based just outside of Washington DC. With me is Rick Edmonds of the Poynter Institute. Andrew Charlton from Accenture who works with Hansen for the Tow Center for Digital journalism, and Chris Krewson of Lion publishers.
Often, in a panel about the state of journalism, you’re supposed to start with all the bad things that have happened because there’s been a lot of crummy developments in my profession over the last five years of the more than 25 years I’ve spent in it. But instead, I wanted to tick off a few positive developments, and then we can talk about what we should be doing to make more of these positive developments happen. Some of them involve people on this very chat.
So I’d start with, in Colorado 24 local papers will stay owned by their communities because of an investment by the Colorado News Conservancy. Local ownership is good, ownership by out-of-town strip-mining hedge funds is bad. This is a good development. On the west coast, Ken Doctor, a long-time student of the media business sponsored a local news site, Lookout Santa Cruz that now’s six months in, and his report is off to a positive start in providing some good competition. On the opposite coast, the New York Times just had a great story about efforts in New Bedford Massachusetts to start a nonprofit news site to compete with a Gannett-owned Daily that looks to be increasingly hollowed out. And right where I’m speaking to you in Arlington, Virginia, for years, we’ve had a Lion publisher member ARL, now doing some great coverage of fairs in Arlington County, Virginia. I read it every day and if you live here, you should too.
So with that, I want to throw it to the panel. What would you add? What have you seen over the last few months that makes you more optimistic about the state of news?
Well, I’ll go. I think that examples you give, you can multiply by 100 or several 100, because this field of digital startups is coming out very fast. Not to toot my own demographic, but I think there are a lot of retired journalists who would say, “Yes, I would like to do that.” Some of them aren’t necessarily in it for the money, and there are many displaced journalists from the hedge funds there. About 40 of them this week in Chicago, who’ve taken a buy-out and probably will be doing other interesting things. So there is a lot of movement in that sector that’s very promising. The legacy is a little bit more mixed bag, and I think we may come to some papers that are either doing well or trying to push pretty fast now into the digital era. So those are all positives.
Thank you. I guess I should note, probably none of us got into this business for the money, or if we did we were misinformed. Who is going next?
I’ll go. So at my organization, The National Trust for Local News, founded the Colorado Conservancy and worked with the Colorado center to make that acquisition happen. And I’d say what’s been heartening to me is that we’ve heard from small independent publishers in communities across the country, who are eager to replicate that model. Who are thinking about either converting to nonprofit status or finding other ways of really grounding their publications in the community for the long-term. And I’ve been actually surprised, as we’ve talked with these publishers at how robust the community support is for small community weeklies.
I think what many of these publishers have lacked sometimes is the confidence to ask for the support of their communities, and so part of what I feel like our role is, is to just encourage these publishers at this moment of succession, at this moment of transformation, to really engage their communities in a different way, and to really ask for support because the support is there to be mobilized. And I think it’s organizations like ours, helping communities to put the pieces together, that’s really going to move the needle on that Community Publisher part of the ecosystem.
Chris, I know you represent a lot of community publishers, your organization does.
I do, yes. So Lion has about 320 members as of today across the country, some the biggest newsroom in their state, like Vermont Digger, which started one person who used to work for the largest newspaper in her state and Galloway and worked for the Burlington Free Press. I believe she was laid off and she took the money that happened in a Separation Agreement and now runs a bigger newsroom than the place that let her go. And so, all we need to do is do that 49 more times, and the field is fighting on okay. Obviously, she’s a bit of an outlier. She’s in rare air in the space, I’d say, and the Texas Tribune CalMatters, all Lion members, but all, doing strong work statewide in their communities.
But most Lion members are much smaller. 80% of our membership have five or fewer FTEs for their whole company. That is not a big business, it’s a small business. And if you look at the research that Penny Hartley was doing with the University of North Carolina, she set a triangle that represents the News Industry in the top part of the triangle about 100 Metro Daily newspapers, which tend to suck up all the oxygen when we talk about declining fate of News organizations, newspapers in particular. We talk about the top 100, but really the bottom 6900, that’s most of the newspapers’ community, dailies and weeklies, and other publications across the country. And most of Lion falls in the back category; small news organizations.
In some cases, it’s a husband and wife team where the husband does the news, and the wife sells the ads, or vice versa, family businesses. In other cases, Milwaukee News Service, you’ve got one full-time person working as the editor, and then students are doing the rest of these, smart head students that are doing the rest. And so you’ve got this whole bunch of different approaches at this. The things that give me hope in this part of the industry is that we’re just really starting to learn how it sees itself as sustainable. Scott Brodbeck who runs ARLnow and a bunch of other breaking news-focused websites around the DC area and the suburbs is one model of Alliance site that has jumped on that piece of what a local newspaper used to do. It’s not everything, not by any means. And I think that’s part of where we get tripped up when we talk about the future of local news, We talk about replacing local newspapers. And I just think that’s the wrong way to frame the question.
There’s an opportunity here, not just in helping an industry and replacing the critical functions of what a local newspaper used to do. Are you really in this to just get warmed-over news in the last few days with some comics and some stock quotes? Is that really what we’re after? No, we want to hold government to account, we want to know what’s happening, we want better water, cleaner air, better schools in our community, these are the things that our members are doing right now. But I wouldn’t call them local newspapers. And instead of one place doing it, and a literal process called the Daily Miracle. Why we think we can find a business model for what we used to call a miracle, I’ll never know. But if we have many of these places replacing many of the functions, and also resolving some of the historic inequities that existed in ownership, newspapers were never in many places in this country owned and read and supported by every community in them. There were just… There’s no way.
So the golden age of Metro Daily newspapers were golden for a certain subset of people, probably not for the whole community. And right now for lunching many small things to make up for it, we have a chance to resolve some of that and have the next great Korean Language Daily News Organization in Korea town in LA, owned and run and operated for that neighborhood, serving that community and building business models tied to that community. If the overhead is that much smaller, if you don’t have to support a tower of truth, or a huge printing operation, where you take in $100 and 90% of those dollars go right back out to pay for that paper and pay for the press and pay for the trucks and all the other things that aren’t news and aren’t news gathering, we can level set, we can share wins.
