COVID-19 Accelerates Local News Trends, for Bad and Good

As Financial Crisis Deepens, Newsrooms Making Quicker Shift From Print to Digital and From Dependency on Ad Dollars to Reliance on Reader Revenue

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.

  • Many legacy news outlets that are in better shape financially are surviving, but even they will emerge from the pandemic with leaner organizations that are more reliant on customer revenue for their future.

  • New research shows the local “news deserts” problem is getting worse, with a number of smaller daily and weekly outlets suspending publication.

  • 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.

  • There’s a growing movement for changes in public policy to bolster the local news industry, but there’s also strong skepticism about government involvement in an independent press and questions about how quickly any aid could be provided to the industry.

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 ...

Tim Franklin, head of Medill Local News Initiative

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.

“If there’s a silver lining to this historic pandemic, it’s that it vividly illustrates the essential role that local news plays in our communities. And that’s leading to a surge in people paying for local news, and to a reawakening among policymakers and philanthropists about how they could be part of the solution. Those are good things.”

The Retreat of Print

In late March, 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 cancelled 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 has added comics to its digital replica edition, plus other features not in the print paper. It has also enhanced its Sunday print edition, including a Perspective section, a games-and-puzzles tabloid and “good news” stories.

“The vast majority of readers we’ve heard from have been supportive and understanding of our decisions,” Katches said. “… That doesn’t mean there aren’t readers who miss the printed paper every day and want to see it come back. But they understand the situation we’re in. We’ve experienced a 50 percent drop in advertising as a result of the pandemic. Most of the state has shut down. We’ll consider bringing back home delivery days when business conditions improve.”

Along with its print cutback, the Times and its related companies will get financial relief from a $8.5 million Small Business Administration loan under a new federal program to help businesses hurt by COVID-19.

For more than a decade, news executives have been talking 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 4 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? “

Abernathy noted that even the Arkansas Democrat-Gazette, which has made a dramatic switch to digital by dropping daily print delivery and giving subscribers iPads to read a replica edition online, has kept its Sunday print edition because it’s a moneymaker.

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.”

We know lots of newspapers that have reduced frequency, and we expect a lot more.

Nancy Lane, CEO of the Local Media Association

But that doesn’t mean their previous hesitancy was a mistake, Lane said.

“I think they were smart to hold onto print as long as it was profitable and paying the bills as they work toward a digital future,” Lane said. “But now with the crisis at hand, it’s not smart. So it forces them to roll out a plan a lot sooner than they wanted to.”

Media industry analyst Ken Doctor, who writes the Newsonomics column on the Nieman Journalism Lab website, cited Forum Communications in the Upper Midwest. The Fargo, N.D.-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.”

But are news subscribers able to maintain a print habit that has changed from every day to three days a week? Publishers face uncertainty on that point.

“If they’re dropping two or three or four days of print, how many of those print subscribers are they going to maintain?” Doctor asked. “At what price point?”

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

“Print justified itself when the amount of print advertising was sufficient to justify the cost of printing and delivery,” Rosenstiel said. “Roughly half of a newspaper’s costs are tied up in paper, printing and physical distribution. That made sense as long as print advertising was bringing in enough revenue to cover all of that. Recently that is no longer the case. … For most news organizations, a printless future is the future. 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.

An internal memo at the Los Angeles Times last week said that because of COVID-19, “the Times has lost more than one-third of its advertising revenue and expects to lose more than half of its advertising revenue in the coming months.”

Many news organizations report similar ad disappearances. Not only that, said Local Media Association’s Lane, but “I think there’s an accounts receivable issue for money that has not been collected for ads that ran prior to the crisis.”

“A lot of these companies that have so relied on advertising over-all, for 60 percent plus, 65 percent plus of their revenue will all of a sudden be 50-50 companies,” Newsonomics’ Doctor said. “… For many, they have gotten a few new subscriptions, but they’re losing massive ad revenue. … The question is: Can they get that reader revenue to grow significantly?”

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.

Tom Rosenstiel, Executive Director, American Press Institute

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.”

The good news (yes, there is some) is the healthy subscription bump that many news outlets are seeing because of strong interest in COVID-19 coverage.

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. … We’re also working with those types of publishers to fast-forward their digital transformation, and that’s hard when you’re so far behind.”

Will ad dollars come back robustly when the pandemic recedes?

“No,” said Lane. “I think it will be a long, slow recovery for advertising. I don’t think anyone thinks, like, we turn on the switch, everything goes back to normal and advertising goes back to where it was – which was still not where anyone wanted it to be.”

