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The decline of local journalism is a “threat to democracy and is fuelling the rise in fake news”, Theresa May said earlier this year while discussing whether state intervention was needed to preserve national and local newspapers.
Ever since the rapid evolution of technology and the consequent shift online, the print industry, particularly local newspapers, has struggled to keep up. It is print where the bleeding is most severe, however, as nearly 1,800 local newspapers have closed their doors since 2004, according to a 2017 study conducted by the University of North Carolina’s Center for Innovation and Sustainability in Local Media.
And while some stories will now go uncovered in metropolises like New York City with its recent Daily News’ layoffs, the situation is much worse in small towns and rural communities where newspaper markets are based along county lines, townships and other small community-based jurisdictions.
With the influence of local newspapers declining as the shift towards digital publishing evolves, the absence of community journalism has created a vacuum in the public sphere of influence; and by common consensus, it needs to be filled.
Digital media startups gain traction within local news
Enter digital media startups, the digital age’s answer to the void left behind by local print organizations. Just as the name suggests, these publishers are harnessing evolving technologies to address the gap. Although comparatively nascent, some have already achieved a significant measure of success.
Former Washington Post editor Jim Brady departed Digital First Media—a media management company that owns more than 50 newspapers across 12 states—with a desire to focus on local news. Brady found that it was a tough concept to pursue when a news organization was owned by a larger company or had a long legacy, so he formed two small digital startups—one based in Philadelphia and the other in Pittsburgh—in 2014 and 2016, respectively.
And Brady’s business is expanding. His company, Spirited Media, acquired Denverite, a small digital newsroom in Denver, Colorado, just last year.
There are a growing number of similar digital media startups, like Brady’s, that are taking the place of traditional community news organizations. However, the question remains whether they can fill the news vacuum growing across the United States and elsewhere. It’s also unclear if these companies can ever be economically viable, as some turn to for-profit models and others pursue non-profit avenues.
The traditional subscription model: A proven success
Many digital media companies use a subscription-based revenue model, where users pay a fee to access content. Legacy publishers like the New York Times have seen significant growth in digital subscribers using this business model. Mammoth Media, an emerging company in LA, offers its users access to its library of text-based stories for a subscription fee of $2.99 a week via its app, Yarn. It’s an approach reminiscent of Netflix, but for text-based stories. The founder’s underlying thesis, as described in a recent blog post, has always been to own its fate when it comes to distribution and monetization.
E-commerce data has quickly become an influential factor in the success of digital media startups. Clique Brands, an LA-based company, has made a concerted effort to leverage data from its media businesses (like Who What Wear, Byrdie and College Fashionista) to launch products. Its data set is a rich one, driving sales of over 20,000 products per month (via affiliate marketing). This data is then leveraged to launch products, like JoyLab, an activewear collection in partnership with Target.
And what’s the best proof point that they are on to something by playing at the intersection of content and commerce? Amazon invested in their last equity round of financing.
Many local digital media startups are leveraging their IP to sell episodic or long-form content to various networks like Facebook, Snapchat, Twitter, Amazon, Hulu, Twitch, HBO, Showtime, and Netflix. Companies like ATTN, Crypt TV, and Jukin Media have seen success in pursuing this strategy. Companies like Crooked Media have been very successful in engaging their online audience in person via live events. Crooked’s “Pod Save America” has been touring across America to sellout crowds while giving its fans a unique opportunity to connect with the hosts. This undoubtedly helps generate new fans and a deeper engagement with existing fans.
“At the end of the day you’re not going to improve local journalism without local journalists.”
Subject to ‘Mother Digital’
Earlier this year, Facebook changed its algorithms to emphasize user engagement, particularly one-on-one conversation, resulting in a de-emphasis of public content, like posts from publishers. This has resulted in a significant decline in referral traffic volume. Traffic from Facebook is on a downward trajectory for hundreds of publishers, with many seeing even more than a 50% decline. And by most accounts, the situation is getting worse.
Half of US adults get their news from Facebook according to Pew Research, and roughly 30% of all external page views are driven by Facebook, according to Chartbeat — with Google driving a similar percentage.
So, many digital media businesses that generate revenues purely from advertising are taking a hit. Brands, of course, smell blood and are driving CPMs way down while requiring minimum views, and on many occasions, forcing digital media companies to supplement their declining organic reach with paid advertising, impacting margins further.
Are Digital Startups the solution?
For now, it seems that the new digital startups are attempting to prove they are financially viable before they expand further into small communities. In February, the Local Media Association surveyed nearly 200 media leaders in charge of small digital operations. That included those new startups as well as the more traditional newspaper, TV and radio organizations.
“At the end of the day you’re not going to improve local journalism without local journalists,” Brady said. Most agreed that the future is digital, but also found that there was not a coherent financial strategy to make them solvent. And fewer than a quarter of them said they were adequately staffed to meet their revenue goals.
Today, profitable growth increasingly depends on having five, six, or even more revenue streams — an often fluid portfolio of bets on businesses and products that extend beyond traditional sources of monetization. Companies in every publishing sector are launching live events and podcasts, creating subscription offerings, producing videos for consumers and brands, and expanding e-commerce and product licensing efforts.
TV networks and film studios are developing streaming video services. Sports leagues and video game companies are converging on e-sports. Many are prioritizing new advertising products. Some of the most ambitious players are expanding globally, building new revenue streams in new geographies.
If digital startups wish to thrive in the turbulent digital economy, exploring alternative revenue streams is essential to their growth and success.