There’s this huge public source journalism, open-source journalism that’s happening. Chalkbeat, if you live in a community covered by Chalkbeat, you can reuse that coverage. ProPublica, which has the largest nonprofit newsroom in existence, you can with credit, reuse any ProPublica investigation. And so these are all ways you get education coverage right there and investigative if you live in one of the cities that are covered. That’s two of the things that the local newspaper used to do, but can’t anymore because most of its money is going to Heath Freeman’s beach house or something. So you have to consider there’s as much good as there is bad. And for me, it’s about letting go of these preconceived ideas of what success is. And it only looks like success, if we replicate tomorrow what the Miami Herald was 20 years ago, or 30 years ago, or whatever. I just don’t think that’s the right way to frame the dialogue.
For people who didn’t recognize Heath Freeman, he’s the Who runs Alden Global Capital, the hedge fund that has been strip-mining newspapers coast to coast and now owns Tribune Publishing, hence the comment about people likely leaving the Chicago Tribune.
He owns a nice house in the Hamptons too, by the way. Like a very large-
I’m sure it’s very nice. Lovely beach views. Finally, Andrew, I wanted to get you into this.
Thanks, Robert. Thanks for the opportunity to be part of this panel. My name is Andrew Charlton. I’m the Managing Director at Accenture in Australia. Look, I think the first thing to say is that Public Interest Journalism is essential to our democracies. Public Interest Journalism informs our citizens, it holds our leaders and people in positions of power to account, and it brings communities together. Over the last few decades, of course, as everybody on this panel knows, the business models of Public Interest Journalism have been through enormous change. That change has manifested itself in a lot of ways.
Out of that change, has been a significant decline in the revenues of many sources of Public Interest Journalism, particularly newspapers. I think it’s important as we start to frame the solutions to this problem, to also think about the real nature of the problem. It’s certainly true that revenues of newspapers have been in decline for the last 20 years. There’s of course, no question about that. We have done some work over the last few months to analyze the revenues of newspapers in the United States and other countries, to understand what the nature of that decline has been, but importantly to look at the sources of that decline and try and understand why and what some of the avenues for the future are.
I think the first thing that jumps out of the analysis that we’ve done is that the significant decline in newspaper revenues over the last 20 years, that’s a decline of around 54% in newspaper in nominal terms. It is obviously a massive hit to any industry. But when you disaggregate that decline, the story is much more complicated than it might initially appear. Newspaper revenue is made up broadly as you all know, of three sources; circulation, display, and classifieds. As we think about the sources of revenue across those three different categories, circulation revenue actually over that period hasn’t declined very much. There’s been a bit of a decline in print circulation, but across the industry, that decline has been roughly compensated for by an increase in digital circulation.
Display advertising, which accounts for a little less than half of all revenue for newspapers in the United States, about $29 billion, the beginning of that period I described in 2004, but that’s in a very significant fall, about a 50% fall. But the real loss in newspaper revenue, particularly for smaller newspapers was in the third category, in classifieds. Classifieds revenue for newspapers declines by between 80 and 90%. And that has really been the enormous king hit to the newspaper industry. It accounts for more than half of the total decline in revenue for the newspaper industry as a whole, and a very material proportion, more than two-thirds decline in revenue for small newspapers.
So when we think about what the causes of the decline in the economics of newspapers have been, understanding those different categories of decline is extremely important. In particular, understanding where that money is gone. Classified revenue which used to be about $18 billion dollars, that has substantially gone to online pure-play classified businesses; online car classifieds, online real estate classifieds, online property classifieds, eBay, other marketplaces, Facebook marketplace, Airbnb. These pure-play online players have really taken a huge shock bite out of the revenues of newspapers across the world.
When we look forward, I think there are some positive trends. The first positive trend is for some newspapers, not for all newspapers, but for many newspapers particularly during COVID, we saw an increase in subscription revenue. I think we started seeing a generational change where younger people are more willing to pay for news and other digital products. I think Gen X is the real problem here. Gen X, The Napster Generation, the generation that got all the internet news for free, didn’t pay for music. The other generation has really struggled to get their heads around paying for digital products. But actually, all the consumers and indeed more importantly, younger consumers are quite used to paying for digital products including paying for news, and we’re seeing that growing in many markets.
I’m also seeing alternative business models. The Guardian Newspaper around the world has pioneered a supporter model where they’ve gotten revenue from people who believe in the importance of the message and the content. So I’d summarize these points by saying, first of all, there’s obviously been a big decline in newspaper revenue. It’s important to understand what constituted that decline. It certainly didn’t all go in circulation or display advertising. The biggest drop was in classifieds revenue. That classifieds’ revenue went to online pure-play classifieds businesses. And finally we are seeing some green shoots around the world, new business models, as other people on this panel have talked about, and generational change in the consumption and willingness to pay for news.
So let’s talk about ownership structures because it struck me when I was looking at my own list of good news. There wasn’t any one way to do it. Some local news sites like Scott Brodbeck ARLnow, they are for-profit straight up, and we’re here to make money, boom. The New Bedford Light, the Massachusetts site I mentioned, is a nonprofit. And you have Public Benefit Corporations like Lookout Santa Cruz, the Colorado papers where yes, you’re supposed to make money, but your charter also includes certain Public Service obligations beyond just phrases like, “Don’t be evil.” Aren’t we suddenly on anyone that seems to work better? I know lots of people say if we just have newspapers be nonprofits, then this whole business of having to get back to the 20% profit margins they had 25 years ago, we could just set that aside.
Well, let me jump in on that. You put your finger on the two things about nonprofits, they don’t have to generate that premium, though some of that premium goes into reinvesting, investing in change, investing in technology. And nonprofits are much better situated to get philanthropic support, et cetera. So those are big pluses. I’m not sure that the for-profit media is dead, and there’s some good counterexamples. Star Tribune in Minneapolis, Boston Globe that are well up the curve and in building a Digital Subscription Base, and a lot of others are trying to get there. It’s no easy task, and it takes many years. So I guess I would say, I think there’s room for all these structures.
