Will local media survive COVID?

This article comes from the March 30 edition of my newsletter.

The coronavirus may very likely be the knock-out blow to long-struggling local media outlets that depend on ad revenue.

Let’s start with the paper of record, the Austin American-Statesman. After shedding dozens of positions over the years via buyouts, the Statesman was purchased in early 2018 by GateHouse, the largest newspaper owner in the country, whose profit model is based on gutting local papers. Late last year, GateHouse acquired the second largest chain, Gannett, and is now operating under the Gannett brand.

From the New York Times today:

You could, this Sunday, purchase Gannett, the biggest newspaper chain in the country, for a mere $261 million — about a quarter of what Michael R. Bloomberg spent on his presidential campaign.

And (Elizabeth) Green, a founder of the nonprofit education news organization Chalkbeat, is one of the few people who may be able to raise the money to pull off a deal like that.

But she quickly realized that Gannett wasn’t worth it: Buying it would mean signing up to pay off a high-interest loan from a giant New York private equity firm and relying on an advertising business model that may be in its death throes because of the coronavirus.

Indeed, I had already begun writing this article when it was reported that Gannett will require any employee making over $38,000/year (that likely includes every Statesman reporter) to take three weeks of unpaid furlough over the next three months.

The ad-based revenue model that used to prop up local papers has been eroding for 20 years. The reason they succeeded for decades was simple: there was no competition. Where else would a local car dealer advertise other than local media? Where else but the classifieds section of the local paper would a landlord place an ad for a vacant apartment?

Craigslist completely destroyed the once-profitable classifieds business and the broader internet opened up new advertising opportunities that local media couldn’t compete with. Sure, local papers sell online ads, but they don’t get anywhere near the money they used to get for ads in print.

Many of the local businesses that continued to advertise in local print –– local retailers, local bars and restaurants –– were just dealt a potentially fatal blow by the coronavirus. Whatever margin local media was operating on before will likely evaporate.

It’s well-established, for instance, that the Austin Chronicle, which has remained a much thicker paper than many of its peers in the alt-weekly world, has stayed alive in recent years due to the largesse of its founders, Nick Barbaro and Louis Black. Both men were made rich by SXSW, and have used their fortune to keep the lights on at an unprofitable enterprise. The Chronicle has also asked readers for donations, an unusual step for a for-profit publication.

I don’t know what the implications of SXSW’s cancellation in particular has on Barbaro or the Chronicle, but it’s likely that the closure of local retailers and eateries will prove devastating to the paper.  The first paper where my work was ever published, Isthmus, an alt-weekly in Madison, Wis., announced that it would “go dark for an undetermined period of time due to a dramatic drop in advertising.

The death of the advertising model does NOT have to be the death of local news. At least not in Austin. Strong news reporting –– in many cases better than what the ad-based model provided –– can be supported through philanthropy and/or subscriptions.

The philanthropic model is best-exemplified by the Texas Tribune, which raises money from donors large and small and makes money by hosting events. KUT, like other public radio stations, is also funded mostly through donations as well as some public funding.

The Austin Monitor and the Texas Observer feature a blend. Both are nonprofits but they also sell subscriptions.

And then, of course, there’s this newsletter, which is funded entirely through subscriptions.

I’m fairly optimistic about the long-term future of local media in Austin. Not only is it a large and growing city, but it has a large population of highly-engaged people who have both the interest and the mean$ to support nonprofit or subscription-based media. I am much less hopeful that quality media will survive in poorer communities, including some large cities. 

(To be clear, I don’t expect any of this to serve as much consolation for the many journalists who are looking ahead at pay cuts and layoffs. I don’t want to see any current publications fail and I very much encourage employees of local media outlets to unionize so that they have a seat at the table during the tough times ahead)

In this context, my own contribution to local news is limited by the fact that one person only has so many hours in the day to work, especially when I’m trying to take care of a 1-year-old.

However, my hope is that in the coming months the subscriptions will continue to grow and I will be able to devote myself to this project full-time. I’ve also begun to consider ways that I can offer the product at free or reduced rates to those for whom $10/month or $100/year is a significant burden. One idea that a reader shared is allowing subscribers to pay a little extra for their own subscription (perhaps $1/month or $10/year) to subsidize subscriptions for others. If you have other ideas, feel free to share.

This is just a small sample of what you get every weekday if you subscribe to the Austin Politics Newsletter

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