April 22, 2020

This is an abridged version of an article on Northwestern University’s Medill Local News Initiative website. It can be read in its entirety here

Before 2020 even started, we knew it was shaping up as a brutal year for journalism jobs as major chains were merging and cutting staff. We knew small publications, especially weeklies, were struggling. We knew “news deserts” were growing across the country. Then came COVID-19.

Now 33,000 American journalists have been laid off, furloughed or given pay cuts. The impending recession — or even depression — could take out some of the best advertising customers for news outlets.

What will local news look like when we emerge from the pandemic? Interviews with journalism organization leaders, analysts and scholars paint a portrait of an industry transforming on the fly:

  • The move from print to digital has been thrown into overdrive as publishers look to cut costly printing and distribution expenses on unprofitable days of the week.
  • Likewise, as ad revenue plummets, news outlets are hastening their shift from an advertising-based business model to getting customers to pay for content through digital subscriptions or memberships.
  • Major news chains, undergoing dramatic restructuring even before COVID-19, are ill-equipped to withstand the financial pressures from high debt loads and falling stock prices.
  • While corporate and foundation support for the local news industry has increased in recent weeks, many doubt whether there’s enough philanthropy to meet the need, especially in poor areas.

COVID-19 has shown the value of local news, boosted audiences and increased subscriptions even though many outlets have dropped their paywalls for pandemic coverage. But the virus could also be fatal to news coverage in some parts of the country.

“This crisis is accelerating at warp speed trends that already were underway in the local news industry — namely the shifts to digital and a consumer-pay business model,” said Tim Franklin, the senior associate dean at Northwestern University’s Medill School of Journalism, Media, Integrated Marketing Communications and the leader of the Medill Local News Initiative. “Some will not survive this moment, and it pains me to say that. But many others will transform, innovate and triage their ways through this crisis, and those organizations may actually emerge better positioned for what we all know is largely a digital future.”

The retreat of print

In late March, the (Poynter-owned) Tampa Bay Times decided to cut back print delivery to two days, Wednesday and Sunday, because of the financial impact of COVID-19. In the two weeks before the announcement, advertisers had canceled more than $1 million in business, said Times CEO Paul Tash.

“Look, I’m 65 years old,” Tash said on YouTube. “I grew up reading newspapers. I love the feel of the printed page between my fingers every morning. So I understand. For some readers, this change will not be welcome.”

Many of the Times’ daily print readers have migrated to the e-edition, an online replica of the print paper, according to Mark Katches, the Times’ executive editor.

“We expected to see a jump, but the numbers have been pretty extraordinary — as many as 50,000 uniques a day using the replica product,” Katches said. “… This time last year we had about 5,000 daily e-newspaper readers. We had grown it over the past couple of months by adding exclusive features to the e-newspaper and by marketing the product more. But it ballooned on the first day the newspaper didn’t hit the driveways or front porches.”

The Times will get an $8.5 million Small Business Administration loan under a new federal program to help businesses hurt by COVID-19. Katches said readers “understand the situation we’re in. We’ve experienced a 50% drop in advertising as a result of the pandemic. … We’ll consider bringing back home delivery days when business conditions improve.”

For more than a decade, news executives have talked about cutting print days, and the Advance Local newspaper chain did so in dramatic fashion in 2012 when it reduced the Times-Picayune in New Orleans to four days a week and cut back at other papers, too. Other big chains resisted such a move for years, but McClatchy announced last November that its Miami Herald, Fort Worth Star-Telegram and Charlotte Observer were dropping Saturday print and its other dailies would do so by the end of 2020.

Now, the financial pressures from COVID-19 have accelerated the industry’s timetable.

“What you’re going to see coming out of this [pandemic] is what was probably inevitable anyway in terms of the future of daily newspapers,” said Penny Abernathy, a University of North Carolina professor who is an expert on news deserts.

“The hard reality was, even at their peak, most newspapers were never profitable more than three days a week,” Abernathy said. “But the Sunday paper especially was so profitable that it paid for the other four days of the week. One of the issues when you go from seven days a week to less than that is: How do you do it? Do you do it … from seven to six? And then six down to something else? How do you get the diehard readers of your print edition to make that transition?”

Nancy Lane, CEO of the Local Media Association, said the pandemic has put print-reduction plans into hurry-up mode.

“The crisis has forced [publishers’] hand to implement a plan that maybe was three years out, to implement it in three days. And so we know lots of newspapers that have reduced frequency, and we expect a lot more.”