Yeah, I would agree with that. I think there’s room for all these structures, and as we look at community publishers, many of these small businesses, family businesses. And so as a matter of succession, it can be easier like we did in Colorado to put them inside of Public Benefit Corporation structures, and to figure out how to change their tax status. And what the kind of baseline revenue mix is, so if there’s a big percent of earned revenue, that transition to nonprofit status can be difficult and there are some limitations around how much earned revenue you can have and bring in philanthropic dollars.
I’d say media funders have also really stepped up and are providing Fiscal Sponsorship to some of these small businesses so that there’s other ways to get philanthropic revenue into like, “for-profit” entities. At the trust, we encourage publishers to think very carefully about this distinction between nonprofit and for-profit and to really understand that who owns an entity and its tax status. They’re related questions, but they’re not the same questions. Though you can have a Public Benefit Corporation like we do in Colorado, and the trust as an owner, our interest is in the long-term sustainability. So we don’t have expectations of pulling profit out, all the net revenue that gets generated is invested back into the business.
That’s a different set of calculations as an owner than Alden Global Capital as an owner or an extractive for-profit owner inside of that structure. So it’s really, I’d say the actual dimensions of decision-making are a little more nuanced than just, “Oh, it’s non-profit or for profit.”
To make sure that-
Oh, sorry, Robert.
To make sure our listeners are clear on this, can you walk us through briefly what exactly becoming a Public Benefit Corporation has meant for these newspapers? Besides, I presume the owners can’t strip-mine the profits to build themselves nice mansion houses in Telluride or Vail or whatever?
Yeah, sure. I mean, the Public Benefit Corporation, there are different legal categories in each state. In this case, the Colorado News Conservancy is a Colorado Public Benefit Corporation. And as part of the requirements, we have to do reporting on our impact every year to the state as part of that mission. And it means that in our articles and by-laws, it explicitly states, our Public Service and our Public Service mission. And so we as shareholders can refer to that whenever there’s a discussion about bringing on new owners, bring on new investors, and we can point to it and say, “Our goal here is not profit maximization, it’s actually benefit to the community.” And that’s actually institutionalized in the articles of incorporation.
So it’s a wonderful option, I think, to be able to get some of the benefits and flexibilities of a corporate structure and be able to retain some of that earned revenue, and also keep the Public Service mission.
Got it. Okay, Chris, you were speaking, I think?
Yeah, sorry. Look, I mean, nonprofit to Elizabeth’s point, it’s a tax status, it’s not a business model. It makes me laugh in my sector of the industry to talk about pulling profits out when there just aren’t that many profits there to begin with, especially for these smaller publishers. I’m thinking about it a lot differently. It’s a lot easier to start an LLC, a for-profit company than a nonprofit. And think about who it advantages to launch a nonprofit. The resources you need to have, the connections you need to have, the time you need to wait for that return email from the IRS. At all advantages, people with means, people of wealth.
When you launch a for-profit business, nonprofits have no equity. It’s not just a matter of profit, it’s ownership. Nobody owns a nonprofit. The community owns it, or it’s a collective ownership, but there is no one place that owns the assets of a nonprofit. What does that mean for entrepreneurs who are trying to build things to pass on to their families? That doesn’t exist in a nonprofit structure. And so it’s a little more complicated than just, “Start a newspaper, buy a beach house.” That’s not the math that we’re talking about. And one of the projects that we’re involved at the Lion is something called the Tiny News collective, which aims to launch 10 newsrooms this year, 100 in year-two, and 500 by year-three across the country. And we’re deliberately telling these entrepreneurs who sign up with the collective, that they don’t need to make that decision at the outset of whether it be for-profit or nonprofit.
The first thing they need to worry about, probably for a couple of years is just building audience and building revenue. When they’ve got enough of the base to understand those things in their communities, sheltered by the overall nonprofit that’s going to incubate them, that’s what the Tiniest Collective, which is a 501(c)(3) will help them do. At the end of that process. They can say, “You know what, I want to form a board of directors in my community,” and we’ll help them do that. “I want to become my own 501(c)(3),” or, “You know what, I think this business might be better if I just run it.” And then we have to settle the assets with them, and there’s a sale that has to take place, but we as a collective, we’re not looking to get rich, we’re looking to stand up more news organizations across the country.
And the point is, there’s a lot of pressure for people to make that decision right away, because if you choose poorly, it’s expensive to pick the other one sometimes. It’s a little easier to go for profit. To nonprofits, it’s a little more complicated to go the other way because of that asset settling that has to happen over time. I just, especially for things that are getting started, I feel like making people choose that at the very beginning is one of the things that has caused this friction in what we’ve seen. So Lion has both in our membership. We have for-profit members and nonprofit Members. We’re about 70% for profit, 30% not. The nonprofit newsrooms can tend to be larger. All those big ones I talked about earlier, VTDigger, Texas Tribune, CalMatters, all nonprofit newsrooms, all with big stats, all Statewide, all higher overhead.
When you talk about a newsroom of 77 in Texas or 53 in California, multiply that out for what it means for the budget. And Rick knows this better than anybody on this call what that… Probably Andrew, too, you are an analyst. But that’s a lot of money to commit to bringing in. And when you’re nonprofit, you still have to bring in enough to not just pay for that, but plan for what happens ahead. A nonprofit can also be a fabulously good business. Hospitals are nonprofits, and how many gleaming hospital buildings have you driven past? Because they keep bringing in all this ungodly money from insurance companies and expanding and buying new things, and their tax status is nonprofit, but they are fabulously profitable nonprofits.
Yeah, around DC, you can just look at the salaries paid to some of the folks who have local nonprofits to see that those folks can probably afford beach houses too. Let’s pivot now to talk about income. We talked about the classified ads going away. I remember from my time at the Washington Post, where, for a certain time in the 1990s, it seemed like that would be something you’d never have to worry about. And now Craigslist happened and The Washington Post did not Craigslist itself. But there’s display ads, and they’ve been in the News a lot lately between investigations in the US and now in the European Union over Google’s influence/control of that market.
The broader problems that it is such an opaque cluster of machinery where it’s not quite clear where the money’s going. There was one study that came out of the UK a year or two ago that found something like, it was 18% and 33% of the revenue and display ads just disappeared, nobody knew where it went to. Are we seeing progress there? Some way to make sure that newspapers can get, I should say, new sites, I’m showing my age. Can keep more than half, or whatever it is, of the money actually spent on display ads on their own sites?
