Local-News Business Models Emerge | Local News Initiative

Richland County is nestled smack dab in the middle of north central Ohio. It’s a mostly rural enclave in the center of a state in the heartland of America.

Richland is not a wealthy place. The median household income and the percentage of adults with college degrees are well below the national average. Richland also lags the rest of the country in broadband internet penetration.

In short, Richland County is an improbable place for one of the more successful local, for-profit digital news startups of the past decade.

Yet, the Richland Source is defying the odds of its demographic deficits and has found a profitable journalistic niche in a community of 125,000 residents that is also home to two local dailies and a weekly newspaper.

The Source’s financial elixir is a committed local ownership, a highly diversified revenue stream, a clearly defined editorial mission focused on solutions journalism, a cost structure unburdened by legacy print and award-winning journalism.

The Alarming State of Local News

The Medill State of Local News 2022 Report has chronicled the alarming and unceasing loss of local newspapers in the U.S. More than a fourth of local newspapers have closed since 2005 – and a third will disappear by the end of 2025 if current trends continue. The loss has hit less suburban and smaller communities the hardest.

There’s no magic cure to the ailments of the local news industry. Aggressive cost cutting hasn’t solved the problem and is likely making it worse. Policymakers in Washington and in statehouses have so far failed to advance solutions. Philanthropic institutions have stepped up, but there aren’t enough charitable dollars to spare an entire industry.

At a time when news deserts are expanding, and the nation is losing an average of two newspapers every week, the Source is one of several success stories that offer a potential strategic roadmap that other for-profit local news outlets might follow in suburban and smaller communities.

Other examples include The Pilot, a hundred-year-old twice-weekly newspaper in central North Carolina that serves a community of similar size to Richland County, and the Shawnee Mission Post, in the suburbs of Kansas City.

The common characteristics of all three are local owners who are invested in both the news outlets and the markets where they are located. They have developed business models that stress diversified revenues sources, a laser-like focus on readers’ needs and behaviors, high-touch engagement with the community and trustworthy journalism.

The Source was founded in 2013 by Carlton Fernyak, former CEO of MT Technologies, a century-old, family-owned printing and office equipment firm sold to Xerox Corp. in 2017.  Fernyak is currently also president of the board of the Richland Area Chamber & Economic Development.

The Source’s mission, according to its website, is to seek “innovative ways to impact our community and reach sustainability at the same time.”

The site’s business model is built on four different revenue streams. Advertising makes up 35 percent of its revenue. In-house marketing services serving “brands throughout the U.S.” accounts for 27 percent. Philanthropy (from organizations such Solutions Journalism Network, the Google News Initiative and the Lenfest Institute) comprises 21 percent. And memberships represent another 17 percent, with 1,100 paying individual members.

The company is also the inventor and operator of an artificial intelligence product, Lede AI, which provides high school sports results to local newsrooms around the U.S.

Best Source of Revenue? All of it

“Which line of revenue is best?” Source Senior Advertising and Marketing manager David Yoder asked rhetorically at a “New in News” webinar on July 26, organized by the Medill Local News Initiative and Konrad Adenauer Stiftung USA.

After the webinar, Yoder noted that the Source added its in-house marketing services just six years ago, and it’s already the second-largest revenue stream. “I think it just made sense at some point to stop trying to guess what ‘kind’ of market we were in and instead work with our market to find the ways we serve them and ways they could support journalism.”

On its news side, the Source is differentiating itself by practicing solutions journalism, a rigorous form of reporting that explores both community problems and potential answers. The Source also has adopted tools in which readers can easily submit questions and story ideas.

As a result, the Source’s website says, stories on the home page are typically about “progress, entertaining events, and the accomplishments of people, organizations and businesses in our area.”

Source Editor Larry Phillips said his news organization strives “to do journalism with our audience, not to our audience.”

In North Carolina, The Pilot in Southern Pines, is demonstrating how legacy newspapers in mid-sized communities can also transform themselves.

Pilot Publisher David Woronoff, who two decades ago recognized the need to expand beyond the newspaper, created and acquired a statewide business magazine and four lifestyle magazines – of which three are in the largest cities in the state – that now make up the majority of his company’s revenue.

Bookstore Adds Diversification

Buying and operating the local independent bookstore provides both new revenue and a way to directly engage with residents in his community. He also established a full-service, in-house marketing agency, and even published phone directories. Now, The Pilot news organization represents just 26 percent of his company’s total revenue, Woronoff told Medill.

“Diversifying is absolutely essential,” Woronoff said. “You won’t survive unless you do it. The far greater risk is to do nothing. If you just sit tight and say, ‘You know what, I only know the newspaper business’ or ‘I only own a standalone radio station,’ The clock is ticking on you.”

While Richland Source and The Pilot offer potential business models for news outlets in mid-sized markets of 100,000 to 200,000 residents, the for-profit, digital-only Shawnee Mission Post in suburban Kansas City is showing how digital outlets in metro areas can achieve sustainability.

Johnson County, with 600,000 residents, is one of the most-affluent and best-educated in the country. More than half of the residents have a bachelor’s degree or higher and median household income is significantly above the U.S. average of $65,000.

The Post was founded 12 years ago by the husband-and-wife team of Jay Senter and Julia Westhoff, as the Kansas City Star began reducing its coverage of the area and the local weekly paper, the Johnson County Sun, was closed in 2011.