Media industry analyst Ken Doctor, who writes the Newsonomics column for Nieman Lab, cited Forum Communications in the Upper Midwest. The Fargo, North Dakota-based company announced in early April that it would drop Monday and Friday print delivery of its flagship paper, The Forum.

“You see other companies that are announcing Mondays and Saturdays are going,” Doctor said, “and you’re going to see a lot more of that.”

Tom Rosenstiel, executive director of the American Press Institute, said the lower cost of digital publishing made cutbacks in print inevitable.

“For most news organizations, a printless future is the future,” Rosenstiel said. “And it may, in fact, be the only path to viability.”

Shift from ads

While COVID-19 is hastening the transition to digital, it is also quickening the transition to a reader revenue model for a simple reason: Advertising has dried up.

“A lot of these companies that have so relied on advertising over-all, for 60% plus, 65% plus of their revenue will all of a sudden be 50-50 companies,” Newsonomics’ Doctor said.

Newspapers that can’t get readers to pay may fade away, said American Press Institute’s Rosenstiel. “To the degree to which you are not making a meaningful transition toward subscriptions, the shutdown of the economy caused by the pandemic is going to strangle weak newspapers.”

News outlets that have already been aggressive on reader revenue may be able to quicken their step and stay on track, but Lane is more worried about newsrooms that are still firmly ad-centric.

“I’m mainly thinking of publishers of color, alternative newspapers, papers that relied more on a weekly free distribution but reached really important audiences, underrepresented audiences,” Lane said. “They very much still rely on an advertising model.”

Will ad dollars come back robustly when the pandemic recedes?

“No,” said Lane. “I think it will be a long, slow recovery for advertising.”

Big chain consolidation

The dramatic restructuring of news chains has an obvious result: fewer journalists covering the news.

After Gannett merged with GateHouse last year to form the nation’s largest newspaper company, it announced layoffs. Then when COVID-19 hit, it ordered many staffers to take furloughs. The stock price of the new merged Gannett has slid to the point where the company is worth half of a single house purchased by Amazon owner Jeff Bezos, as Newsonomics’ Doctor recently pointed out. Gannett is deeply in debt to the private equity firm Apollo Global Management, which could take control if the finances keep going south.

Meanwhile, there are strong signs that Tribune Publishing will merge with its leading stockholder, Alden Global Capital’s MNG Enterprises. Alden is a hedge fund reviled by many journalists as a “vulture capitalist” firm that acquires distressed newspapers and slashes their staff. Chicago Tribune reporters are so worried about the prospect of an Alden merger that they are conducting a high-profile campaign to recruit a new owner. Tribune Publishing recently made buyouts to reduce staff and reacted to COVID-19 contractions by ordering furloughs and pay cuts for non-union staff and asking guild members for concessions.

Another major chain, McClatchy, is in bankruptcy. Its hedge fund creditors, Chatham Asset Management and Brigade Capital Management, want to put it up for auction.

“What I think is clearly problematic right now is public ownership or hedge fund ownership,” American Press Institute’s Rosenstiel said, “because in those instances these companies needed to take on debt to get larger or they’ve got hedge fund owners who have a liquidation strategy.”

Some news industry advocates have come to view news chains and legacy newspapers in general as an old-fashioned business model dragging down journalism.

“There’s a sentiment out there — let newspapers burn to the ground and die,” Local Media Association’s Lane said. “And that was actually said at the Knight Media Forum this year by a presenter, and to a room full of funders. I found that very offensive and I think it’s not either/or. A healthy local media ecosystem needs all players — newspapers, broadcasters, for-profit, nonprofit, digital startups. All together we matter, and I’d like to see the emphasis on that.”

Rosenstiel is optimistic that local news outlets can get consumers to pay.

“While some people are skeptical that there are enough subscriptions out there for local publications, if you do the math and you do the modeling, and you look at what the potential market is, if you can create a relationship with readers, I believe those models are viable. I believe there are enough local subscribers out there for these legacy local publications to make it.”

Legacy that works

Not all legacy publications were in big trouble before the pandemic, of course.

Newsonomics’ Doctor cited several non-big-chain news outlets that are relatively healthy and have “a deep civic commitment.” Among them are the Dallas Morning News, Seattle Times, Los Angeles Times, Boston Globe, Post and Courier of Charleston, South Carolina, and Star Tribune of Minneapolis.