Well, I mentioned what Andrew and others said, I think we’re a long ways from being there and we’re close to there in the United States. It’s encouraging to see some regulatory pressure. Australia, EU countries. But I think the Google Facebook remain kind of darlings here, yet they’re stripping money out of these other countries and don’t enjoy much of a good reputation there. But between that and their obvious stakes, still seem to have a hold. I think I’d also say that to my perception, I hope is changing. There’s some time it might change, and I trust this kind of living on the 1990s as far as News business goes. So there’s a lot of ground to cover before that’s phased. And some people say, “Well, it’s not really Google on Facebook.” I don’t mind that. I mean, I think as you noted, the classifieds began to deteriorate pretty quickly in the 2000s.
The big force preventing advertising from growing, and this affects those startups that want to get a share of advertising. Is that Google and Facebook just suck it up. And they have very good products. So that’s the reason they succeed, but they don’t produce any news themselves. They break it off to other sources. And as you say, the return to the people who are actually doing the hard work of reporting, it’s pretty slight right now.
Yeah, like I said, to a certain degree the returns to many parts of the reporting industry are slight rate, but I do think it’s important to make a distinction about where the revenues to newspapers have gone. As I said earlier, a large part, in fact, a majority of the drop in newspaper revenues come from a loss of classifieds. And that money didn’t go to Google, maybe some of it went to Facebook through marketplace and other products like that, but the vast majority of that drop in classifieds’ revenue, went to pure play online classifieds business. Cars, real estate, secondhand goods, et cetera.
Those online classifieds business are where most of that, what we used to call the Rivers of Gold in the newspaper business went to. Display advertising is a component of the loss of revenue for the newspaper industry, but it was never a particularly efficient component. Putting a display ad in a newspaper that is looked at by X many people when only a small fraction of those X people are relevant to that ad is an inefficient way to create advertising. And that’s quite a significant cost through the economy for the businesses that are trying to do that advertising. So requiring or mandating a constant presence of display ads in newspapers, it certainly supports the newspapers, but it would be an impost on all the businesses that are relying on efficient, low-cost, effective advertising to support their own businesses. So you’re really just pushing a problem through the economy, rather than solving a problem.
And then, Chris, Elizabeth, the very most local publishers, it seems to me, and I’ve certainly seen this looking at local news around DC, at all now and Tyson’s Report and other sites that Scott Brodbeck runs, you can directly talk to the companies involved and sell ads directly, is that a meaningful component of revenue at the sites you’re most involved with?
Yeah, about 75% of our members get most of their money from display advertising. And importantly to your point in framing the question, it’s direct sale. It’s not programmatic, or other things that rely on large audiences and monetizing large audiences while also unable to do direct sale advertising to the communities. So there’s a couple of things at play here.
How many journalism startups have you seen that invest incredibly heavily on the journalism side, and incredibly likely on the business side? And think about, if you’re sitting in a newsroom, and you’re like, “I can put so much talent around me, I can have a sports guy and a News guy, and a business guy,” and it’s very easy to add up the costs. And then I’ve seen so many times people in planning, they just say, “Oh, and I’ve got one person over here.” And they’re going to do on my website and my ads and my photos.
It sounds like publishing a newspaper.
That literally, how one person is going to pay the salaries of the other eight? That’s just bad math. That’s not how any of that works. The things that our publishers learn, even at the smallest size, is how to separate their time so that they’re serving their community by reporting in one sense, and then talking to local merchants and selling what they’re reporting on the other. And balancing that time is a really hard thing to do, but you can’t do the one unless you’re paying for it with the other. Otherwise, it’s a hobby, it’s not a business. And so you need enough money coming in, as I said earlier, more money coming in than going out. Whether you’re paying taxes for that or filing all the paperwork to not pay taxes on that, that’s the essential question. You have more coming in than going out.
And the other stuff around that, it’s just balancing that, figuring out, if you have a lot of overhead, then how much runway do you have between when that money that you had saved up in the bank goes down too far, and you’re not bringing in enough on the other side. And so the reason I say all this is because a program we’re in the middle of starting right now that Facebook is funding called the News Revenue Fellowship, where we’re going to help Lion Member Newsrooms by subsidizing through Lion, a revenue-generating position for two years that we’ll pay for, so that by year three, that person more than pays for themselves and makes that newsroom stronger.
We use the word sustainability in this call, and it’s amazing that we’re still trying to figure out sustainability for this digital-only sector when literally the baseline of sustainability is the ability to stay alive. We should want more from the sector than things that just have a pulse. They need to be able to do more to be healthy. But it’s amazing because we can’t even measure what that looks like for a lot of these things. And so that’s the work that we’re starting, that in order to qualify for one of these fellowships at Lion, we do a sustainability audit. And that’s not like a financial audit, but it’s just a checklist where we look at the business and say, “Where are you? Where are you on audience? Where are you in revenue? Where are you in the… Are you exhausted? Are you spending too much of your energy in start-up mode? And having run a couple of newsrooms from startup?” It’s exhausting. It feels like an 18-hour job. It’s like building a sandcastle on the tide when you’re brand new, and every day it gets washed away, and you got to build it again.
And so, how sustainable are these things? We’re just now starting to understand, I think, some of the beginning stages of that. But there is a strong movement around, read local, support local. These are all small businesses, and the platforms are the other part of this. We’ve talked about Facebook, we’ve talked about Google. For a long time, it’s been a better business to like to Macedonia and build a fake news Empire and run that through the platforms and monetize it to the algorithms than to do the real thing, than to cover a community. Because the algorithms enjoy and boost things that are the opposite of news judgment. They inflame, it’s nostalgia, it’s also anger, it’s fear, it’s hate, the dark side, like I’m hearing Star Wars in my head, but those are the things… Distortions do really well on the platforms, but not accurate coverage of the real problems in your community.
The things that we’re trained as journalists to suss out, that stuff gets depressed by the algorithms because it’s complicated, it’s nuanced, it’s personal, it’s local. And reconciling this I do think the platforms have somewhat of responsibility there. Because it is better and easier right now to monetize fake news than real news. And that is on that. The other stuff, taking classifieds away, advertising away, whatever. They built a better product, they built a better mousetrap. It’s more effective and easier and cheaper for advertisers to reach more people through the platforms. That’s also on the News business, we didn’t innovate. We didn’t create products that resonated as much as the other thing is. However, when you own the scale and when it is easier to monetize distortions, that’s where there needs to be responsibility, and that’s why I think the government is looking at regulation because of that end case.