The Post and a sister publication now have 6,245 digital subscribers paying $7 monthly. They’re targeting 10,000 subscribers by 2025 in their upscale suburban county.

“Our market is ideal for a subscription product,” Senter, the publisher of the Post, told Medill. “It’s an affluent area with a highly educated population and significant social capital.”

Senter expects to generate up to $700,000 in revenue this year. About two-thirds of that would be coming from readers through subscriptions. The rest would come from advertising. The Post has a total of 10 staffers.

Senter attributes the Post’s success, in large part, to a “reader-first” content focus and an affordable subscription price.

“The main strategic insight that has gotten us this far is to recognize that traditional newsroom values and culture are often pretty far removed from the information needs and wants of your average homeowner, taxpayer and parent,” Senter said. “Traditional newsrooms tend to center power brokers and political parties in their coverage and have a nasty habit of getting caught up in inside-baseball aspects of policy-making bodies. Those topics don’t tend to reflect the experiences of most people’s day-to-day lives. We know that if people are going to pay us, we’ve got to be giving them information that’s relatable, interesting, and useful to them.”

Senter believes the Post’s model is replicable in many suburban markets, but not in all. “There are lots of other areas in the country that share (our) demographics. I tend to think that a coverage area with similar demographics and a population of at least about 150,000 would have an addressable market large enough for our (subscription) model to work.”

Profits Reflect Community Engagement

The Post is committed to the for-profit business model, which “incentivizes us to produce the kind of content that is going to get the most buy-in and engagement from our community,” Senter said. “My main concern with not-for-profit models is that they incentivize a publication to cater to the interests of large funders, which may be totally out of sync with the interests of the audience you’re supposedly serving.”

He noted, too, that the priorities of large funders often change, which could leave a publication like his scrambling to stay solvent.

Meantime, Chicago has emerged as a petri dish of experimentation in nonprofit business models, which may also serve as a potential path for news outlets in suburban and smaller markets.

In late January, Chicago’s NPR-affiliated news outlet WBEZ acquired the scrappy tabloid Chicago Sun-Times, and converted it to a nonprofit. Chicago Public Media raised $61 million from foundations and individual donors to support the combination.

The CEO of Chicago Public Media, Matt Moog, said he’s been fielding calls from small and large-market news executives interested in his model.

“The core concept of local news organizations coming together and leveraging their respective assets, whether it’s their news reporting capacity, or their audience or their ability to produce revenue, and finding ways of making it sort of one plus one equals three, I think is something that every responsible news organization should be looking at,” Moog said. “We are leaning heavily into partnerships and collaborations.”

Nykia Wright, CEO of the Chicago Sun-Times, said her outlet is “doubling down on what it means to be a truly digital organization.” At the same time, though, she said the Sun-Times has no immediate plans to reduce daily print frequency like many others in the industry: “We are in the habit-building and not the habit-breaking business right now.”

In addition to the Sun-Times’ pivot to nonprofit status earlier this year, the venerable, 140-year-old Hyde Park Herald, a for-profit outlet covering the neighborhood that’s home to the University of Chicago, merged in July with the nonprofit South Side Weekly in an effort to secure its long-term future.

In addition to these news organizations owned and operated in their communities, local news in America also is increasingly being delivered by national news franchises. The most prominent recent example is digital media company Axios Local, which in two years has established operations in 24 cities with plans to expand to 30 by the end of the year.

Axios Local’s newsletters, which combine some original reporting with curated content from others, now have more than 1 million subscribers. The potential of this model spurred Atlanta-based Cox Enterprises to acquire Axios earlier this month in a cash deal said to be valued at $525 million.

Medill Metro Media Lab at Work

Local news in America also is being served by a growing number of universities.

Medill’s Metro Media Lab, a project funded by the Robert R. McCormick Foundation, is working directly with Chicago news organizations on consumer research, audience strategy and financial management. Its nonprofit partners so far have included NPR affiliate WBEZ, Block Club Chicago, South Side Weekly, Growing Community Media and Evanston RoundTable.

For many years, universities across the country have provided student-generated reporting for local news organizations. These programs provide invaluable experiences for aspiring journalists and much-needed news stories for local outlets from statehouses, city halls and even sports playing fields.

These university efforts now extend way beyond providing news stories, however.

For the past three years, the University of Kansas in Lawrence has been producing an award-winning online news site during the academic year in the nearby small community of Eudora, population 6,500, where the local newspaper collapsed during the Great Recession.

The Grady College of Journalism and Mass Communication at the University of Georgia in Athens announced last fall that it would help rescue the nearby Oglethorpe County Echo, which was converted to a nonprofit and now includes a corps of student journalists.

These efforts illustrate how the local news ecosystem in the U.S. has entered a phase of robust experimentation.  At the same time, however, the unabated loss of local newspapers in the U.S. is a shrill-sounding alarm about the urgency to reinvent the local news business model.

Indeed, the continuing secular declines in print, combined with high inflation and weakening consumer demand, could further accelerate the loss of local news in the U.S. in coming months.

That’s why new models like those in places like Ohio, North Carolina, Kansas, Illinois and Georgia could provide a path forward and help fuel innovation for a local news industry so vital to American democracy.

The Medill Local News Initiative will publish a full report on the “New in News” webinar on August 23rd. The video can be viewed here.

Article image by Nick Fewings used under Unsplash license (Unsplash)

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