“They too are hurt by this [pandemic], and we’ve got to be as concerned about them, because they are a model that can push through this,” Doctor said.

Minneapolis’ Star Tribune has 96,000 online subscribers — 66,000 digital-only and 30,000 with a digital-print bundle. It has a goal of 150,000 digital subscribers by 2025, and that goal is unchanged by the COVID-19 crisis, said Steve Yaeger, chief marketing officer and senior vice president of circulation.

“In the short term, [the pandemic has] accelerated our acquisition of digital subscribers and it’s frankly accelerated the transition of some readers from primarily print readership to digital readership,” Yaeger said.

But the ad situation is troubling. “Our print ad revenue has lost about 40%,” Yaeger said.

A key gauge of the overall health of local news is the news deserts report by the University of North Carolina’s Abernathy. She gave the Medill Local News Initiative an early peek at a key finding: In her previous report in 2018, the U.S. had lost one of five newspapers since 2004. Now it’s one in four.

“The places that have lost newspapers are, by and large, much poorer than the rest of the country,” Abernathy said. “You’ve had the collapse of the for-profit news business model in these places.”

The role of nonprofits

What about nonprofit digital startups? Could they help address news deserts? Abernathy doubts it.

“Most of the digital startups are in large metro areas,” Abernathy said, “and they’re located around there because that’s where all the for-profit and nonprofit money is.”

Abernathy said her 2020 update will show that the number of digital startups has been about flat from 2018 to 2020.

Local Media Association’s Lane was supportive of digital startups, with reservations.

“We love what’s going on in the world of digital startups, but we also know that they have not proven out a business model that’s sustainable either,” she said “There are very few Texas Tribunes out there. So the rest of them struggle the same way that legacy media struggle.”

The Beacon, a new Kansas City digital startup that was featured in a recent Medill Local News Initiative article, plans to launch its website this summer as planned, with no delay because of the COVID-19 outbreak. In fact, the pandemic speeded up the timetable for a soft launch, which is now underway via social media and newsletter.

“We just got a Facebook grant around COVID-19,” said Beacon founder and editor Kelsey Ryan. “We launched a Kansas City Coronavirus Updates group with 5,000-plus members for engagement and opened up moderation with other media.”

Last November, the Salt Lake Tribune announced that it had received Internal Revenue Service approval to become the nation’s first legacy newspaper to go fully nonprofit. Fran Scarlett, chief knowledge officer at the Institute for Nonprofit News, sees it as an emerging trend.

“We’re seeing more and more requests about conversions in the last 12 months,” she said. “…I suspect we’re going to see a flood of that come June through the next whatever number of years.”

Local Media Association’s Lane said there are a variety of ways that nonprofit funding could work.

“You look at the Philadelphia Inquirer. It’s owned by a nonprofit,” she said. “You look at Salt Lake Tribune. And even what Seattle [Times] is doing. Seattle has four funds that are paying a good chunk of the newsroom and investigative reporting with a nonprofit approach.”

To Rosenstiel, the whole issue of commercial vs. nonprofit is “a naive distinction.”

“Nonprofit status can reduce the profit you need to make, but so can a benign owner,” he said. “… What really matters is not the structure of your ownership but the values of your owner.”

Data mining

When news organizations are struggling to maintain basic coverage areas, few have made the necessary investment to fully study the huge amount of data they hold on their customers’ behavior. This means the roadmap that would lead them to greater customer satisfaction often remains buried.

The Spiegel Research Center at Northwestern’s Medill School has analyzed website data from nearly 20 newsrooms to identify behaviors that lead to subscriber retention, including the effect of ad blockers.

“As the industry furiously shifts to more of a consumer-pay business model, it’s only going to be successful if it truly understands the behaviors of its paying customers and uses data to find ways to engage them with them on a regular basis,” Medill’s Franklin said. “The good news is that all of our research shows that local news consumers value quality, original storytelling. The key is providing local journalism worth paying for, and then finding new and better ways to get it in front of consumers.”

But Newsonomics’ Doctor offered a reminder about the most important metric:

“All we care about — and by ‘we’ I mean American society — is how many journalists who actually know the community are covering the community. That’s the metric that counts.”

Mark Jacob is a former metro editor at the Chicago Tribune and Sunday editor at the Chicago Sun-Times. He is chronicling the Local News Initiative’s progress for the project’s website. He is the co-author of six books on history and photography.

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Mark Jacob is editor of the Medill Local News Initiative website at Northwestern University.
Mark Jacob

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