I don’t think it’s a matter of newspapers being owed advertising money. No one is owed advertising money, the advertising money is going to go to the best product to support it, but we need to regulate what that looks like and that is highly subjective. And it shouldn’t be, it just should not be easier to monetize hate and fear and fake news and penalize actual news that tries to help communities as a public good. That’s where I think we need to reframe that discussion.
And Elizabeth, your perspective on local ads from local businesses? Ideally, within all that online tracking that nobody seems to like all that much-
No, not at all. I think Chris’s point is really important that the local media direct sale relationship is really the primary driver of advertising at the community level. So I think it’s important to understand that what’s happened to the Metro Newspaper Business model, and how that’s been decimated, is actually a much different set of dynamics vis-à-vis, the platforms in ad tech, and small community media.
What we see at the community publisher level, is that they need better tools for those direct sales so that they can make the sale, get the ad assets actually show conversion to their local businesses. And so that’s a whole important set of problems, and it’s very different than Metro Papers seeing their regional ad basis they estimated by competitors to classifieds. And I think, unfortunately, and this policy debate as in other policy debates at currently in the News industry, people are having a hard time differentiating between the problems of big Metro Dailies and the problems of other forms of local and hyper-local media.
So let’s talk about government action. Some of you may have recognized one of us has a different accent than the others, and it’s not just the guy from New Jersey. Australia has this digital platforms law mandating negotiations between news publishers, government recognized ones, and down in digital platforms, i.e. Google and Facebook over some sort of compensation scheme that in most… My understanding of it seems to boil down to link tax. How is that actually working out for publishers in Australia? Especially smaller and local ones, not just the News Corp Publishers that seem to have played a large role in shaping of this law?
Yeah, you’re right, Rob. Australia has been one of the first markets in the world where government has taken action to require platforms, principally, Google and Facebook, to mediate with big journalism companies predominantly, and others, and provide payment for the content that appears on their platform. The first question is, in the absence of government action, what is the market value here? What is the value of the platforms extracting from the underlying news? And what is the loss that the underlying news content producers are experiencing as a result of that? To be honest, I think those questions are very challenging to answer.
In many ways, the platforms are significant sources of lead generation for the underlying publications. It is not at all clear to me that if the platforms did not host that news, on Google, on Facebook, that the news sites would be better off. I think there’s been a couple of experiments around the world where we have limited evidence in what that lacks then, with what that actually might look like, and it’s certainly not a clear-cut story that the publishers would be better off. So what is the actual surplus here that should be divided up? I think that that question is absolutely at the core of this discussion, and pretty unclear what the answer is.
I think secondly, in some ways, there’s an extent to which this is a solution, and a problem, which fit neatly together in the world of politics, but doesn’t necessarily fit neatly together in the world of economics. I think, there were lots of people who are looking at the really important and meaningful decline of journalism in Australia, and rightfully saying, that’s a terrible thing. We need to support public interest journalism. And then on the other hand, they were looking at the rise of the platforms and lots of money being made by the platforms. And then putting those two things together, and saying, “The rise of the platform’s equals the decline of newspapers, problem solution, legislation in the middle.” I think the story is significantly more complicated than that.
As I said in previous comments, a large part of the loss of newspaper revenues and in Australia, it’s actually more than 90% of the loss of newspaper revenues has been in the loss of classifieds. Now, none of those classifieds have gone to Google, and maybe a small share of them have gone to Facebook. It’s actually a range of other online classifieds business owners who are receiving that revenue, and none of them are included in the bargaining code that requires them to pay a cent to the underlying content producers.
I’m wondering, can I argue with you a little bit Andrew?
Have at it.
Nobody is saying that Google and Facebook are the root of the classified problem. We’ll stipulate that. And you’re certainly right that Sir Martin Sorrell had the phrase some years ago frenemy. I mean, on the one hand they’re sucking up advertising, and on the other hand, they’re generating leads. But I mean, I do think the window is open for some political solutions. There are several interesting ones we can talk about on the table here in the United States. And that climate is also moving slowly. But I just think it’s too backward looking to say, “Okay, this is where the disappearing revenue went.”
But let’s talk about now and in the future. And I think when you stack up the newspaper industry, the News industry fragmented as it is, against really the obscenely profitable platform companies. Let’s call it a political opening, there is some real reason to say, “Let’s tax these goods, let’s regulate them.” And that can help pave a greater future for journalism in general.
Yeah, I mean, emotionally I see the argument that you’re making, Rick, but I think there’s just a huge logical gap. We didn’t say that Instagram had to subsidize Kodak, because the mobile phone destroyed the 35 millimeter film. We have technological change where one industry or technological development in this case, classifieds and ad tech have affected another industry. The succeeding industry isn’t obligated to compensate the declining industry. The problem that we have here is that there is a public interest externality.
We don’t mourn the loss of the 35-millimeter film. We do mourn because it is so crucial to our society and our democracy, we do mourn the loss of public interest journalism. So that is a problem, which is a social problem, which we have to fix. But that is very different to saying that the person who has to fix that is the industry that succeeded, related in some ways, completely unrelated from the underlying problems that we’re describing. But I don’t think just because Uber defeated the taxis and Instagram defeated the 35 millimeter film, it requires compensation from one to the other.
Didn’t you miss the history lesson where Pulitzer and Hearst paid reparations to the Telegraph? When morse code was no longer the dominant mode of communication in the country? No, I mean, like that… Again, this isn’t owed to anybody. That’s a great point, Andrew, that this isn’t… The classifieds were almost an accident because publishers were the vehicle for that. Classifieds had nothing to do with the gathering of News. What if classifieds had grown up in post offices and they were mailed to people instead of happening on a delivery route? That is just as possible an outcome at the time but it had literally… This is part of Clay Shirky’s essay 20 years ago that blew the top off of my mind. What did a reporter in Baghdad have to do with a department store that was trying to sell fur coats? Nothing.