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 of five days a month through June. 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. That certainly was the case at previously strong papers like the Denver Post and the Mercury News of San Jose, Calif. Chicago Tribune reporters are so worried about the prospect of an Alden merger that they are conducting a high-profile campaign to recruit a wealthy owner or owners to rescue the news outlet. Tribune Publishing has recently made buyouts to reduce staff and has 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 now in bankruptcy. Its hedge fund creditors, Chatham Asset Management and Brigade Capital Management, want to put it up for auction. That has prompted speculation that another hedge fund or private equity firm active in the news industry might be interested in acquiring McClatchy.

“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.

Nancy Lane, CEO of the Local Media Association

“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 start-ups. All together we matter, and I’d like to see the emphasis on that. Now, there are bad owners out there. They give us all a bad name and cause a lot of problems in the industry. But we work with so many family-owned and independent news media that are doing great work that are very committed to their communities and local journalism, and that inspires us every day.”

Some analysts expect private equity companies to do their damage in the news industry and then for more independent, regional owners to emerge.

“I think we may be looking at an era in which we go to a different structure on the chain,” Abernathy said. “It’s going to be privately held and regional. It’s not going to be the 20th century or even the 21st century version.”

Old structures of legacy news outlets remain an impediment, Rosenstiel said.

“The problem that a lot of legacy companies have had is that the business side of their operations were largely ad people,” he said. “Because that was the primary way that newspapers made their money. … And so their tendency to try to deal with profound disruption of newspapers was to pedal the advertising bicycle harder. Essentially, they were focused on the thing that was shrinking and insufficiently focused on the thing that they could grow. At least in the present, they’ve got to accelerate their use of analytics, their messaging to new subscribers. This is accelerating their focus on consumer revenue, which is the future.”

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, S.C., 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 still has more print subscribers than digital, but it 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.

Our print ad revenue has lost about 40 percent. And it’s very painful. But again, even within that, there are a lot of our advertisers that we are retaining, which is great.

Steve Yaeger, Chief Marketing Officer and Senior VP, Star Tribune of Minneapolis

“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. “We’ve seen a lot of subscribers switch because of the situation, some out of convenience, some out of fear, some out of budgetary reasons.”

The ad situation is troubling.

“Our print ad revenue has lost about 40 percent,” Yaeger said. “And it’s very painful. But again, even within that, there are a lot of our advertisers that we are retaining, which is great. We’re very grateful for them. … It’s forcing a lot of ingenuity, it’s forcing a lot of creativity, it’s forcing a lot of hustle.”

The Star Tribune has advantages over some other legacy media, with Minnesota billionaire Glen Taylor as owner. Yaeger was asked why the Star Tribune had been successful.

“Certainly we’re not immune to the same market dynamics that are affecting other news organizations in other markets,” he said. “We might be doing some things differently. I would say that as always it starts with the product, it starts with the news. Over the last decade or so, we’ve held our newsroom headcount more or less steady, and that allows us to produce a pretty robust daily report that we think then is worth paying for.”

News Deserts

The University of North Carolina’s Abernathy will soon update her much-watched “news deserts” report, documenting the disappearance of local news outlets that leaves more and more Americans starved for information.

Abernathy gave the Medill Local News Initiative an early peek at a key new finding: In her previous report in 2018, the U.S. had lost 1 of 5 newspapers since 2004. Now it’s 1 in 4.

“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 main culprit was the Great Recession of 2007-2009, Abernathy said, and she is worried that the economic impact of the pandemic will cause a further die-off.

The places that have lost newspapers are, by and large, much poorer than the rest of the country.

Penny Abernathy, professor, University of North Carolina

Abernathy puts newspapers in three categories: 5,500 small dailies and weeklies, about 150 state and regional papers, and then a few national papers such as the New York Times and Washington Post.

“The bulk of both the loss in circulation and the loss in journalists has occurred at the state and regional level,” Abernathy said. “So that has wiped out all of those critical beats that we used to rely on, whether it was health, whether it was education, whether it was political coverage of the state, all the great investigative work. So that’s been wiped out there. And then of course at the local level, the problem you’ve got is, what’s been wiped out is you no longer have someone showing up for the routine government meetings, like the school board.”

The Role of Start-ups

What about nonprofit digital start-ups? Could they help address news deserts? Abernathy doubts it.

“Most of the digital start-ups 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. … When we looked at it in 2018, more than 90% of the digital start-ups were located in metro areas. You already have quite a few options there anyway.”

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

Local Media Association’s Lane was supportive of digital start-ups, with some caveats.

“We love what’s going on in the world of digital start-ups, 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. We like models like the Daily Memphian, a nonprofit coming into Memphis, funding of $7 million to get it launched by the community. That gets our attention. So if it’s well funded and they have a lot of runway, we think that’s a better route than the scrappy start-up who’s on a shoestring budget, trying to make it on ad revenue and memberships from Day One.”

The Beacon, a new Kansas City digital start-up 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.”

If someone was coming to me for advice, I’d say this is the time to go to your community foundation.

