Saul Hansell explains the underlying economic reality that comes with the Internet’s unbundling of the previously bundled product that my various employers over the years have been tricking you into buying:
[T]he bad news for anyone who actually likes reading about where they live is that no one seems to be able to develop an online version of the local paper–including local papers.
The reason is pretty simple: The news gathering of local papers is heavily subsidized by other higher margin businesses.
The front news sections of papers attract readers and define the brand of a paper. But much of the money is made in other high-margin sections–low-cost content like TV listings and recipes as well as pure advertisements like classifieds and Wal-Mart circulars. Indeed, hometown papers to some degree compete with the Postal Service as much as other news outlets, because they can piggy back the delivery of advertising on their existing network of delivery trucks and kids on bikes.
The Internet has this nasty way of shattering bundles and undercutting distribution monopolies. A newspaper company or a local news startup can offer TV listings and classified ads online. But it won’t have the powerful natural monopoly of a traditional metropolitan paper. And thus it won’t have those extra monopoly profits to pay for the city hall reporters.
Hansell notes that national operations (like his employer, the New York Times), can make up for some of this problem with the national reach of their web operations, with the accompanying revenue. But at the local level, no model exists that can support the “city hall reporters” because the alternative web numbers are simply too small.