The internet unbundled all these things. The internet like, who do you blame for classifieds? You blame the internet. You don’t blame anyone company or any one person, it just became easier and faster for a direct to consumer relationship. Advertising was a great bundle. If news, we think is the most important part. But I knew plenty of people growing up who got the paper for the coupons. How many people just read the sports section of your friends when you were growing up? And now the athletic isn’t so, we haven’t really talked about that at all, but the athletic isn’t a ton of VC funded.
Why do VCs fund things? Because they think there’s a great business on the other side. What’s behind the rise in sports journalism? Well, sure people want to know about their teams. But you know what else is behind the rise in sports journals? Gambling, degenerates. They want hints and tips about who to bet on, on Sunday, and FanDuel and those other things are funding this huge explosion in sports journalism. Some of it’s good, a lot of it’s bad, but it’s the market. Like that’s… So, anyway, I’m ranting. I’m sorry, too much coffee.
Just one last question about Australia, then. Are publishers in the lucky country feeling any luckier as a result of this News media bargaining code or is it too soon to say?
Look, it certainly made a transfer. There’s been a transfer from Google and Facebook, to publishers. Publishers have extra resources as a result of that transfer. Publishers are using those extra resources to hire more journalists to do good work, good public interest journalism work with those resources. So, I don’t think anyone is disputing the need to support journalism, the need to find business models and provide public support to journalism. I think the question is, what should be the source of that support? And that’s where I think the debate gets a lot murkier?
Yeah. And I would say, in terms of sources, I think it’s really important to pursue a diverse array of sources. I think one of what worries me about the bargaining code is that, as opposed to, putting more independence around the press, it lashes the fates of platforms and publishers closer together. And I think that’s true of any large scale subsidy regime, whether it’s transfers or other forms of public subsidy.
So I think in the rush to solve the business model problem with really big policies, I think it’s important to keep in mind that independence is a very fragile state. And it really does depend on where the money comes from, and how that influence gets articulated and enforced. And so, I worry about the long-term independence of the press, when we start talking about really big transfers from governments or companies, typically the corporations.
I wonder if I could change the frame of reference as well. Let’s leave Google and Facebook out of it and talk about the government. One of the several interesting, pending proposals is called the Local Journalism Sustainability Act. And essentially, it allows for a tax write off for an individual of up to $250, for subscribing to a local news outlet. Now, that can be one of the startups as we’ve been talking about, it could be an established source. The nice part about that is it keeps the government out of picking winners and losers. It could go away, so it has that fragility. It’s not law yet, but I mean, I think that’s in some ways, I would agree with Elizabeth. Andrew, maybe that’s a more promising solution than tied too closely to reparations, if you will, from Google on Facebook.
So let’s talk about what would a good government public policy for local journalism look like. You’re mentioning the tax credit. That actually was one of the planks of one of the Democratic candidates the lieutenant governor of Virginia in the primary we just had. It was local tax credit. The part that struck me as being more useful, were having a good anti-SLAPP law in Virginia, which we don’t and lowering FOIA filing fees. What should governments be doing that will not in fact, make local news sites wards of the state, or surfs of Facebook and Google any more than they already are?
Well, I hope I said that the big thought behind the mechanics of the local sustainability is it pushes all of the actual decision making down to a local and even an individual level. So somebody who doesn’t care about the news, unfortunately, quite a few people are like that, they’re not going to go for the $250 subsidy. Somebody who has a terrible all the newspaper, choosing between that and Kansas start up in Santa Cruz, I think the latter will choose the new thing. So it injects money into this system and by and by there have been many similar schemes through the years. Sweden and France, I don’t know that they’re all excellent now. But I mean, journalism kind of like scientific research, good thing, not quite enough of it. So if you can put some government money into juicing that, I think that’s good policy. And that’s not necessarily the only thing as you’re suggesting, Rob.
A little bit, yes. One word from your perspective.
Yeah, I think there’s some interesting things as we start to work with communities to create new ownership structures and kind of work with publishers around succession. I think there are things on the tax credit side that could help apparel, tax credit for journalists, or, frankly, any newsroom employees. I think would bring the costs of news gathering down significantly and most of the costs of running these businesses, even the people, and so I think that would make a difference as we start to think about how to de consolidate large chains. Obviously, we went through this with the tribune in the last round, but there’s reason to believe that there are other papers out there inside of conglomerate companies that might have a better home in their local communities and the chains. And so part of it is, “Okay, what’s the carrots and sticks for doing that?”
And so, I think Steve Waldman has some interesting proposals around tax credits for donating papers. If you could convert a paper from a corporate entity to a locally or nonprofit, are there certain taxes of things you could put in place there? And I think all of that would help kind of tip the balance for some of these large conglomerate publishers to really spin off some of their smaller, lower performing papers that would preserve the local brand and local community to local asset without having to shut them down.
So I think there’s a lot of interesting stuff that could be done on the supply side, in addition to the demand side and through taxes. And none of that is about kind of direct subsidy for News gathering, which I think we have a pretty interesting and robust network of public media in this country. And in part, that’s because the CPB is just a small fraction, frankly, of the overall activity in the system. And it really leverages the activity that happens in the communities and the stations. I think the closer you get to direct subsidy, the closer you get to picking winners and losers, and I think that’s not where we want to be.
All that is true and we are working with Steve Waldman rebuild local news coalition. So at least my members are aware of and have advocated for the Local News Sustainability Act, which has a lot of those tax credit proposals in it. The other thing that sort of exists among small publishers, and it’s not big enough to be a trend yet because, frankly, of protectionism and existing state press associations, but it’s legal ads. A lot of my members would love to be able to offer that in their communities and receive funding for the public notice type advertisements in their communities. Some have done so, one of my members up in Vermont, again, the Chester Telegraph is the publisher of Record in her town. And the publication that lost that contract, the Rutland Herald kind of lost its mind.
The employees have started spamming her site with nasty comments. The State Press Association representative called that a mistake and called on the town to rescind it. Other places like in California, it’s incredibly hard, you have to have some kind of a print presence, even as the State Press Association is saying, “Well, it doesn’t have to be daily anymore, because the businesses are too sick to be able to publish every day anymore.” Instead of embracing the idea that digital only members could be members of their Press Association and gather more dues, the protectionist ones are forcing the hand of the Press Association to clamp down on it so that we’re just… It’s a sick industry. It’s a dying industry in many ways. And I don’t say that because I want it to die, but saying something is going to die isn’t the same as wanting to die, and it’s a dying industry.