Fran Scarlett, Chief Knowledge Officer, Institute for Nonprofit News

Fran Scarlett, Chief Knowledge Officer at the Institute for Nonprofit News, said the impetus for start-ups is not just coming from journalists. She said members of communities are approaching her organization and asking: “How do we get this going?”

In these tough times for financing journalism, new start-ups should seek funding close to home, Scarlett said.

“I think to go to a foundation now, a traditional foundation, a journalism foundation, for funding right now as a start-up might be tough, because they’re trenching in to help the folks that they already have invested in,” Scarlett said. “If someone was coming to me for advice, I’d say this is the time to go to your community foundation.”

Conversions to Nonprofit

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.

Still unknown is whether Salt Lake’s conversion is an exception or a trend-setter.

Scarlett sees it as an emerging trend.

“We’re seeing more and more requests about conversions in the last 12 months,” she said. “More and more and more and more. I suspect we’re going to see a flood of that come June through the next whatever number of years. … We were thinking it would be, once the election money was done, once the election campaign ad dollars were done, it would be 2021 when we would see more conversions, or more desire to convert. I just think COVID has moved the timeline earlier.”

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. … Fresno Bee has 10 reporters paid for by what we call ‘philanthropy journalism.’ We think there’s something really there with that model, whether it’s going full-blown to nonprofit status or some kind of a hybrid approach like Seattle Times.”

What really matters is not the structure of your ownership but the values of your owner.

Tom Rosenstiel, Executive Director, American Press Institute

American Press Institute’s Rosenstiel is skeptical of nonprofit status as a widely applicable solution.

“If you look at the amount of money that exists in the foundation world, the world of nonprofit fundraising, I don’t think it’s sufficient to sustain any broad local news ecosystem,” he said. “And I don’t see any empirical evidence, even in a single city, where that’s the case. However, if you had a broad-based enterprise that was accepting contributions, subscriptions, large donations, doing events, had a really robust economic model and didn’t cut off options but was actually growing revenue options, that strikes me as a better strategy.”

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

Government Aid

As trillions of dollars are allocated to American businesses’ recovery from COVID-19, journalism advocates are calling for more government support for the news industry. But there are plenty of people with misgivings about making media more dependent on government.

“Government involvement means many things,” said American Press Institute’s Rosenstiel. “Postal rates was a government support of media. There is a range of things that would go all the way from a General Motors-like bailout or what they’re talking about with the airlines, where the government gives them money and actually takes some ownership, all the way down to a number of other actions that are I think much more acceptable and safe.”

Rosenstiel cited one idea that’s relatively non-controversial.

“The government is spending a lot of money on advertising about both the coronavirus and the Census and a number of other public service messaging,” he said. “A large portion of that could be directed at local media and not national media. That’s a policy decision that is perfectly benign and could make an enormous difference to the survival of local journalism. There’s a lot of money being spent on those ads, and they don’t all have to go to cable TV and network TV.”

Even in the best of times I think most journalists would not want to take money from the people they cover.

Tom Rosenstiel, Executive Director, American Press Institute

Doctor agreed that the push for an “advertising buy-in program” showed potential.

A detailed rundown of possible government aid programs, including the ad shift, was presented in a recent article in the Columbia Journalism Review by Steve Waldman, President and Co-founder of the Report for America program.

Rosenstiel views government loans as “very different than a government subsidy,” which many people in the news industry shrink from.

“Most of the news executives that I’ve talked to on the business side are not interested in government grants,” Rosenstiel said. “Direct grants like that make them uneasy and put them in a difficult position. … There are a lot of actions that the government could take that are not a direct bailout that are interesting. Particularly with the environment that we are in right now where perceptions of media are so polarized and politicized. Even in the best of times I think most journalists would not want to take money from the people they cover. Particularly in this environment, we have a number of government officials whose attitude toward a free press is so hostile and dishonest that going into business with them seems fraught.”

Local Media Association’s Lane noted that public funding of media such as National Public Radio is not new.

“It’s really tricky, though, depending on the ownership structure,” Lane said. “Because we are watchdog journalists, we’re holding government accountable and then we’re going to accept public funding. As long as no lines are crossed and everyone can still do the job effectively, there probably is a role for public funding of local journalism, but the devil will be in the details, and it’s not going to be for every kind of ownership structure.”

Making the Most of Metrics

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.

The good news is that all of our research shows that local news consumers value quality, original storytelling.

Tim Franklin, head of Medill Local News Initiative

“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 even as the news industry dives more deeply into all types of metrics – reader frequency, reading depth, subscription churn – it’s important to remember the most important number of all for local news.

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

About the author

Mark Jacob

Editor

A former Metro Editor at the Chicago Tribune and Sunday Editor at the Chicago Sun-Times, Jacob is chronicling the Local News Initiative’s progress for the project’s website. He is the co-author of eight books on history and photography.

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