News Deserts and the Economics of Local News

Local news is and will continue to be an invaluable source of information not only for the local communities which they serve but also for our society at large.

In recent years, the growing issue of “news deserts” has continued to plague the media landscape across the country. While it doesn’t mean that local news completely disappears in a given area - sometimes cracks are filled by adjacent counties and coverage of basic news - the quality, depth, variety, and investigative impact of local coverage diminishes, leaving local communities high and dry, with only broad news content that lacks local appeal and specificity. In this article, I hope to dispel some myths about the history of news deserts and what can be done to turn back the tide.

For starters, one of the biggest myths about news deserts is that it’s only a problem for rural areas. Cities like Denver and Charlotte are seeing a “drying up” of local news, as well. While they are far from being news deserts in the strictest sense, they’re suffering from a similar decline in sustainable local coverage. This economic decline of the local paper gives rise to “ghost newspapers” or dailies or weeklies that never shutter but greatly scale back their coverage of local government meetings and other topics of interest to the local communities they once covered. In the end, the result is the same: large swaths of the country are losing out on local perspectives, diversity, and representation. And it is an existential threat to our very democracy.

While much has been written recently about news deserts, most of it focusing on the impact it has on communities, a great deal of the conventional reasoning behind what is causing them misses the root cause of the issue. People say it’s due to the decline of print and the growth of digital, or a lack of interest in local news, or the rise of “big tech” and search. But these are myths. The decline of local journalism over time was all but inevitable due to the impact of our increasingly interconnected society. While much of the reporting on this topic rightly identifies the serious potential harm from a lack of local news, none of it addresses the true underlying cause of news deserts: economies of scale.

The economic model that once enabled our beloved local newspaper to be a viable business is not working anymore.

Before the digital era, the local news space was, in fact, a closed ecosystem. National and local news were quite separate. National TV news typically just covered the biggest stories, and without much depth. By contrast, local TV could (and still can today) only cover a small subset of local news because of its high production costs, airtime/watch-time limit, and its entertainment-focused design. Neither could fully satisfy demand. 

As a result, the local newspaper became the ‘default’ news source for most people, and it was also the only available marketplace for local advertisers. Usually, 1-3 local newspapers dominated the market in a certain region, given the population limit. This monopoly/duopoly situation allowed the local newspaper to become the default choice for local businesses who wanted to advertise if they couldn’t afford to advertise on TV. As a result, the local newspaper was, for a long time, a lucrative business! It had a stable cash flow, so long as they wrote relevant local stories, and many grew beloved reputations they could leverage to bring in ad dollars from local businesses.

Our first-hand studies in many local markets indicate that this old model's effective ‘CPM’ (revenue per 1000 views) could be up to $300. And in most cases, it was above $100 - way higher than the digital advertising rate we have today. But with the introduction of digital technologies, especially digital advertising, this entire economic model collapsed.

While this didn’t happen overnight, digital advertising, with its focus on ‘impressions’ and ‘CPM’, made us all focus on the number of eyeballs, or scale. Local news simply could not compete with this type of scale and demand. Local news, in contrast, has never been an impression-based system. It has a natural constraint - the population of the community it serves, which is preventing any local-based businesses (retail, services, news) to see real economies of scale.

Newspapers worked in the past because of one thing - scarcity.

For example, a local news story today that’s not on NewsBreak, no matter how high-quality or engaging it is, can usually only reach an audience of a few thousand at most (and many local stories reach far less). In contrast, a national story, a viral piece on a popular celebrity, or just a “cats and dogs” video can easily get millions of views on social platforms. As for monetization, a local story’s digital ad revenue today is in the range of single to double-digit dollars, sometimes just dimes or even pennies. So, revenue has significantly decreased but the operating cost of running a local news outlet hasn’t changed, or may have even increased! You still need to pay your journalists, your production costs, your rent & overhead, plus new expenses like web hosting/CMS/SEO if you’ve made the jump to digital. Suddenly, local news stops being a viable business.

How to reverse this news desert trend.

The answer may fall into a model that’s already working well in other domains: The Sharing Economy. Think about Uber, Airbnb, or DoorDash. By adopting a similar sharing model to pay for the important work that journalists provide, we may be able to develop a new, sustainable way of delivering the local news to readers, IF we’re able to re-establish the flywheel of Economies-of-Scale.

And that might look something like this:

  1. On the “macro” side of the economics, having a sharing platform (or multiple platforms) that provides a solid foundation to local news outlets - all the “must-have” and “nice-to-have” digital capabilities to run news publishing, such as CMS, web hosting, app development, newsletter, paid subscription module and/or advertising stack, backend operations, distribution/marketing suites (e.g., SEO, social distribution tools), data analytics, etc. - would be key. In this model, the owner/publisher or the editor-in-chief of a local news outlet doesn’t need to spend a long learning curve and become an expert in new, digital technologies & distribution models (typically not their strength), and will instead be able to focus more on content creation and brand & audience development (which is definitely their strength). Most importantly, local news outlets will then be able to spread their overhead by sharing infrastructure costs with all of the other local news outlets (in other regions), by leveraging a single sharing platform. And this is almost exactly like what Uber/AirBnb/DoorDash/Turo/WeWork do. 
  2. On the “micro” side of the economics, this sharing model will also bring in a strong economies-of-scale in monetization that the average individual local publisher would struggle to reach. As discussed above, digital advertising to some extent is all about the scale of impressions. The bigger the aggregated scale of viewership, the higher bargaining power you will have in pricing (e.g., CPM, ARPU, etc.). By joining a sharing model (a sharing platform), a local news outlet will be able to receive a much better advertising rate ($$ per page view, per unique visitor, or per video view). The efficiency gain happens by putting all the ad supply together, providing a bigger overall audience for brand advertisers to target their customers, increasing the size of the pie for all local publishers, negating the need for advertisers to reach out to each local news outlet individually. 
  3. Some may worry that by adopting this sharing model, local publishers might lose control of their own businesses, becoming mere content providers for a larger platform. But I don’t believe things will evolve that way! Content, especially local news, is still fundamentally different from many other content mediums. Trust, authenticity, editorial judgment, and editorial brand are essential to local readers. They trust their local news outlets and recognize their editorial brands. A great sharing platform will enable local publishing to become a viable business again, and will never replace the local news itself. In fact, a sharing platform like this should also ‘deplatform’ itself and give more brand emphasis to the local news outlets themselves - such as followership, award & recognition, and co-branding initiatives - so that the local users are reading and following and interacting with the local news outlets, via the sharing platform. 

Local news is and will continue to be an invaluable source of information, not only for the local communities which they serve but also for our society at large. Being able to create sustainable economies-of-scale at the local level can help ensure that we’re all able to keep the integrity of our democracy healthy for years to come.

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