And so, until this happens, until people embrace that the present is digital, it’s not the future anymore, it’s the present. You’re going to see random spasms like this. And so I do think there’s a guy out in Kansas, Jake Seaton who’s running a startup called Column to help with one central point for this interaction to happen so that his going company can keep track of all the rules around public notices and communities and make it easier for small businesses like my members to opt in. But until the press associations allow that to happen, it’s a non-starter. And those press associations are also not the healthiest businesses. So I just think it’s kind of waiting out the clock, it’s a matter of time. The digital publishers now are kind of the small fuzzy mammals ripe for the asteroid hit. And so we’re just waiting for that final ash cloud to go up and dissipate, and then we can start building the stuff that needs to be built.
On that cheerful note, let’s wrap up. We’ve talked about ad revenue, classifieds, public policy, let’s talk about subscriptions, and specifically paywalls. Since there are lots of sites that know how to demand that a reader sign up on their first click. There are lots of sites that hopefully remember that you’re actually a subscriber and don’t make you log in every time. Let’s close out by discussing ways that sites are finding ways to welcome the new reader, the occasional reader, the out of town reader. I’m thinking of things like the New York Times, if you’re a paying subscriber you now have 10 gift articles you can make public for anyone for the rest of the month.
What other good things are we seeing where I guess readers can become, I guess, a little bit of lead gen people for the papers, and the papers don’t necessarily shut out… papers, there I go again. The news sites don’t necessarily shut out the people who could be the next regular readers?
Well, the one thing, Rob, the solicitation of new subscribers has gotten very sophisticated the last couple of years. I won’t say you’re not going to have places where you get the paywall, and that’s the end of the story. But Wall Street Journal, New York Times, many good regional papers can track who are prospects, can kind of welcome them, get them registered, which helps with sending newsletters and other solicitations.
I think the state of the art has improved and is improving. But, at least in the newspaper business, and I think other successful sites, The Insider, Brodbeck, et cetera. There’s a realization that we’ve been saying all morning, advertisers aren’t going to carry the freight anymore. And in some ways, I think it’s healthy, because new sites, newspaper sites have to deliver something of value and find an audience that wants it. And I think that’s where a lot of the business model action is right now.
Elizabeth, do you have any lessons to share from the publishers in your trust?
Yeah, I mean, I think the issue of paywalls at the local level is tricky. Some audiences are just not trained to go to the site in general. And so if you have a really tight paywall, but most of your readership is actually in paper, or in their inbox, it’s sort of lost audience development. And so, I don’t think there are any hard and fast rules, I think it’s about what Rick said, which is figuring out what is the high value product that people are willing to pay for? And what’s the journey that you want your customers or readers to go on to become supporters. And I think, there’s obviously parallel paths here, too, there’s many sites that have found a lot of revenue in membership and sort of a totally different relationship that’s not transactional.
I think there are some readers for whom that’s a much more compelling value proposition than like hitting the paywall three times and continually being hit up with like 399 for three weeks or whatever. So I think there’s a balance to be struck and too much transactional language, I think does turn people off. And then it’s like you’re buying a pound of apples rather than supporting your local journalism.
The Costco Experience.
Chris, do you want to have any offer that the… I should mention, Lion is short for Local Independent Online News … a Lion perspective on getting readers, turning readers into subscribers or members, whatever you want to call them?
Well, about 50 of our publishers out of the 316, about 50 call subscriptions in their top three revenue streams, more than that have membership programs, and that really is a distinction with a huge difference. To Elizabeth’s point, that a hard paywall for a site that is just trying to start building an audience, if the site is like less than five-years-old, and you’re just trying to get people to know who you are, a paywall is very similar to the experience of having an app. It’s a double bar to clear. They’ve got to find you and then you’ve got to convince them to pay you in that transaction, versus what a membership funnel kind of looks like. I join a site, I sign up for an email newsletter, and then I get a solicitation, “This is what the site is, this is what we cover, you should support our work because no one else is doing it.”
And that argument gained a lot of weight in the last year. We’ve always been able to say local news is important to the civic health of communities. But with Coronavirus really, for the first time, we can say local news can save lives. If we’re accurately reporting on something that you’re not getting information from otherwise, then it’s a crucial life-saving service. And several of our members spun up membership programs at the beginning of the pandemic and built revenue streams to help support them while the advertising fell off a cliff because stores weren’t open and distribution points for print media weren’t open. And so, we saw members sort of take advantage of this incredible disruption, this acceleration from the collapse of the other parts of the industry.
It just becomes a different way to… Like reader revenue, I would say is that, like I talked about advertising being the number one revenue driver in Lion, but the fastest growing one is absolutely reader revenue. And especially for the smaller newsrooms, it feels to me more like membership is the value proposition that makes sense. It is a bit of a public media model. If you support the work that we’re doing, then please sign up and become a supporter through. But that in the technical parlance, it’s a drip campaign, where you’re asking people through email to take an action to pay for something. What they’re paying for is intangible. It’s not the same as hit the paywall and pay me money.
And I think the solution there, especially for the larger newsrooms, is some model of micropayments because, I might read the story in the Cape Cod Times about the guy who claims he was swallowed by a whale, if I only had to pay a quarter. And everybody wants to read that story, but a million people don’t want to subscribe to the Cape Cod Times to read the story about the guy who says he was swallowed by the whale. So there needs to be, I think that interim thing, and you can see the application of that in sports.
If my team is playing your playoff team, I’ll read your column about my guy, I’ll pay you a quarter for that over a discrete frame of time. But I don’t want to subscribe to your newspaper and pay you $40 a month and then figure out how to cancel it by calling somebody on the telephone. So it’s just an interim period of time until I think that micropayments thing gets figured out. And then we figured out how to monetize the regular reader, the occasional reader. And we just do a better job of sweeping that up. Right now, in my mind, that’s kind of the gap, right? There is not a mechanism for the occasional reader to get what they want and for the publisher to feel like they’re not missing out in that transaction. It’s just a matter of time, I think.
