Media Acquisitions: How we can impact local news.
It’s no secret. The news industry has been caught in a death spiral. Over the past 15 years, over 2,000 American newspapers have closed, and over half of the newsroom jobs that existed in 2008 have vanished. This collapse has been caused in large part by three things:
A business model almost entirely dependent on ad sales, which couldn’t survive plummeting revenue thanks to insurmountable competition from tech giants like Google and Facebook.
A transition online which bet that freely accessible news would give papers greater reach and bigger audiences to compensate for lower revenue per ad.
Media consolidation by companies which sought to realize profits through cuts rather than investment and growth.
Lower ad revenue meant less money to pay journalists to gather news, which led to a decline in quality, which led to a declining audience, which led to declining ad revenue, which led to more cuts, and so on. These trends have accelerated to an even more dangerous pace as a result of the coronavirus pandemic.
Obran plans to break this cycle by putting the audience rather than advertisers at the center of the business. We plan to do this by forging a new relationship between communities and their existing newspaper. Our goal is to acquire existing local newspapers, root them to the community by transitioning them into a member- and employee-owned business, and reduce their reliance on ad revenue by bolstering audience-generated revenue through a robust member engagement program and innovative approaches to paywalls.
We believe this will help build them into news organizations that are not just sustainable, but growing to meet and invest in the information needs of the communities we partner with.
These methods are not yet widespread, but they have a proven track record where they have been implemented. Engagement-focused membership programs have seen success in news startups like De Correspondent and Honolulu Civil Beat as well as legacy outlets like the Financial Times. Metered paywalls have shown success at news organizations of all kinds, yet they remain ripe for innovations that would increase revenue. We believe these methods will be especially powerful when implemented by a legacy news organization with a built-in subscriber base.
To execute this strategy, we are investigating the purchase of one or more local newspapers located in the Pacific Northwest and elsewhere.
The Economics of Subscriptions
The idea that news organizations need to increase their circulation revenue isn’t new. As advertising revenue continues to drop like a rock, circulation revenue has been increasing, slowly but surely. Tying digital paywalls to digital and print subscriptions is a popular approach to make up for lost ad revenue.
The economics of this strategy appear sound. According to a recent study by the Lenfest Institute, subscribers have a far higher customer lifetime value (CLV) than an unsubscribed digital reader. For the average paper, their research shows that one new subscriber will generate $217 over the average customer lifespan of 20 months. News organizations that put more emphasis on subscriptions have brought that CLV up to $300 to $350 per subscriber.
However, many legacy news organizations have been slow to innovate beyond this. They’re seeking to get more bucks for less “bang” by attempting to raise more revenue while offering a product of decreasing quality, and they fail to see beyond subscriptions for creative ways to monetize readership.
More Ways to Pay
While metered paywalls have proven to be a useful tool to convert readers into subscribers, news organizations leave money on the table with overly restrictive paywalls. Once a reader has used up their three to five free articles a month, they’re blocked until the next month rolls around, with no way to gain access without subscribing. Many users don’t want to commit to a lengthy, expensive subscription and bounce off to a site that will give them access to the content they’re looking for.
Paywalls have evolved since their inception, but have reached a bit of a dead-end in their development. The New York Times started their paywall with 20 free articles a month. They have since tightened it to 5, which has become an industry standard. The latest evolution has been to only allow subscribers to access certain content. However, this does not allow people to get a preview of what is presumably the outlet’s best reporting, fails to build the loyalty necessary to convert someone into a subscriber, and potentially limits the spread of important information.
As metered paywalls proliferate, getting people to subscribe will become increasingly difficult. Currently, only 16% of Americans are willing to pay for online news. However, given the limited options they’re given to do so, is this much of a surprise? Print newspapers and magazines give two payment options: pay-per-issue or subscribe. News paywalls usually only provide one.
Rather than force readers down the subscription or membership track, giving readers more options to “feed the meter” to increase the paywall limit would monetize readers who either can’t afford or don’t want a long-term commitment. One method would be to allow readers to buy access to a set number of stories once they hit their limit. This could be combined with a “sharewall” which allows readers to access a story by sharing it on social media, increasing the audience and thus the potential for new paying customers.
These innovations can be mixed and matched and stacked on each other in a variety of combinations to balance loyalty-building and revenue. Furthermore, these readers will have given their contact information in the exchange and thus become warm sales leads for email marketing intended to convert them to members in the future.
Another innovation that has shown promise at publications like Wired and the Washington Post is the idea of allowing companies and organizations to sponsor access, essentially lifting the paywall for readers for the chance at being the most prominent advertiser readers see. The downside is that this practice doesn’t train readers to pay for news, and it maintains advertising as the profit center of the business.
However, who says this kind of sponsorship has to be limited to advertisers? Readers donate to for-profit newspapers like The Guardian and Seattle’s The Stranger already without any presumption of a personal return. Donations to a for-profit entity aren’t even deductible. Readers sponsoring access to a certain number of visitors would give a more concrete incentive to donate.
Membership: More Than a Subscription
News organizations can’t just paywall themselves into prosperity. They also need to provide their paying customers with a product that justifies the expense, and to do that they need to change their relationship to their readership.
People who are engaged in their communities are far more likely to pay for the news. These are people who like to be involved and active in civic life, and the news helps them do that. These readers are not passive people, but they are treated as passive consumers of news rather than active partners.
But, membership needs to be more than an up-sell on subscriptions to be effective.
Membership programs that engage the audience in a meaningful way have been proven to provide significant economic advantages to news organizations. A robust membership program which focuses on engagement and participation will increase CLV by reducing the subscriber churn rate and increasing revenue from membership dues. With proper community engagement efforts these members can be transformed from passive readers into active evangelists for their newspaper.
Innovative newsrooms around the country and around the world have found ways to use membership programs to involve readers in the news gathering process, leading to increased audience engagement, trust, and revenue while improving the quality of journalism. These methods include community listening sessions, open news meetings, co-reporting, source assistance, crowdsourced fact-checking, and more. News organizations that use these methods have seen increased trust and engagement lead to increases in paid memberships and donations.
There is no one-size-fits-all approach to building paid membership. What works for small, local publications will be different from regional and national publications. For example:
After trying everything to boost subscriptions and ad sales, the Idyllwild Town Crier in Idyllwild, CA, stabilized itself in recent years with a multi-tiered membership program. The paper takes its watch-dog role seriously, and had already built up plenty of good-will and trust with the community through its reporting before creating its membership program. They use a weekly, open-to-the-public news meeting to build reader engagement.
In addition to offering perks like discounts at local businesses and admission to member-only events, the cooperatively-owned Devil’s Strip in Akron, OH, allows member-owners to participate in many decisions, including prioritizing an annual list of editorial projects that the newsroom wants to embark on.
International news site The Correspondent invites its members to share their expertise and experiences to better inform the site’s journalism, and allows them to contribute to a moderated conversation underneath each story.
Together, these approaches will unite the community with their newspaper in the mission of delivering high-quality journalism and set us on the path to build a more sustainable and resilient future for local news.
