September 29, 2020

Two full-scale newspaper launches in digital format marked milestones last week as they test whether going big can challenge a shrinking legacy print title.

The Daily Memphian in Tennessee, with a news staff of 35 and $7 million in startup funding, celebrated its second birthday.

Analyst Ken Doctor’s Lookout Local in Santa Cruz, California, hired a high-profile executive editor — Chris Fusco, who is leaving a similar job at the Chicago Sun-Times. The site, which will go live in November, Doctor said, has added four other news staffers and several business-side employees.

The Daily Memphian also had signed on an executive editor departing a metro back in December — Ronnie Ramos of Gannett’s Indianapolis Star, whose tenure included that paper’s coverage of sex abuse in the USA Gymnastics program.

Eric Barnes, founder and CEO of The Daily Memphian, pulled together a fact sheet for the two-year occasion with these highlights:

  • It has 13,900 paid digital subscribers paying an average of $9.25 a month.
  • Its newsroom staff, 25 at launch in fall 2018, has grown to 35 with an additional 20 regular freelancers. They post roughly 20 stories a day.
  • Besides avoiding deep discount introductory rates, the site is minimizing churn, losing only 10% of subscribers after six months.
  • It has launched 20 newsletters and captured 45,000 email addresses, the standard strategy these days for courting users who may eventually subscribe.

Barnes told me that The Daily Memphian is on track for his five-year goal of 25,000 paid subscribers and breaking even.

From the outset, Barnes has been explicit about challenging the legacy newspaper in town, Gannett’s Commercial Appeal, claiming that chain ownership leads to “massive cuts and loss of local focus.”

In its most recent report to the Alliance of Audited Media, The Commercial Appeal reported a paid plus digital Sunday circulation of 44,000 and daily of 23,000. It lists 2,500 users of its digital editions, and executive editor Mark Russell told me there are another 9,900 digital-only paid subscribers not reported in the statement. The two newsrooms are roughly the same size.

Barnes said that he believes The Daily Memphian is the largest one-city nonprofit and unusual in offering a full range of coverage (as opposed to smaller sites that focus exclusively on single topics, investigations or accountability journalism).

He likes where the Memphian is positioned competitively as a business, Barnes said, as I asked whether the combination of debt and a profit imperative is weighing down chain-owned titles.

“Yes, absolutely. … Digital advertising has plateaued; they are resorting to deep discounts and churn to grow a paid digital volume. We have all taken a huge advertising hit from the COVID-19 downturn, but print advertising especially.”

As for news staffing and capacity, Barnes said, “I hate it when any journalist loses a job, even if it’s at The Commercial Appeal.” But he considers continued newsroom cuts likely at his cross-town rival together with dependence on news from other Gannett papers in Tennessee.

A soft spot in The Daily Memphian profile, in my view, is that the source of its financing is less than fully transparent. Businessman Andy Cates led the launch effort and is chairman of its board and probably a major contributor.

Most of the initial funding has flowed through the Community Foundation of Memphis. The foundation makes grants of its own but also is a pass-through for designated donations. So it is not possible to identify who the biggest funders are (though in fairness, that is not uncommon for nonprofit sites).

Doctor, like Barnes, decided it made sense to plan carefully and not launch before bringing on a well-paid staff of 17 or so. With Lookout Local, Doctor is trying to put to work what he has learned after a long run as a consultant and analyst of the news business.

If all goes well in Santa Cruz, an adjoining county to Silicon Valley, he hopes to have a replicable model for digital-only news startups that would work in other communities.

Doctor had already hired Jed Williams, a business strategist for the Local Media Association, as his chief revenue officer. The current batch of additions includes a director of community outreach, two more editors and two full-time reporters.

Fusco explained the move from a big-city daily to a chancy startup in a lengthy note to Sun-Times staff last week. In a nutshell, he emailed me, “This is a ground floor opportunity to take everything I’ve learned in journalism — the good and the bad — and apply it to an editorial and business model that Ken clearly has thought through. Every aspect of our industry is risky right now, and the benefits of being part of something that can grow and prosper far outweigh the risk of trying something new.”

Lookout Local has raised $2.5 million in foundation grants to get started, Doctor told me earlier, and he counts The Daily Memphian as one of his models. The publication is a for-profit public benefit corporation, which facilitates tax-free support. Like The Memphian, Lookout Local will be seeking paying subscribers as a main revenue source.

The venture should be ready for liftoff by late October, Doctor said in an email, but he has pushed the launch back to mid-November.

“We thought it would be presumptuous for a new local news company to begin publishing just before the election, so we are opting for soon after and pointing to a robust 2021.”

Rick Edmonds is Poynter’s media business analyst. He can be reached at redmonds@poynter.org.

Correction: Lookout Local is not technically a nonprofit organization, but instead a for-profit public benefit corporation. Subscription numbers for The Commercial Appeal were also updated. 

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
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