I will admit, I’m a little skeptical about micro payments. I think I’ve seen Rick shaking his head because people have been hoping we can figure out a long time and collaborative systems like Blundell have never quite seem to work out. But perhaps-
Somebody may get it right sometime. But you’re right, Rob, 10 years of trying it with some very smart people haven’t been able to sell it yet.
A lot of stuff didn’t work till the iPhone was invented either.
Right. Well, if Apple finds a solution, we know it will be one where Apple keeps a large chunk of the profits. Perhaps 30% comes to mind. Let’s close. We’ve talked about a lot of things that companies and sites and newsrooms are doing wrong, governments are doing wrong. Let’s recap with one suggestion for your choice, a local publisher, a local government, a bigger news chain, the web. One thing they should start doing different, that would make things better for local news, besides subscribe to the local news site of your choice.
One thing that hasn’t come up that I would highlight as positive is that we have organizations, newer organizations that are going directly to producing quality local news. So we mentioned Steve Waldman, another of his inventions, his report for America, which is competitive. People apply to get a job. They get assigned to news outlets, both for profit and legacy and new ones. And when the purpose of covering news and isn’t being covered elsewhere, and we’ve mentioned ProPublica, I was fascinated to learn that their fastest growing program now is one in which they bring their very substantial expertise to helping local news sites.
So, the grand Pulitzer Prize winner a couple years ago is anchorage Daily News, doing some incredible work out in sort of the unexplored, lawless no shares part of Alaska. And that was very much a collaboration between some good reporters and editors there. I think that that mode is ripe to keep growing. And that’s certainly what both those are organizations are aiming for.
Andrew, do you want to offer a suggestion to publishers or governments?
Yeah. Thanks, Rob. And let me say, thank you for the opportunity to participate in this discussion, I think it’s been a really terrific conversation. You asked us for one answer, I’m going to-
Maybe two, to have little flexibility.
I’m going to take a different tack. I think the key thing I take out of this conversation is that there are lots of parts to the answer. I thought lots of Chris’s and Elizabeth’s suggestions were really important, but also really varied. And show that there are many different paths to the solution here, a solution to an incredibly important problem. Clearly, one part of the solution is business model evolution. And Chris talks a lot about the importance of online, the importance of digital. We talked about membership, business models and a range of other business models. And certainly, that business model evolution needs to continue to occur. And that is part of the solution. Another part of the solution is better harnessing subscribers and understanding willingness to pay.
Another part of the solution, I do think is government support. I come from a country in which there is a lot of government support for media, including and not limited to an enormous amount of public support for public broadcasting, which plays a really important role in local news. Public Broadcasting isn’t the only way for governments to support that role, but it is certainly one way and at least in many people’s view, an important way. I think I would say that there is no one size fits all answer for all publications. It matters differently to the nature of the content, local versus Metro, different types of content. But we have done this before, we have been through business model evolutions where industries were torn apart, but the underlying demand for the product did not disappear.
And that is the situation we’re in now. There’s still an enormous amount of demand, challenges, how we monetize it, there are lots of different solutions to that. All those solutions will play a role, all those solutions will play a role in different combinations for different publications. And there’s a long way to go.
Chris, your turn.
Yeah, I think, look, it’s not a journalism problem, it’s a business problem. We know there’s demand for journalism out there, I’ve lost track of the startups that have foundered, not because they weren’t producing great work, but because they couldn’t pay for it. And so I think reframing this as an opportunity around training journalists to be entrepreneurs, because most of these startup leaders, and digital-only publishers come from a journalism background, what they don’t have is the business plan. And I do think there are lessons that can be applied from startup culture about finding and measuring and wetting the appetite of a discreet audience. And then building based on that audience’s needs and wants. These are all things that you learn when you go through any accelerator program in Silicon Valley. But it is woefully missing from the equation for a lot of these startups.
My sense is our theory at Lion is that if we equip them better in the very beginning, they’ll be stronger later on. If we train them well, if they go through the exercise of testing their idea against a market, against users before launching it, then there’ll be more likely to be strong a year, two years, three years in. And that’s what we’ve been able to get support from platforms for. Lion’s largest funders right now are Facebook and Google, and then the Knight Foundation, and the Democracy Fund, because the platforms now are starting to recognize their responsibilities here, I hope. There are now millions of dollars flowing into journalism, from platform forums, excuse me, in the US, with this stuff in mind, and that’s what Lion wants facilitated.
So what I think needs to happen is much more creative entrepreneurship, in News. Local newspapers were important and occupied a key part of their community, but they were also part of a larger ecosystem for that local newspaper. We need to build that in a different way for these local sites. There needs to be solutions in those markets around high school sports, around court reporting, around whatever we’re going to do about criminal justice reporting these communities. And that’s changed radically. We haven’t talked about that at all, but over the last year, it’s been a sea change in how local papers think and talk about what the police tell them happened, versus what actually happened. How many businesses were built on what the police said happened?
And so we just need a culture of entrepreneurship and supporting these local businesses in this country. And I’m here to help sort of define what that is, so that we can build these strong pillars of community going forward.
There’s definitely a whole ‘nother panel we could do about things like naming suspects and publishing mug shots, but we’re about out of time. So Elizabeth, you get the last word here.
Great. And thank you so much for such a productive and wide-ranging discussion. I think the other piece of sustainability, honestly, going forward is to Chris’s point, yes, this is the business model, the business model being remade, we need to kind of all of the above approach. But I think the other really exciting development that I’m seeing across the country is the growth of collaboratives and collaborative journalism and newsrooms coming together to share resources, to share stories, to build an audience together. And I think in an environment where the News resources are shrinking, that kind of collaboration is just really critical. And so it’s also starting to think about not just the business model of an entity, but how do you really think and produce journalism at an ecosystem level? And I think both of those have to go hand in hand.
All right. Thank you, everybody. I have to admit, we probably haven’t figured out ways for local news to generate the kind of income that’ll let publishers buy beach houses. But if the reporters can least afford to take vacations on the beach, that’d be real progress. And I think I hope we did get somewhere to get a little further down that road.
Thanks, everybody, for your contributions and thanks to you all for staying tuned, watching, and listening.